22. The Changing Landscape of the Tech Industry
Hosted by Chris Castle, with guest Claire Lee.
From founder demographics to the problems a startup faces, Silicon Valley -- and the world -- are changing. In this first half of a two-part episode, Claire Lee, the head of the early stage group at Silicon Valley Bank, talks about how startups and established companies across various sectors are evolving. The challenge for acquiring seed capital has been usurped by larger problems, including finding talent and running your business in morally appropriate ways.
Chris Castle sits down with Claire Lee, the head of the early stage group at Silicon Valley Bank. Claire discusses the various startups she is involved with across various sectors, such as cleantech, fintech, and healthcare. Much of the conversation revolves around her experience at Recode's Code Conference 2019 and three lessons she took away from her attendance.
First, media platform companies such as YouTube, Facebook, and Twitter need to make large changes to become more transparent. Their user base is losing trust due to the persistent problems of hostile environments, hate speech, and misinformation.
The second takeaway was on the role of technology throughout our lives. For example, automated content moderation through AI can only go so far, as the technology behind them require a certain baseline standard of ethics which is as yet to be defined. A generation of new users are looking for tooling to place constraints on bad actors, which are problems that have not been tackled at scale.
Finally, Claire's third realization was the adaptation of technology in decidedly non-startup environs. For example, she cites how both Harley Davidson and Goldman Sachs are revolutionizing their businesses to adapt to both new consumer needs and to attract engineering talent. Both consumers and employees are demanding better corporate values before acquiring or working for a brand.
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Chris Castle: Hello, and welcome to Code[ish]. I'm developer advocate Chris Castle, and today, we're talking with Claire Lee from Silicon Valley Bank about a few of the most pressing issues facing the tech industry that were just recently discussed at Recode's Code Conference. Thanks for joining us Claire, can you introduce yourself.
Claire Lee: Yeah. Hi, Chris. Thanks for having me. I'm Claire Lee. I'm the head of the early stage startup evangelism group at Silicon Valley Bank.
Chris Castle: There are a lot of things that we wanted to chat about today, but can start with what is Silicon Valley Bank for those who are unaware, and what do you do as the head of early stage there?
Claire Lee: Silicon Valley Bank is really at the intersection of the innovation economy. We have been around for 35 years helping innovators at every stage of the life cycle with their technology and life sciences startup find access to capital, talent, and customers. We're really looking at servicing innovators and investors primarily with really interesting groups across the board from life sciences, energy resource innovation, which is the artist formerly known as cleantech, of course software and enterprise software being a big piece of that, fintech hardware, and then the private equity and venture capital world as well. My favorite of all the groups would probably be the wine division.
Claire Lee: It does, it is.
Chris Castle: You travel to Burgundy and fun places like that frequently to talk to wine innovators.
Claire Lee: Yeah, the interesting thing is we tend to follow the people and we really place bets early on people. What's really interesting to me about this story is how this evolved. It was essentially when in the early days the founders and investors had exits and did well and then this trend began where they would go and buy a winery, or buy some vines and at least try and make a very different product than the one they potentially had before. Silicon Valley Bank founders, at that point, were very much pioneering the category of venture debt and they kept supporting these individuals through the next chapter of their life cycle. It's fascinating, we work with a lot of very cool boutique wineries in Washington state, in Oregon, and then in California of course, Napa, Sonoma. We've been branching out and evolving that business, as well like every other group. It's a really fascinating story.
Chris Castle: Yeah, that's cool. Is it your standard wineries like someone who just wants to create a really nice wine? Is there some tech startup or innovative bent to it where it like they're doing something different or they're using IOT or something like that with their vines?
Claire Lee: Yeah, that's a good question. I think, again being at the intersection of it you see a lot of cross pollenization where you've got people who appreciate technology and the uses of that in any industry, every single industry is being disrupted at a rate, and a pace, far faster than previous years, previous decades. Yeah, we bank boutique wineries, as I said. Premium wine, so that for anyone who knows is not the stuff that we get at Trader Joe's.
Chris Castle: Yeah, right.
Claire Lee: Normally. Really interesting, very entrepreneurial people. One thing we saw lately was a robotics company actually started in New Zealand, essentially university technology transfer and research project that became a commercial viable entity backed by a large Japanese corporation that's just entering the United States.
Chris Castle: Okay.
