Bryan McGann likes to say that he’s in the “third quarter” of his life, but that doesn’t do him justice even in terms of athletic metaphors. The director of the Startup Ventures Clinic at Duke Law School has played—and continues to play—multiple sports, even simultaenously. That’s true in the literal sense, as he’s a member of the Athletic Hall of Fame at Raleigh’s Cardinal Gibbons High School, played a brief stint as a catcher in the Atlanta Braves organization (what he calls “the world’s shortest professional baseball career”), and was a decorated AAU boxer and soccer player.
He’s also had significant careers as an entrepreneur, a longtime lawyer with Smith Anderson, a commercial banker, and Duke law professor, while earning an MBA, J.D., LLM, and PhD along the way. He’s the inventor and founder of the Pill Pockets brand pet treats, the world’s leading medicine delivery aid for animals, which he came up with to solve the problem of getting his own golden retriever to take his medicine. The company was purchased in less than three years, and continues to dominate its market more than 15 years later.
McGann talked to us about his path and, especially, Duke’s Startup Ventures Clinic, which does pro-bono work for aspiring entrepreneurs in the Triangle. And yes, that could include you whether you have a connection to Duke or not.
Q: So after about 10 years as a commercial banker, you decided to go to law school at UNC. How did that come about?
A: I was fortunate enough to have an admissions director at UNC who looked past my first few semesters of undergrad when I was a boxer and a soccer player, and instead focus on my more recent academic work. So that was what really changed my trajectory. And then I was picked up by a big firm in Raleigh, Smith Anderson. But while I was in law school I came up with the idea for the Pill Pocket. I started to work on it on nights and weekend.
Q: How did Pill Pockets become a company?
A: I got some attention from investors in Colorado. They had a huge venture fund but they also invested on the side as angels. They kind of made me an offer that I couldn’t refuse. Their only condition was that I had to run the company. I’m sure you’ve been in that situation before where, you’re so passionate about something, that they say, all right, we can’t lose that passion. We’re willing to put our money in, but we need you to run it… I had thought I’d get someone else to run it. I’d just spent three years in law school and had just been picked up by a terrific firm. My idea was not to immediately give up that salary… But it went very, very quickly. It was concept to cash-out in less than three years.
Q: It’s a way for pets, dogs especially, to not notice they’re taking a pill?
A: Yes. Most people are kind of confused when they stick a pill into a block of cheese and give it to the dog, why the dog eats the cheese and spits out the pill. And the answer to that is very simple: because they know it’s in there the minute you hand it to them—they smell it. What people tend to do is to get the smell of the medication, which is typically very pungent, onto the outside of whatever it is they’re sticking it in.
The secret sauce of the Pill Pockets was that the hole in the center allowed you to hold it with one hand, drop the pill in the pocket and cinch it closed and the animals have no idea it’s in there—they gulp it. The larger the dog, the easier it is. But we’re successful with 70-80% of cats, and that’s just huge. If you ever owned a cat who needed medicine, it’s somewhat brutal. It requires a towel to hold the cat’s claws while you stick a pill down their mouth, that 50% of the time is going to get clinically entrapped, because they don’t drink water afterward. With the Pill Pocket, it slides right down immediately, gets in the gut and starts to work.
Q: Then you went back to Smith Anderson?
A: I did. That’s the beautiful thing about law firms, they anticipate lawyers moving into and out of their practice. I didn’t really understand that when I got there. When I had that offer from those angels, I typed out a resignation letter and went to present it to the senior partner, and he said, No, that’s not the way we do things. Your office will be here, your name will be on the door, it’s still on the letterhead. If you fail, come back. If you succeed, come back. So I took a year off after we sold the company, then went back to the firm in 2007, and now I’m still there, essentially, as an “of counsel” lawyer.
Q: How did you acquire a patent for Pill Pockets?
A: That was actually interesting. I was able to buy a patent that was close to what I had. That was back in the day when you had to actually go and search for a patent rather than be able to go on Google Scholar or the Patent Office website. My attorney came up with something similar to what we were doing, where the claims were close enough. The problem was—or the good part for me—was that the patent was about to expire for lack of payment of maintenance fees at the seven-year mark, literally within 30 days of going away and never being patentable again.
My attorney said, why don’t you call him and ask him what’s going on. And it was exactly what you might expect. The guy had been in a car accident. He had had this idea years before but now he was in a wheelchair, and he said, I just can’t do this. So I said, I’d like to buy it from you. We worked it out and I bought it from him. He unfortunately passed before we sold the company, but his wife ended up with a six-figure check.
