On a recent Wednesday in Woodside, Calif., about a dozen Silicon Valley-based investors gathered to celebrate a new fund. These were some of the region’s top “operators”—the executives who make organizations tick day-to-day—from some of the hottest tech companies around, with many decades of experience (and financial success) represented in the room. But they also had something else in common: Nearly all of them were first-time investors.
Why had they never invested before? Because no one had ever asked them to.
Operator Collective, the new fund, counts more than 100 of these operators and first-time investors as its limited partners. (The fund has not yet officially closed but currently stands at $45 million.) Notably, 90% of these LPs are women, and more than 40% of them are people of color. And yes, 77% of them have never invested in tech, though they are fully steeped in the industry.
“We didn’t build this like a traditional VC firm,” says Mallun Yen, founder and general partner at Operator Collective, and a long-time tech exec who has helped scale multiple Silicon Valley companies. “We wanted to turn the model on its head.”
Yen and Leyla Seka, a former Salesforce exec who co-led the tech giant’s move towards equal pay and is now an LP and investing partner at Operator Collective, officially launched their fund Wednesday afternoon at Fortune’s Most Powerful Women Next Gen Summit in Southern California. The fund’s differentiator, they argued, isn’t just that it taps into such a diverse group of qualified (yet under-utilized) investors. It’s also that it taps into a group of execs whose unique experience is valuable to entrepreneurs.
“We’re not talking about an executive who worked at some pre-cloud company,” says Seka. “We’re talking about the COOs of the top unicorns in the Valley.”
Other VC firms have hired investing partners with startup experience, but few have focused on bringing on such an operator-heavy (and diverse) pool of LPs. And Operator Collective’s lengthy roster of LPs won’t stay behind the scenes, as is most common with typical VC firms. That kind of access is likely to be attractive to startups, especially given that nearly 50% of the fund’s mostly female LPs have worked at companies that have been acquired, 41% of them have worked at startups that have gone public, and 44% have scaled their respective companies to $1 billion. The roster includes the COOs of Silicon Valley startups Waymo, Stripe, and Cloudflare, the CTOs of Lime and Gap, and the CMO of Zoom, to name just a few.
“[Yen] has taken a group of highly successful, mostly women, who are not necessarily CEOs and who have not been invited into the somewhat clubby world of venture capital,” says Dan Scheinman, a long-time angel investor and an advisor to the Operator Collective.
Indeed, many of the women invested in the fund say they have never been approached with investing opportunities. And even those who have say their jobs keep them from spending the kind of time needed to vet those opportunities.
“Mallun came to me and said, I want to start a fund where all of the LPs are operators,” says Erica Schultz, president of enterprise tech startup Confluent (and the former chief revenue officer of another tech company, New Relic). “Most of us operators are too heads down and too busy to do our own due diligence and do our own investing.”
The conversation between Yen and Schultz, now an LP in Operator Collective who has brought in multiple other LPs, actually started at another Fortune women’s summit. Schultz agreed to invest on the spot. Yen, who had recently written an op-ed on why women gather for business events but don’t actually make deals together, knew that she was on to something.
“The first person I talked to [about the idea for the fund] agreed and said she would invest,” says Yen.
A lot of other women have said yes over the last year and a half. But amassing such a large number of LPs can come with some challenges.
“It can be hard to manage a community of over 100 people,” admits Yen. But she counters that having redundancy in the LP community is a strategy: Because these operators are so busy, she always has multiple options to pull from when startups need help. Yen also says that she and Seka have plenty of prior experience managing community dynamics in their prior jobs.
While the number of LPs in Operator Collective is large, the actual fund size is not—at least in relation to some of the mega-funds now prevalent in Silicon Valley.
“There is a lot of capital being raised, so founders can be more picky,” says Seka. “But we have founders holding their funding rounds open so we can come in. We’re providing something unique.”
Operator Collective has already made five investments, including in Guild Education, a Denver-based “education benefits” platform for enterprises. “We raised a $157 million total round, and they were a small part of that,” says Rachel Carlson, the startup’s CEO and co-founder. “But we specifically said: We want Operator Collective in it.” (Operator Collective wouldn’t disclose the exact size of its investment in Guild.)
Carlson points out that, in addition to receiving money from Operator Collective, she also decided to put some of her own money into the fund, and has brought in her company’s SVP of engineering and chief product and analytics officer as LPs as well. “We wrote very small checks,” she says, laughing.
That the fund allows small checks at all is also somewhat unique—and intentional.
“We have a sliding scale that allows different levels of investment,” says Seka. “We have people in the fund at $10,000 and some at more than $1 million. We’re not just raising a fund, we’re all going to be the next generation of investors.”
The fact that many of those next-generation investors are women and people of color is part of Operator Collective’s mission and, argues Yen, its advantage. “These women are incredibly experienced and talented,” says Yen. “And they have big networks.”
Deal flow, according to Yen, Seka and several of the LPs, has not been an issue.
Editor’s Note: A previous version of this story incorrectly identified Dan Scheinman as an investor in the Operator Collective. He is an advisor to the fund.