The Future of Venture Capital Is With Operator-Investors

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The Future of Venture Capital Is With Operator-Investors
The Future of Venture Capital Is With Operator-Investors

Many of history’s best coaches were once players themselves. From the legendary Phil Jackson, who led the Chicago Bulls and Los Angeles Lakers to a record-breaking eleven NBA championships, to Alex Ferguson, who managed Manchester United to 38 trophies, coaches who were athletes themselves have a unique ability to outperform.

A similar dynamic is gaining traction in venture capital, with the potential to completely transform early-stage investing.

Established funds such as a16z, Greylock, and Sequoia hired vertical-specific Former Operators who brought successful entrepreneurial track records, industry relationships, and experience navigating the challenges that founders face in the first wave of operator-investors.

Operator Angels were the second (and most recent) wave. Angel networks sprouted up in every sub-category and region, allowing current startup operators (with sufficient personal wealth) to help reshape early-stage capital tables by bringing in “smart money.” With the rise of AngelList and programs like On Deck’s Angel Fellowship, current entrepreneurs can now play a more active role in the startup ecosystem while still building their own businesses.

As more Operator Angels have emerged, founders have begun to recognize the distinct value they can bring to a capital table.

Operator Fund Managers are the most recent wave of this trend. A growing number of current operators are raising venture funds, owing to a combination of: (a) founder preference for operator-investors to fill out cap tables, (b) easing regulations by the US Government that have made it easier to launch venture capital funds, and (c) the creation of AngelList Rolling Funds, which offer significant benefits to emerging fund managers.

These trends have prompted current operators — startup founders and early employees, executives at large tech firms, and domain experts — to raise their own funds, leveraging their full-time job and sector knowledge to source, invest in, and support great startups. These new funds have taken a variety of forms: Solo Operator Funds (Gumroad’s Sahil Lavingia), Multi-Operator Funds (Eventjoy’s Todd Goldberg and Superhuman’s Rahul Vohra), and Operator & Investor Partnership Funds (Lolita Taub).

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This context inspired our team (Siya & Taylor) to establish Pathway Ventures, an early-stage fund focusing on the human side of the future of work. We’ve both spent our careers building and scaling Edtech and Future of Work startups, and we’ve both been functional leaders in product, marketing, and BizOps. Siya leads Startups at MongoDB in addition to Pathway, and Taylor is the Chief Operating Officer of FutureFit AI.

While we have both previously invested in Edtech, many people have asked us what distinguishes Pathway from funds run by full-time investors. We believe that Operator-Investors are the future of early-stage venture capital for four reasons based on our own experience and conversations with founders, LPs, and fellow Operator-Investors.