Samir Kaul, managing director of venture capital firm Khosla Ventures, is pushing back on what he sees as runaway legal costs in startup financing. He said he recently rejected a private equity firm's proposed agreement for one of his portfolio companies over a single term: the $1.5 million budget for legal fees. The total should have been a tenth of that amount, Kaul said.
Kaul has watched legal expenses climb steadily over his two decades in venture capital. In the early 2000s, a Series A term sheet cost about $25,000. Now, he said, the same document runs $200,000.
The cost of standard documents
The price increase is not tied to complexity. Early-stage term sheets follow well-established templates, and the underlying deal structures have not changed dramatically. What has changed is the volume of lawyer hours billed to review and negotiate language that is largely boilerplate.
Kaul's complaint reflects a broader frustration among investors and founders who see legal fees as one of the least productive line items in a financing round. For a startup raising a few million dollars, a six-figure legal bill can consume a meaningful share of the capital before the company spends a cent on product development.
Law firms defend the fees by pointing to the stakes involved: a poorly drafted agreement can create problems years later, especially when companies raise additional rounds or sell. But Kaul's stance suggests that some investors are no longer willing to accept that logic without question.
Pressure on outside counsel
Khosla Ventures is not alone in scrutinizing legal bills. Some institutional investors have started capping outside counsel fees or requiring itemized budgets before work begins. Others have shifted routine work to lower-cost providers or in-house teams.
Technology is also entering the picture. Tools built for legal document review and contract analysis can handle tasks that once required junior associates, and firms that adopt them can pass savings to clients. For legal professionals, the pressure to deliver faster and cheaper is coming from multiple directions at once.
Why this matters for legal professionals
For lawyers who serve venture-backed companies, Kaul's comments are a warning about client expectations. If a prominent investor publicly rejects a $1.5 million legal budget, law firms should expect more clients to question their own bills. Being able to explain the value of legal work - and to document it - will matter more than relying on customary rates.
Legal teams that want to stay competitive should also examine where technology can reduce hours without cutting quality. Document review, due diligence, and contract generation are areas where AI for Legal tools are already being used by firms to lower costs and shorten turnaround times. For paralegals and associates handling the bulk of that work, familiarity with these tools is becoming a practical advantage, and training options like AI for Paralegals can help build those skills.
The legal industry has long billed by the hour, and that model assumes the work requires human attention. As clients like Kaul push back, the firms that adapt - by using technology, setting transparent budgets, and justifying their fees - will keep the business. Those that don't may find their invoices getting the same scrutiny Kaul gave that private equity firm.
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