Who Represents Who?
How VC Lawyer Dynamics Work in a Fundraise.
When you start a priced round, you very quickly meet “the lawyers.” What’s less obvious is who they actually work for and whose interests they are paid to protect. If you assume everyone is there to “get the deal done,” you can miss the fact that counsel dynamics are fundamentally about incentives and representation.
This post explains the roles of company counsel and investor counsel, where conflicts of interest arise, and how to protect yourself with your own lawyer.
Company Counsel vs. Investor Counsel
In a typical venture financing, there are at least two distinct legal teams:
- Company counsel
- Engaged and paid by the startup (even if investors reimburse some fees at closing).
- Responsible for your cap table, corporate clean-up, board consents, and making sure the financing structure works for the company long-term.
- Should translate legal terms into business tradeoffs for the founders.
- Investor counsel
- Engaged by the lead VC or investment syndicate to represent the investors’ interests.
- Focused on protecting the fund’s economics (liquidation preferences, anti-dilution, pro rata) and control rights (board seats, vetoes, information rights).
- Drafts or heavily marks up the definitive documents to align with the term sheet and the fund’s playbook.
Even when everyone is friendly, those are different jobs. Your company counsel is there to protect your side of the table; investor counsel is there to protect the fund.
Who Drafts What (And Why It Matters)
In many rounds, investor counsel drafts the first full set of documents from the term sheet. That often includes the:
- Stock purchase agreement
- Amended and restated charter
- Investor rights agreement, voting agreement, right of first refusal/co-sale
- Various consents and disclosure schedules
Company counsel then reviews those drafts, pushes back, and negotiates language around governance, protective provisions, economics, and closing conditions. When founders do not have experienced company counsel, documents tend to drift in the investors’ favor simply because the first draft is anchored there.
Key takeaway: the party drafting first has structural leverage; your lawyer’s job is to rebalance that draft toward something that works for the company too.
Conflicts of Interest and “Can One Firm Do Both?”
Sometimes a single law firm is asked to “represent the company and the lead investor” or to “just paper what everyone agreed.” That can create conflict-of-interest issues.
Basic conflict rules say a lawyer cannot represent directly adverse clients in the same matter without informed written consent and must decline representations where loyalties are materially limited. In practice:
- A firm that historically represents the VC may see itself as “the fund’s lawyers,” even if nominally engaged by the company.
- Joint representations can make it harder for founders to get candid advice on whether to walk away from a proposed term.
- If a deal later goes sideways (down round, recap, dispute), the question of “who was your lawyer?” becomes very real.
Founders should be skeptical of any setup where it is unclear whether the lawyer’s first loyalty is to the company or the fund.
Three Common Founder Mistakes About Lawyers in Fundraises
- Assuming “the VC’s lawyers” are neutral deal facilitators.
Many founders treat investor counsel as if they’re a shared resource whose job is to “make everything fair.” Those lawyers are hired to protect the investor’s economics, governance rights, and risk exposure.
- Letting the deal run without their own experienced counsel
Some founders rely on a general business lawyer or skip dedicated venture counsel to “save on fees.” This usually backfires in the form of aggressive preferences, control provisions, or cleanup costs in future rounds that far exceed the initial savings.
- Not asking who is being represented and who is paying.
Founders often do not clarify engagement letters, who the client is, or how fee reimbursements work. That makes it hard to spot when a firm’s primary relationship is with the fund or when a “joint effort” masks divided loyalties.
Quick Checklist: Protecting Yourself on Counsel Dynamics
Use this checklist before and during your raise:
- Do we have our own venture-experienced company counsel engaged early, before signing the term sheet?
- Do we clearly understand who investor counsel is, who engaged them, and that they do not represent us?
- Have we seen and signed an engagement letter for our company counsel spelling out that the client is the company (not the VC)?
- When a firm proposes to “act for everyone,” have we discussed conflicts, waivers, and what happens if our interests diverge?
- Are we reviewing each key document (charter, stock purchase agreement, voting agreement, investor rights agreement) with our own counsel, line by line, before we sign?
- Do we have a clear sense of total legal costs for the round and how investor fee reimbursements work so we are not surprised at closing?
Even in a friendly round, clean roles and clear representation make negotiations faster and less emotional.
Bottom Line
If you are heading into a raise or already holding a term sheet, make sure you have your own startup-focused counsel looking out for the company’s interests. Before you sign anything, have your lawyer walk you through who represents who, how the documents allocate economics and control, and where you should push back.
If you want to learn more about hidden traps in term sheets and how to structure your board, join us for our upcoming masterclass, How to Raise Venture Capital for your Startup without Giving Up Control.
Save your Seat: https://howtoraisevcround.com/how-to-raise-priced-round-2