“It’s a practice that’s well understood and the SEC has issued a bunch of letters on how to structure this,”

“The law firm invests at the same price as everyone else—it’s no special deal—and the amount of the investment is typically a small percentage of the total amount that’s coming in,” Grundfest said. “The investment is done not through the law firm itself, but usually a separate fund where the money comes from a law firm’s partners and associates.”

“sidecar venture capital fund”

“A small number of Grand Slam home runs will make your day,” Grundfest said. “But the investment funds affiliated with the law firms are constrained—they put in relatively small amounts, so the real returns go to the VCs.”