Claire Lee: They'll be selling their robotics equipment and their intelligence sensors to growers and farmers. I just loved making that introduction because of course, we want him to be able to go and sell his fantastic product to these wineries in Napa, Sonoma, and beyond.
Chris Castle: Yeah, that's cool. I got to meet with a Heroku customer called, Creator. They've created a robot that makes hamburgers. They have a fast casual restaurant in San Francisco where they have this machine that creates a burger for you. They have their software running on Heroku in the cloud that interacts with it for point of sale and health of the machine. It's cool to see all these, the merging of hardware and software.
Claire Lee: Absolutely.
Chris Castle: Whereas Heroku was really only for software at one point and now everything cloud is connecting more and more with hardware.
Claire Lee: Yeah, I mean we're seeing the same in healthcare. Healthcare plus software really is a whole category in its own right, digital health as well.
Chris Castle: Yeah, that's cool.
Claire Lee: Someone said to me earlier, cancer is huge. Cancer is the biggest market actually for the biotech and life sciences sector startups in the US at least. Yeah, let's hope that there's more intelligent solutions coming out like that.
Chris Castle: Yeah, that's cool. It's cool to see. What have you been up to lately? We chatted about--you were recently at Recode's Code Conference and picked up all sorts of great nuggets and interesting information for developers and tech founders, and whatnot. What were some of the most interesting things you heard about or saw there?
Claire Lee: Yeah, I guess ... This was my first time at Code and it was great to be involved, and I just found it an incredibly diverse group of people, pretty small intimate group as well so it gave us plenty of opportunity to really connect with old friends, and colleagues, and also meet new people who would otherwise probably not collide with each other on a daily basis. Yeah, Code was fascinating. There was probably three big takeaways for me and anyone who wants to read the more intelligent engineering brain synopsis is recommended to read Steven Sinofsky's "Learning by Shipping" medium post on the conference. It's really interesting to see, I think, that the passion and energy in the room was directed towards three main things.
Claire Lee: One was looking at when we think of media platforms like the big platform technology companies, YouTube, Facebook, Twitter, and I'm including Instagram obviously as well with Facebook, is they came under a lot of pressure to be more transparent. That was number one, takeaway for me was transparency and trust in this digital age, really important. The second thing was around looking at really the role of technology in various forms. One was when we think about AI what are the ethics and the ethical applications related to AI. Particularly, when we're looking at automating things like content moderation or basically policing the web to really address the issues around the hostile environments, or hate speech, or misinformation, disinformation, and "fake news". That was, I think, a really interesting piece of conversation for me because I'm not usually exposed to something that really is looking how media has evolved so much in this digital age where we're having a very different conversation today about these platforms than we did maybe in 2004. When I think that was when Facebook emerged. That plus, when you look at say the very public questions that are out there right now around Twitter, obviously as a platform, which Kara Swisher actually referred to as a cesspool.
Chris Castle: That's interesting.
Claire Lee: In a kind, that sort of term of endearment.
Chris Castle: Right.
Claire Lee: I absolutely, I happen to adore Twitter and that's where I tend to consume a lot of my news but one great comment was, maybe that contributes to even greater bias and myopia because we tend to follow people that are close to us, in at least opinion potentially. I think that's a very interesting challenge for us is to understand ethics and bias as it relates to the way we can really manage and moderate content in this digital age. It's not an easy answer, there's no silver bullet, for sure, but I thought that was fascinating. Susan Wojcicki, the CEO of YouTube actually was on stage along with representatives from Facebook and Instagram, as I said, and then Twitter. I think what we're looking at is a generation that's really searching for tools that can at least put some beautiful constraints around the bad actors, let's say. Right? Limiting the amplification of something that's actually considered "bad". You know?
Chris Castle: Yeah.
Claire Lee: Where does it break the tools and the rules versus what kind of things are we going to put in place that obviously allow positive content or at least verified, validated content to be amplified to a greater degree and therefore, monetized. Any investors that know what it's like to invest in consumer startups understands that what a powerful platform Instagram has become.
Chris Castle: Right.
Claire Lee: For these consumer startups. That was a fascinating discussion, so that's probably second point. Then thirdly and finally, I think really looking at the greater role of technology as a whole. It was quite fascinating, I think, that I really liked the way Kara, who's of course from Wall Street Journal, I think initially, and then obviously set up Recode Decode, and has evolved and then they've merged with Vox Media. You had Kara, you had Ezra Klein from Vox, Peter Kafka, other amazing journalists, and these are people I don't hesitate to call journalists. Right?
