The Changing Face of UK VC: Siobhan Clarke, partner at Episode 1 ventures

Born in Northern Ireland, and in the midst of a career that has taken her to San Francisco and back, Siobhan Clarke is now a partner at young venture capital firm Episode 1, based just off Oxford Street in London.

An engineer by training, Siobhan has long been immersed in the tech scene, holding a succession of strategic roles at Cisco over eight years before setting up a software-focused startup accelerator, Particle Leap. There, she split her time between London and San Francisco before jumping ship to join Episode 1, after co-managing partner at the firm Paul McNabb tempted her into the venture capital fray.

Right now, she is experimenting with a hybrid role where she performs typical VC functions - deal flow, sitting on boards - in combination with operational responsibilities both at board level and as a more informal advisor.

Episode 1 focuses investments on UK software companies, with its first fund of £37 million being allocated across 21 firms. Fund two closed in November 2017 at £60 million, and has been earmarked for around 25 investments with a focus on deep tech and marketplaces.

We sat down with Siobhan earlier this year to talk about her career to date, diversity in the industry, and what Episode 1 does to better foster inclusion.

Below is a lightly edited transcript of that conversation.

Scott Carey, editor at Techworld: How do you view the industry as a whole from a diversity and inclusion perspective, and has it changed at all since you entered the industry?

Siobhan Clarke, Investment Team and GTM at Episode 1 ventures: I think it is damnably poor to be honest, there is no other answer to that question.

You only have to look at the BVCA report to see the stats. I think it has changed since I have been on the inside, partly because we are now talking about it more. Maybe there has been something of an acceleration because of the #MeToo movement, where it's now OK to talk about these things a little more openly, whereas before it might have been a case of 'Don't say anything because it might ruin your career'.

I think there is a greater confidence amongst people to talk about what is the un-talkable and framing that conversation to find what levels of bias exist, as well as challenge our own ways of thinking.

Is diversity more than just gender for you?

Gender diversity is the easiest to get your hands around but to me it is much bigger. It’s about background and connections. I grew up on a farm in Northern Ireland far away from the privilege of private schools, which taught me to see diversity as bigger than gender.

Episode 1 focuses on UK software companies, so we track what companies get seed funding vs those that we have seen. Across the UK, of all the companies that get seed funding, we see approximately 80%. If we focus on London then we see 95%. Our ideal is to get to 100%.

London has been the centre of investment historically. Therefore, as part of this fund we’ve gone proactively into the regions, which means I spend time in Belfast and Edinburgh and Manchester. I am glad to say that is leading to results as this second fund has already seen us invest in a few companies outside of London.

In the broader context of getting more girls into STEM and technology, do you think that by focusing on software companies, it's always going to be harder to find female-founded companies, or is that a stereotype that needs shifting?

A simple law of numbers applies, you can't get away from that. We need to encourage more diversity into the top end of the funnel. If we see a company in a space and we really like it, we would go and look at all other similar companies in that space, so for us it's about the whole company approach and not necessarily about a female team.

Female founders have traditionally - and the BVCA report bore this out - struggled to get warm introductions because they traditionally haven't had access to the same networks as their male counterparts - is that something that needs to change?

That's something we are totally aware of and I joined this Ladies in VC WhatsApp group around nine months ago. It now has 250 women across Europe in it and there is a lot of sharing of deal flow. I wouldn't say that it's prolific because we all still compete, but certainly where we see stuff that doesn't fit the scope for us, I will share it there.

When I first started on the VC side I was shocked by some of the reactions I would get from other funds or ecosystem partners where, and in particular when it was just myself and Carina [Namih, partner] in the room, some of these people had never met two female partners in a single VC firm. It's not that they said anything, but you could tell by their body language and approach that this was a completely unusual event for them and that was a bit weird for me.

They would say things like: 'you don't make the decisions', and it would be like: 'actually I do and either we have this conversation or we don't'. So bias still exists in the industry and despite the fact that we have a network of people, perhaps some of those females are seen as more junior - that assumption bias needs to be overcome.

The fact is that the industry has been established and had its own networks for a long time, but that is changing now, not just from a diversity point of view but I also think we have had 5-6 years of incredible growth in VC funding in the UK, so we are now starting to break down barriers. The low hanging fruit has got itself there, but now we are at the point where entrepreneurship is becoming much more of a choice for everybody coming into the mix, therefore VC's have had to change and recognise that not all money is created equal.

There is more of a focus on value add, different cultures and founders are asking themselves ‘do we want to work with these people?’ This will force a net change within the industry for good.

How do you combat that bias at Episode 1?

We call ourselves out about our own blind spots and that is a cultural thing. Back at the start of fund 2, we had two new female partners join this group, so our weekly investment committee has new voices and experiences in that mix.

We are very good at calling out bias and explaining why. We have adapted our culture to clearly defined decision making points but we also have opportunities for people to change their minds as we go through and admit that bias or question openly.

So, we spend a lot of time having those conversations back and forth here and that is the only way for each of us to learn and bring our insights and experiences to the decision making process. You need to feel free to do that without judgement but also in a way that enables others to challenge your thinking.

How do you feel about more affirmative approaches to creating better diversity in the industry?

I think they're great, as well as this whole 'burgeoning entrepreneurship as an approach to building a future for yourself as an individual', which means we'll see more startups coming into the world. I think that VCs have had a change where not all money is created equal. There is plenty of room within the market for specialisation. I think that is great because I personally am a believer in quotas: that there is a certain amount of systemic approach you have to take to move the needle and the market readjusts itself to that, but that's just my personal approach to it.

What about some kind of Rooney Rule to invest in female-led companies?

That would be kind of cool.

We use FundStack to track where there are female cofounders or CEOs but my sense is, and maybe I'm just optimistic, but I think we have a good diversity mix that we see coming through our doors. We do a lot of participation in female open hours and outreach work with groups such as Community Growth Ventures, we do open hours with them and extending it to people that may not have had access to traditional VC networks.

What sort of companies do you like to invest in?

In founders what I really like to see is grit and resilience and a deep-down, core strength that they are doing something they really believe in. There is a fine line between arrogance there, but you can also see them attracting talent and their ability to listen.

What I also really like is where you have an established software industry that has been around for years and hasn't changed at all and skills haven't evolved, and a company comes along and won't do it that way anymore.

The other one is the opposite extreme, where we are into the second or third generation of software. We want a team that sees things in a different way, they see it as a way to solve the actual issue. So where someone sees something slightly different to everyone else out there.

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