I tell this to my students—that my experience wasn’t typical in two ways. To go from concept, from the start of the company, to cash-out in less than three years is not typical. And to go from idea to holding a patent within 90 days, that just doesn’t happen, unless you’ve got a ton of money to buy something. For me it was very serendipitous.
Q: You’re now in your third year with Duke’s Startup Ventures Clinic, last year as Interim Director and now as Director. What does the clinic do?
A: It is a pro-bono, student-run, student-led clinic that services startups, entrepreneurs with ideas, or any company or individual that could not otherwise afford legal services. They come to our clinic and we assign a student to work with them on issues that any startup faces at the beginning of its run, supervised by a licensed attorney, which is me.
So typically, like you can imagine, we do a lot of trademark searching, we do company formation, we fix a lot of problems. You’ll have an entrepreneur who comes in and says, Look at my logo, it’s really great. We’ll say, That is really nice, who did that? They’ll say, Some designer that I got over here. We’ll ask them if they have a work-for-hire agreement. They’ll say, “No. Do I need one?” We’ll say, “Yes, because you don’t own that.” That’s basically what we do. We service anywhere from 30-35 clients a semester, maybe more.
Q: Do the clients need to have a Duke affiliation?
A: No. They just have to be able to certify that they don’t have the cash to be able to go out an hire a practicing attorney in the area. We have a very unique relationship with the North Carolina Bar. Their role is to protect the practicing bar in our jurisdiction. They don’t see us as competition for that because we’re providing different legal services. What they see is those folks who would typically come out and make all these mistakes and then fail. We’re kind of the seed legal services group that then graduates these companies that are more successful to the practicing bar.
Q: What is the demographic of the typical client at the clinic? Is it a recent grad? Someone who’s working at, say, a software company but thinking of launching a startup?
A: All of the above. Primarily, “near students.” By that I mean those who are out of undergrad but are maybe in an MBA program, but they went to the MBA program because they wanted to be an entrepreneur. Or students who have just graduated from undergrad or their MBA program and they’re looking for their “thing.” That’s probably the most that we see. And that can be from N.C. State, North Carolina, Duke. Carolina’s actually putting together their own clinic—finally—so UNC in 2019 will have a Center for Law and Entrepreneurship. A lot of the people we do business with now, and lot of the companies, come from UNC. So we’ll collaborate going forward with Carolina’s clinic from now on.
But then we have retirees. We have people who have worked 30 years at Duke and think they’re retiring, they have their 401K, and now they want to start the business they’ve always wanted to start. But they don’t have a ton of money to spend on $400-to-$500-an-hour attorneys.
Q: What do you feel you learned most from your startup experience that you share with your students?
A: What I focus on mainly is quantifying and dealing with risk. An entrepreneur at one stage is not the same as an entrepreneur at another stage. How you quantify and deal with risk is going to be dependent on several things. First and foremost is, where are you in your life at the time. An entrepreneur who comes out of undergrad and has been living on rice and beans while he’s been in college can be a little more risky in what they can do. Now, they typically don’t have the resources or access to resources of someone who’s been around a little longer. But when I stepped away from the law firm, I stepped away from a six-figure job, a house and a mortgage, a wife and a child. That risk is infinitely greater.
Of course there’s a financial component to this. How do you finance your company, what are you comfortable with. I mortgaged my house, I put every penny I had into the company. I was willing to lose everything I had—but I wasn’t willing to go past that. There had to be a stopgap. I was willing to lose everything I had up until then and start again, but I wasn’t willing to go to where you declare bankruptcy and your credit is bad. I wouldn’t go “under,” even temporarily under.
But that’s a lot of what I teach them. A lot of what they learn at law school is the formulaic, doctrinal coursework they have to have. Putting the SEC rules into practice. Their eyes glaze over as they talk about exemptions to SEC regs. But when a client of the firm says, I want to take my business plan and go raise money, now you have you know what you’re doing to advise these companies.
Q: How many law students work on the clinic?
A: Up until this year, it’s been eight. We’ve been capped at an 8-1 student-to-faculty ratio. But we’ve had such demand for the course and complaints when people can’t get in that this semester we’re trying a new model. We have a fellow and one other clinical teacher who’s going to work with me, and we’re going to have 14 students.
Q: So do you hope to almost double your clients?
A: Hopefully, but we have to work to get the clients. They have to know we’re out there. We do our work in the offseason, so to speak. In the summertime I’m working with folks at the incubators and accelerators around town, letting them know we’re out there and we can help them.