Why it matters
Reimbursing investor legal expenses is standard practice and not unfair on its own. The market range varies by stage: $25-50k at seed, $50-75k at Series A, $75-150k at Series B+. Caps materially above these ranges are signals — they suggest the firm runs heavy diligence (which means a slower deal and more retrade risk), or that they don't know the market, or that they're using your balance sheet to fund a process they should be paying for. On a $5M round, a $150k expense cap is 3% of the cheque coming back to the firm before you even get the money.
How to negotiate
Get the cap to market: $40k at seed, $60k at Series A, $90k at Series B. Cap should apply only on a successful closing — if the deal dies, each side pays their own. Limit reimbursable expenses to outside counsel and necessary third-party diligence (financial, IP, technical); exclude internal investor time, travel, and entertainment. Get the firm's preferred counsel listed by name (it's a forcing function on costs).
Example language
How this clause typically appears in a term sheet. Read it carefully — predatory language is often buried in routine paragraphs.
At the Closing, the Company shall reimburse the Investors for all reasonable legal, accounting, and diligence expenses incurred in connection with the financing, up to a maximum of $150,000.
TURNSHEET provides intelligence, not legal advice. This page describes typical market behaviour and common negotiation tactics; your specific deal may have nuances that change the analysis. Always review your term sheet with qualified legal counsel before signing.