You're looking for a financing round to help give the company much-needed runway to develop its product—but you don't want a large chunk of the investment going to the lawyers. How do you keep legal costs down?

Recently, we have seen the emergence of "open source" financing documents—and there seems to be a widely held belief that these forms are the cure-all to the epidemic of skyrocketing legal fees. While a movement toward standardized legal agreements is always a good thing, entrepreneurs have discovered that managing legal expenses requires a lot more than just using good documents. You don't need to do your own legal work to save money, though. These five tips can help you keep more of the investors' dollars in the company's coffers—and out of the lawyers' pockets.

Work with a True Venture Lawyer

Naturally, I am a little biased on this one! But in all seriousness, working with an attorney who specializes in start-up financing can go a very long way in reducing legal fees and deal friction. There is a language that all venture lawyers speak—and an exposure to prevailing market trends that enable start-up lawyers to more effectively evaluate the terms of your deal. Provisions that are odd to your buddy the real estate lawyer are often quite standard in the eyes of a venture lawyer. Going with an expert in the field eliminates the learning curve and steers everyone to a faster close.

Understand How the Investment Works

I know what you are thinking. You did not start this venture to learn more about board seats, drag alongs and liquidation preference. You want nothing more than to get back to focusing on product. In reality, however, you are the one on the front line discussing these issues with your prospective investors. Any experienced entrepreneur will tell you that having a strong grasp on the deal mechanics will help facilitate a faster pitch process, term sheet signing, and closing. Take the time to understand exactly how the deal works. Lean on your lawyer to educate you on the critical investment terms, current market conditions, and closing logistics, so that you can become a well-equipped negotiator. 

Find a Lead Investor

With the wide variety of crowdfunding options available, it is true that you can mass-syndicate financing rounds a lot easier these days. However, having a strong lead investor helps create a natural momentum in the deal. You not only generate more excitement around the investment (the "social proof" that everyone talks about)—you also create a more efficient process. With a lead investor in place, you are more likely to avoid last-minute changes to the financing documents—and can more effectively goad the smaller investors into dropping minor negotiating points and simply going along with the proposed deal terms.

Stay Organized on Your Side—From Day One

The biggest driver of legal fees in a financing is generally not the back and forth over the deal documents—it is the review and associated clean-up of the company's legal due-diligence materials. Your investors (and their lawyers) will have an extremely limited tolerance for untied loose ends, particularly with respect to your company's capitalization, corporate governance, and intellectual property ownership. There is often an urge to put off the legal housekeeping until funding. Bad idea. As counsel for VCs and angels, I have been involved in too many deals where the negotiation of documents takes only a few days—but the legal review and clean-up takes weeks. One way to really short-circuit this process is to get your legal ducks in a row now—even before you've started fundraising. Complete everything associated with formation at the time of formation. Keep your signed contracts in one place. Keep your counsel in the loop.

Over-Communicate with Your Lawyer

I cannot over-emphasize that last sentence. Your lawyer or lawyers need to stay well informed throughout the entire fundraising process. Failing to communicate with your lawyers will slow things down and allow potential problems to snowball. Keep your lawyer in the loop as you are pitching investors and debrief them on your progress. Bring up potential legal issues quickly so that your counsel can resolve them. An experienced venture lawyer has "seen it all"—they can help you identify and overcome potential deal hurdles.