My last post reminded me to come back to a theme that I address from time to time – transaction costs for small transactions. While it is true that smaller deals are not necessarily less complex than larger deals (sometimes it seems like just the opposite), you just can’t paper a $1,000,000 deal (let alone a smaller one) the way you can a $10,000,000. $40,000 is 4% of $1,000,000 – it might be a material item that eats into the money you have to put to work in your business in significant way. (By the way, I picked $40,000 randomly because it is not far off the cost of a typical Series A investment from a VC (that is the cost of one side’s lawyer).) But, there are risks in doing a less than thorough and careful job of documenting a transaction. I am sure there are many horror stories out there. Having said that, all businesses have to manage risk one way or another to preserve the value of the transaction. At the risk of stating the obvious, the best thing you can do is use an attorney experienced in representing early stage companies and hope the other side does too. The other thing you can do is be sensible about your own deal strategy – pick your battles. If you feel the need to negotiate every sentence of a document, guess what – your transaction costs will reflect that.