Operator-Investors: The Future of Venture Capital

Source: Strong Early Access to the Best Deals

Operators see deals 9+ months before more traditional investors do. When a founder is prototyping ideas, researching market segments, and preparing for launch, they don’t call VCs for advice. They call operators who have had similar experiences.

Evaluate: Ability to Separate the Hype from the Opportunity

Operator-Investors can do much deeper diligence on companies within their sector. Given their work on the ground and their sector-specific network, operator-investors have a stronger sense of reality: emerging trends, what users want, and what types of partnerships/distribution channels work.

Invest: Differentiated Insights & Empathy that Wins Deals

In today’s fundraising environment, good founders have a lot of options and flexibility on who they raise capital from. Capital alone isn’t a differentiator and allocation on the cap table must deliver a high value per dollar invested.

Support: More Tactical Portfolio Advice & Connections

While many firms have portfolio support teams, operator-investors can go far deeper and more specific in supporting portfolio companies since they are plugged into the vertical. Every operator-investor brings a unique flavor to portfolio support given their work in the operating space, essentially serving as an “extension” to the executive team across their work expertise (e.g. finance, product, business development).

Conclusion

Our team at Pathway Ventures is confident that the time for operator-investors has arrived. We’ve already seen early-stage rounds ranging from $1M — $7M (really!) filled only with operators, and we believe that the number of operator-investors will skyrocket in the next year.

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