Dexterity Talks with Joseph McCarthy
Earlier this year we met up with Joseph McCarthy, Director: IP Commercialisation, Start-Ups and Venture Capital at Aspen Legal (https://www.aspenlegal.com.au/) to discuss the business opportunities and challenges facing start-ups in 2024.
Can you tell us a bit about yourself and what you do?
Aspen Legal is boutique law firm that provides legal secondments to clients alongside traditional legal services. My role is focussed on clients in the R&D and VC space. My clients are mainly on the Higher Ed / Research Institute side, however earlier in my career I worked in private practice focussed more on supporting start-ups and I still do lots of that.
How is your business progressing in 2024?
It has been more robust than expected with significant growth in our secondments business. There has been broad uncertainty in the economy which has meant a lot of clients are seeking fixed placements to fill temporary needs.
There is a seemingly never ending discussion on different fee models for law firms, what has been your experience with these?
There is no one size approach that works for all clients. Subscription fee models can work well for clients who are mature enough to know roughly how much they will spend on legals in any given year. It will take some years for a start-up to have that information available, so they will generally prefer fixed fee or hourly billing.
What do you think are the key considerations lawyers and other advisors should keep in mind when working with start-ups?
I worked inhouse for 12 or so years, where we were the client to many external law firms and other providers, which teaches you what a client wants. You need a lawyer that is reliable, sticks to budget and responsive to your needs. Depending on the matter you will sometimes need a large firm with a certain letterhead, but a start-up’s budget doesn’t usually permit that.
As someone who has been on both sides of transactions, what do you think are the key challenges for start-ups coming out of higher ed?
Generally, when a start-up is being launched from a university, the founders will come from research and academia. That means they will have a steep learning curve to get across all the other elements of running a business.
In the past decade in Australia there has been an explosion of programs, bootcamps, accelerators, etc… geared at upskilling those founders to develop the necessary business acumen. They are helping, but it is still a significant obstacle that needs to be overcome in a very short period of time if the business is to survive. This means the first few employee hires are critical to ensure the business has got the necessary mix of skills and experience.
The other major obstacle is that tech development is deeply uncertain and there is often a significant gap between the early-stage grant-funding offered to carry out R&D and the support required to turn the R&D into a commercially viable product. The risk is that you fall into the ‘valley of death’ of funding in between those two places.
On the flip side, what are the challenges for institutions who stay on as investors in start-ups once they are spun out?
Universities have a number of goals: to serve the community through conducting R&D, to support their students and staff, and where possible to return revenue via the successful commercialisation of their IP. Their challenge can be how to balance those goals, which sometimes compete with each other.
Universities are funded to carry out early stage R&D, but have historically had limited access to funding ongoing start-up ventures that may come out of that R&D. New investment funds such as the follow on funds Breakthrough Victoria is establishing with Victorian universities is designed to bridge that.
What do you most enjoy about your role?
I enjoy facing the challenges that come with growing a business and the bonds that you form with your business partners on that journey. It’s also been eye-opening to return to being a service-provider after spending so long in-house, which has been both challenging and rewarding. I always love working with amazing clients doing innovative things, and it’s fun being a part of a business that’s doing things differently.
Joseph McCarthy, thanks for talking with us!
Dexterity Talks is a web series of interviews with founders, investors and advisors in the start-up scene. This interview was conduct by Pippin Barry (BA, JD), an Australian lawyer and the principal of Dexterity Law.
