Wicklow native Claire Lee is one of the most influential Irish people in the Silicon Valley investment scene. She tells John Kennedy how investing in people, not strictly in product, is an enduring trend in San Francisco.
The last time I saw Claire Lee, it was on a swelteringly hot day in San Francisco and she was carrying her newborn son Ben (now four) in one of those wearable baby carriers as she left one of the myriad of tech meet-ups in the city and we walked down a hill together.
At the time, she was a principal with Microsoft Ventures in San Francisco and her views on the tech start-up scene were as strident then as they are today.
‘A lot of the reason for the failure of companies is, the founding teams fall out of love with each other, fight and break up. The team is hugely important and, in a lot of cases, venture capitalists invest in the people, not the company’
– CLAIRE LEE
Today, Lee is managing director of early-stage banking at Silicon Valley Bank (SVB). SVB is a towering force in the San Francisco tech scene and works with more than 50pc of VC-backed firms globally.
Since 2012, SVB has lent $110m to 17 Irish tech and life sciences businesses, including AMCS, Accuris, Boxever, Lincor, Movidius, Qumas, Openet and Swrve.
As well as this, SVB collaborated with the Collison brothers’ Stripe to build the Atlas system, which enables entrepreneurs from anywhere in the world to set up in the US.
Prior to joining Microsoft Ventures, Lee advised former US president Barack Obama’s State Department.
She will be the guest of honour later this week (3 November) at the Bank of Ireland-backed Startup Grind, which takes place at NDRC.
A melting pot of IQ and cash
Recalling our last meeting, the mother of two laughed: “That was Ben’s first tech conference. He was born into the Silicon Valley craziness.”
Now six years in Silicon Valley, Lee admits the fast-paced culture takes a bit of getting used to. “It takes time. The degree of diversity here is quite huge and you have to remember, most of the people that come to work here are immigrants. It’s a melee of culture and ethnicity with a huge concentration of intelligence and capital.”
Passionate about education, inclusion, international affairs, and providing greater access to capital and opportunity, Lee is an adviser to Astia Global and the US Department of State, and sits on the NationSwell council.
Lee’s road to the Valley began in Ireland after she left college and worked for IBM. Later, at Microsoft, she worked alongside the chair of Microsoft Europe, Jan Mühlfeit, on European policy around entrepreneurship and education. Lee was also part of the corporate strategy team that created and launched the Microsoft BizSpark programme globally.
“I had this interesting opportunity to work with Mühlfeit, who was this amazing character, and we spent a lot of time at the European Parliament presenting to various ministers around policy on education and entrepreneurship and helping people to become angel investors. And that’s how it led, in time, to me working with the US State Department – it was all pretty organic.”
Moving from being a venture capitalist with Microsoft Ventures to heading up the early-stage group within SVB has been a seamless transition.
“Once you are involved in the innovation ecosystem and you are working with start-ups, entrepreneurs and investors, you are just immersed in that world.
“The innovation world fundamentally has the same requirements for success: access to capital, access to talent, access to customers and partners. But capital is the biggest requirement – money certainly makes the world go round.
“My goal is to obviously look through that lens and democratise access to capital for entrepreneurs globally. Silicon Valley Bank has, for the last 30 years, developed hugely on this basis. More recently, the bank has been expanding pretty aggressively internationally. In the US, we would have 29 offices in strategic places. For example, we opened an office in Houston to focus on investments in the energy sector.
“Silicon Valley Bank punches above its weight. It tends to see trends and then goes into markets and areas, and supports companies in these areas like fintech, payments, energy, resources and cleantech.
“When I think of SVB and Ireland and the UK, we have companies that we work with that are successfully raising funding here in the Valley, and one thing I am certainly seeing is a gradual increase in the ability of Irish and British companies to raise greater sums of funding and become more and more credible.”
Lee said that SVB is continuing its global expansion, which includes plans to expand into Canada.
“We have chosen to invest in Ireland because we believe it is a major centre of innovation and a global hub for entrepreneurs.”
She said that the key to SVB’s performance is its occupation of the intersection of tech firms, venture capitalists, angel investors and other groups.
“As a commercial bank, we work with a lot of private firms and we conduct wealth management and we are increasingly working with partners like industry groups, not-for-profits and we have partnerships with bodies like Endeavor Investor Network, which enables us to engage with countries where we don’t have a footprint, like Australia for example.”
Mapping success for entrepreneurs
When it comes to overseas tech firms entering the US, Lee has worked closely on the development of Stripe’s Atlas service.
“I have been very much involved in Atlas from the beginning and it came out of beta in April. So far, we have onboarded thousands of companies to the system, which gives them US incorporation status as well as a US bank account. We worked with Stripe on the onboarding API specifically because it helps reduce the time it takes to get through administration, from days or weeks to minutes.”
As a commercial banker working with start-ups entering the Valley, Lee said that the same instincts she had as a venture capitalist still apply.
“The number one thing is, when I look at a team, a product or traction, I try to understand the motivation for solving a problem. Some people make assumptions about a certain market growing or trending and they will say talk about the ‘unique’ approach they are taking. When we hear the comment, ‘We are unique’, we just laugh because they obviously haven’t seen the competition out there.
“Another issue is if they are building a scalable or sustainable business. For example, is their fintech solution actually compliant? Do they need help with the regulatory environment? And then, even if the product or the idea is wonderful, does it have a certain shelf life? And what is the addressable market? Is it millions, tens of millions or hundreds of millions?”
Crucially, Lee believes what Silicon Valley investors ultimately invest in is the team, not necessarily the product.
“A lot of the reason for the failure of companies is, the founding teams fall out of love with each other, fight and break up. The team is hugely important and, in a lot of cases, venture capitalists invest in the people, not the company. Often, they almost expect the company to fail but the entrepreneurs are incredibly bright and they invest in them, I’ve seen that happen with companies.
“When they look at teams, they evaluate whether they have the tenacity to pivot and do something else. And usually they succeed.”
Lee’s perspective on the Silicon Valley investment scene is at odds with the tendency of Irish tech firms to stick at something to the very end, and the badge of shame that is attached to failure.
“What is interesting about Silicon Valley is the notion of what failure means. Often, failure is a necessity and certainly in the Valley.
“Some people will look at a team and say, ‘You know what, I’m investing in you.’”
She has a point when you consider how the original investors in a failed gaming company called Glitch encouraged the team to try something new – the result was Slack, one of the fastest-growing business software platforms on the planet.
“It’s not always going to be a killer app or the next Facebook. A lot of the time you are investing in the people, which is a good thing.”
Updated, 3.20pm, 1 November 2017: This article was updated to clarify that Silicon Valley Bank has plans to expand to Canada, rather than Africa, and that the bank has lent $110m to 17 Irish companies, not $75m to 15.