Harbottle & Lewis partner Tom Macleod talks all things venture capital, career progression and commercial awareness
“Innovative, entrepreneurial and inclusive,” are the three words that Tom Macleod, partner in the venture capital group and corporate team at Harbottle & Lewis, uses to describe the firm which saw him grow from a junior associate into a partner. “I know a lot of law firms say this, but we do really feel that we’re entrepreneurial. We understand our clients’ businesses and we encourage our lawyers, particularly the junior lawyers, to get out there and really try and find their niche and build their own practice at a very early stage.”
It is this entrepreneurial spirit that attracted Macleod to the firm initially. “I saw working with early-stage clients and venture capital funds as a way to build my own practice — the deals are smaller initially and you have the chance to bring work in through the door which you might not otherwise have the opportunity to do if you’re at a larger City law firm,” he explains.
On his transition from senior associate to partner, Macleod highlights the importance of thinking “with a partner mentality” when he was an associate. To make the transition “less of a leap”, associates should take responsibility for matters and clients with the mindset of “the buck stops with you” rather than relying on the safety net of the partner, he noted. “Hopefully, I’ve learned a thing or two from the good managers that I have worked for over the years,” Macleod chuckles when he brings up the management side of being a partner.
Discussing his day-to-day, Macleod goes into some of the exciting work that he gets to do as a corporate lawyer with a focus on start-ups and investment into early-stage businesses. “Just yesterday, I was working on a new concept for a chain of sports based social entertainment bars, which is quite exciting.” At the same time, Macleod is working on a later stage fintech investment with one of the firm’s long-standing clients, while advising a founder in the CBD (cannabidiol) industry on a dispute with his co-founders. When working with early-stage founders and entrepreneurs, Macleod emphasises the need to be pragmatic and commercial in his role. “Given the vast number of businesses we see succeed (and, given the nature of start-up businesses, fail) in this space, they often lean on us for business, as well as legal, advice.”
I went on to ask him about the impact of the rise of interest rates on his clients. “It’s a difficult fundraising market, with investors having the option of safer investments providing quite attractive fixed returns, which wasn’t the case when interest rates were low. It is also a relatively subdued market for venture capital-backed start-up exits, compared to what we saw a couple of years ago,” says Macleod. “Lots of buyers, such as private equity funds, typically fund acquisitions by way of borrowing, so when interest rates are higher, there is less access to cheap money and acquisitions become more expensive”, he tells me.
The federal reserve is expected to cut interest rates in the new year — so are clients excited about things changing? “There is still nervousness in the market,” Macleod cautions. “I think there are some positive signs on the horizon, but I don’t think anyone is expecting things to change overnight. It is a difficult market and it’s likely to stay that way for a while, but there are some signs of optimism. A lot of funds have capital that they need to deploy, so there are still opportunities for good companies to get funded and to exit,” he says.
As some of Macleod’s clients are in the tech industry, I also asked him about the recent AI boom. “There’s certainly been a big focus in VC on AI investments,” said Macleod. He notes that there are some VCs investing into the underlying infrastructure while others are investing into companies which use that infrastructure to provide innovative services. “Time will tell if it’s a bubble or not,” Macleod ponders.
Ahead of his appearance at Harbottle & Lewis’s upcoming virtual event with Legal Cheek, I asked Macleod to give readers a preview.
“The beauty of working with an early-stage client, particularly in tech, is that a firm like Harbottle has the opportunity to work with the business across all aspects. So, often the relationship might start with a start-up or venture capital lawyer like myself meeting a founder and advising the founder on the best way to set up the company, structure relationships with co-founders and protect the company’s assets in the early stages, often with help from the intellectual property team if these assets are IP,” he explains.
We would then advise the company through multiple rounds of funding. “Taking money from venture capital funds can involve quite complex transactions,” Macleod highlights. Further into the lifecycle, the corporate team might advise the company on acquiring competitors or companies in new sectors. “Then, if things go well for the company, we are hopefully there to advise management and the shareholders when they exit the business, perhaps on a sale to a trade buyer or private equity, or via an IPO.”
Macleod also stresses the co-operation between the different teams in Harbottle & Lewis when advising a client “from inception of the idea right through to exit and beyond”. For example, the commercial team would negotiate customer and supplier contracts as well as advise on data issues, the employment team would advise on key employment hires and any internal disputes, whilst the commercial litigation team would advise on third-party disputes and potential litigation with customers and/or suppliers if they arise.
Although Macleod does not advise personally on each of those elements, he notes that he often remains the primary point of contact for the founder throughout a company’s lifecycle. “You really do get under the skin of the business and you build very interesting relationships with the founders,” says Macleod, when reflecting on the nature of his role.
Approaching the end of our conversation, I asked Macleod how he advises clients in a space which evolves as quickly as tech. “Often, we are at the forefront of new technology, but it doesn’t mean we are going to be experts from day one,” Macleod explains, “The key is to learn quickly and think on your feet.” He also does not shy away from asking colleagues with relevant expertise in the firm for help. “It is not something to be afraid of. I see it as an opportunity to do something exciting and a chance to learn something new,” he says with a smile.
Tom Macleod will be speaking at ‘Lifecycle of a tech start-up — with Harbottle & Lewis’, a virtual student event taking place on Thursday 18 January. Apply now to attend.
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