Chris Castle: Yeah, yeah.
Claire Lee: As opposed to-
Chris Castle: They're not just bloggers.
Claire Lee: Bloggers. The general philosophy, I think, that they brought was really fascinating, and that was the third big takeaway for me was, technology is so, I mean it's everywhere. Software is eating, fill in the blank. Right?
Chris Castle: Right.
Claire Lee: At this time, I think having a lot of these big, big problems we're seeing around energy and climate change, clean energy and the need for greater solutions, and broader solutions, when you think about migration and immigration, and social mobility there was a lot of discussion on that specifically looking at the role of technology around the US border. Also, really looking at the role of technology in helping essentially break down barriers and create much better access for everybody to the same kind of things, i.e. not being hunted down and treated differently just because you may have a certain ethnicity, for instance. There was a lot of discussion, I think, around the role of the big tech platforms and also the role of anyone who is in this industry when it comes to much bigger questions around financial inclusion and representation across the board, access, and then really the privacy and data questions were really dominant. I found that amazingly interesting.
Chris Castle: Do you get the sense, was the tone or could you get a sense of whether are we at the, and these people that were there, are we at the realization phase of this right now? Were there people actually giving like, here's how to fix some of these problems? People that seem be beyond just like, okay I recognize there's a problem, I want to actually fix it now. Were there people throwing out solutions or saying, "Here's what we need to do as a community."
Claire Lee: Yeah, to quote Steven in his summation blog after Code, I think he nailed it when he said, "There's a consistent course reminding us all that context matters." That's actually the title of his blog. What I came away with really is knowing okay, we're in the phase where we're acknowledging there's a problem, there was a lot of discussion around how that problem manifests in everyday life. As I said, a lot of consistent thought leadership coming from representatives, very senior representatives from these companies. However, the talk about transparency and the need for trust, I mean it was so pervasive that of course we're all reminded of that as we board the planes home, but I think what became evident for us was probably the trust has been eroded and to quote someone on stage, "Once the trust is lost, it's very, very hard to win it back." I think what these platforms are facing is, and I'm not sure the word backlash is justified, although we did dive into that at Code as well, it was a really interesting discussion, but where do you draw the line. I think what people have seen is that our requirement now is for greater accountability. I think Tim Cook even called people out on that in a commencement speech very recently where he said you can't go and create chaos and acknowledge that you are creating chaos without taking responsibility and accountability for fixing the things that are broken.
Chris Castle: Right.
Claire Lee: I think that's a very important learning because coming away going, oh yeah, we need to be more transparent and we must be aware of the data and privacy implications, and the need to retain trust. You can only have trust if it's bidirectional.
Chris Castle: Yeah, right.
Claire Lee: These platform companies have a lot of work to do. That phrase was probably mentioned, if you were to do word map from code, I'm pretty sure that's high up there.
Chris Castle: The phrase of, they have a lot of work to do.
Claire Lee: Work to do.
Chris Castle: Yeah. Do you think all these companies, all these platforms are still corporations, public corporations, most of them are with their primary goal as maximizing shareholder value? How do we make sure that part of their, like Tim Cook said, like part of their goal is taking care of the messes that they create helps to increase shareholder value? How do we make that a priority in the bylaws of the corporation? Do we need to make things like this in the bylaws of the corporation? It seems like there's so many questions that break a lot of the ... Me being, I did economics in college and it seems like there are a lot of things here that break the, maybe now incorrect rules of how capitalism works.
Claire Lee: I think it's the new normal.
Chris Castle: Yeah, yeah.
Claire Lee: Breaking the rules is innovation, when you think about. I think if a lot of creators, innovators, engineers, and founders tried to color within the lines, that we probably wouldn't see a lot of the remarkable solutions that we do see every day, and we do. The great thing about our world is that we're exposed to these incredibly talented passionate entrepreneurs, most of whom are really trying to solve a problem. That's where this idea comes from, the genesis of the company, and that's what they're seeking to do something with. Really, monetization or commercialization is probably, it's usually not the reason.
Chris Castle: Right, yeah. Well, I think any rational human probably would not start a company themselves, or at least start a tech company.
Claire Lee: I think you have to be a little bit crazy to start a company.
Chris Castle: You have to be excited and have some irrational-
Claire Lee: You have to be extraordinarily resilient and tenacious to continue to run a company. It's hard.
Chris Castle: Right.
Claire Lee: Really, really hard. I had a really interesting mini epiphany when I was listening to Matt Levatich, who's the CEO of Harley Davidson. I really liked his fireside chat with Kara Swisher because to me, it showed the value of integrity. When he talked about the values of the company, and the culture, and the way that they hold ever employee accountable, and the way they take ideas, I think it's called "intrapreneurship", which is really allowing people, the employees in the company to be as important a constituency as the customers. That's how their products have evolved in keeping relevant today. He actually demoed and brought on stage the first all electric vehicle, which is what he calls for first-time riders, or aka children, to get them used to riding bikes. I love the way they're evolving, but they're doing it in a way where they're staying true to their core values.
Chris Castle: Okay.
Claire Lee: Which I think of course, it's a huge piece of their competitive advantage. On the flip side, had he reacted to this big conversation around tariffs, which are really impacting their business to a massive degree like to the tune of tens of millions of dollars on their bottom line.
Chris Castle: Yeah, right.
Claire Lee: They're not wavering. They're aware of it, they've had to pivot, they've had to make some really interesting executive decisions, but they are still not straying from their core values. I think that definitely resinated when I listened to Matt. I mean, I don't own a Harley Davidson today, but it certainly made the brand in my mind stand for something. I think increasingly this generation of millennials and GenX, or GenZ rather, are going to be even more selective about what brands they spend their money on. Sourcing, ethical sourcing and sustainability matters more to this generation than any other generation before that. It's going to make a huge difference to brands that start, and survive, and thrive versus those that are just unsustainable and therefore go out of business for a number of reasons.
Chris Castle: Yeah, and it seems to be the same way also for brands that people will work for, or the millennial generation will work for. I both want to purchase from, I'm maybe not quite the millennial, but I both want to purchase from and work for companies that share the values that I have and want to spread or want to make more known in the world, I guess.
Claire Lee: Yeah, I mean I think, look honestly, in the Silicon Valley Bank startup outlook report, access to capital at least for the constituents we're working with, which are 50% to 60% of the VC backed tech and life sciences startups globally, those startups are really not battling as much for sources of capital these days. There's an abundance of capital, although it is highly concentrated still. They are actually more engaged in a battle for talent, a war on talent. Access to talent and talent acquisition is really, it's number one, I think, priority for a lot of the CEOs that we spoke to in our startup outlook report. 91% said that was their biggest priority. It's an obstacle to growth. Think of it, if I was to write you a check tomorrow and say, "You know what, I love your idea, Chris." "Here's a check $5 million." I mean, that's a seed round, by the way, in Silicon Valley. $5 million, okay?
Chris Castle: Yeah.
Claire Lee: Convertible note, here you go. Then you go out next week to try and find people to spend that $5 million on. How easy do you think it's going to be to find engineers in Silicon Valley? Whether it's enterprise software, consumer, or fintech, or cleantech, or biotech. I think everyone now shares that kind of pain point. Going to the other end of the spectrum, David Solomon from Goldman Sachs was on stage as well at Code. He said that 74% of Goldman Sachs' employees are millennials or GenZ.
Chris Castle: Shocking.
Claire Lee: 60% of GS is 30 years old or younger.
Chris Castle: Yeah, that's shocking.
Claire Lee: I mean, that is fascinating. They're hiring 2,500 grads every year but get this, we think of them as a bank, like Silicon Valley Bank. We're a bank.
Chris Castle: Right, yeah.
Claire Lee: They have 11,000 engineers. They're competing for engineering and tech talent just like the platform companies that we just spoke about. I just find that an amazing nuance is that graduates today, like in the next decades are going to have a range of choices when they come out of college. Let's face it, college probably won't look like it does today in 20 years time either.
Chris Castle: Well this has been great, thank you. That's all the time we have for this episode, but keep your eye out for the second part of our conversation of our discussion with Claire in a future episode. We're going to discuss supporting woman founders and generally lowering the barrier to all under represented groups to becoming startup founders.
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Developer Advocate, Heroku
Chris thrives on simplicity and helping others. He writes code, prototypes hardware, and smiles at strangers, helping developers build more and better
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