Leyla Seka of Operator Collective: More Women and Underrepresented Minorities Need to be Involved in the Investing Cycle

Although my last conversation took place at the end of 2019, it’s a perfect way to start the new year off with the series.  I’ve known Leyla Seka for many years going back to when she was heading up Salesforce’s Desk.com division. She left the company last year after being there for eleven years of doing some really cool things, including helping to create the AppExchange, and helping to spearhead the company’s equal pay initiatives. But just last month she became a partner at Operator Collective, a VC firm founded by long-time tech executive Mallun Yen with the goal of broadening the pool of those participating in venture capital investment.  In fact 90% of these limited partners (LPs) are women, and more than 40% of them are people of color.

Importance of Investor Diversity

Leyla shares what led her to become an investor and LP with Operator Collective, how this challenge compares to her road to becoming a senior executive at a company like Salesforce, and why she feels it’s important for more women and underrepresented minorities to get involved in the VC space.

Below is an edited transcript of our conversation. To hear the whole interview watched the video or click on the embedded SoundCloud player below.

Investor Diversity Needs to be Increased Among Angels

Small Business Trends: Tell us what exactly is Operator Collective?

Leyla Seka: The idea really started with the fact that a lot of women and underrepresented minorities were not involved in venture. And there’s a lot of side hustle going on around venture. When I worked at Salesforce, we acquired a number of companies and we brought their awesome founders over with us and then those founders would stay for a couple of years and then often they’d leave and many of them became venture capitalists. And when they left, I noticed they were calling the male executives and were like “Hey, invest in my fund,” or “Hey. Angel invest in this company.” And they weren’t really calling the female executives or anyone else.

Small Business Trends: Right.

Leyla Seka: So I got cut into one of these eventually, a friend brought me in and I started realizing it was a whole additional income stream that they were getting access to. Not all of them, but a lot of them. And I’ve been notorious for equal pay for many, many years. I think I always will be. I hope I always will.

Looking for the Right Kind of Company

Small Business Trends: I hope so.

Leyla Seka: Yeah. I intend to be until my last breath, I’m going to be talking about this. But it felt like another income and disparity. Right?  And also you know we want different types of companies. Right? We’re all sort of chomping at the bit for a company that represents the society we live in and not just the upper wealthy classes. And if we really want that then we need to let different types of people invest and create new companies.

So, Mallun had sort of created the framework of this and had begun to get some initial investors and she was working on that. And then after I left Salesforce, we were friends and I was already involved. We got much more closer involved. And then it became a really interesting project where we’re … Most venture funds don’t have over a hundred limited partners. Right? And most venture funds certainly don’t tell you who their limited partners are. We went about it in a much different way because the limited partners inside of Operator Collective are all operating executives.

A More Well Rounded Network

Now we recruited out of our network. So it happens to be 90% women, 40% people of color. And it’s a more well-rounded network than your typical VC network tends to be. But what we found so interesting about that is all of these, we surveyed our population of LPs, and we found that 56% of them had never invested before.

Small Business Trends: Wow.

Leyla Seka: These women and men are the people running unicorns and running giant divisions at huge companies. So 56% of them had never invested before, and when we asked why, over 75% said, “No one ever asked me.”

Small Business Trends: Wow, 75%. And these are, like you’re saying, these are people who have done some tremendous, outstanding things in their career, have tons of experience and were never asked before.

Leyla Seka: Yeah. I mean, to be fair, I was asked four years ago and partially because I was having a fit about it. Right? I was yelling about it and like, “Why am I not being asked?” And so that really, that metric for me was very humbling because it sort of completely validated the thesis that Mallun and I were running at that we weren’t really being asked to the dance ever. Right? So that was a real, a big principle of it was to get operating executives into venture, to get them thinking about the next companies, advising the next companies, helping the next companies. But also understanding that most operating executives are so busy they can’t breathe. So creating a framework that allowed them to engage in a way that made sense to them. Right? But didn’t put any kind of force on them to do anything they didn’t have time for.

Raising $45 Million

Small Business Trends: Congratulations are in order, because recently you guys raised $45 million or you opened with a chest of $45 million. The target was only 30 million and you’ve got 45 million. So that’s got to feel pretty good?

Leyla Seka: Yeah, that was awesome. I mean Mallun deserves a huge amount of the credit there. My partner Mallun, she is absolutely phenomenal when it comes to getting people fired up about the mission. But yeah, we raised over what we thought, which is very exciting and also very validating. And now we started, we already made some investments. Our investment thesis is focused on business to business SAAS, which is another difference. Right? I will be honest with you, I’m sort of new to venture capital but I was very surprised in my first run out how many people started asking me to invest in their lipstick companies, which is funny because I don’t wear any makeup. Like none. The only time I ever wear makeup is when my Salesforce or someone else puts it on me. Otherwise, I don’t wear makeup, not my jam. So I was like, “Wow, I’m really not your target here. Go to someone that wears lipstick and ask them to invest in your lipstick company.”

But it does sort of show the bias that exists inside of venture right now, that is female venture capitalists invest in cosmetics or consumer types of companies. And I think that’s great. By all means invest in what you believe in. But I don’t know anything about lipstick, but I know a lot about B2B SAS. I mean I built the AppExchange. I know a lot about that.

Exposing the Bias of the VC Community

Small Business Trends: Your experiences is, “I’ve been with Salesforce 11 plus years. I’ve worked with several big tech companies. As part of that, I’ve helped build big tech and lipstick is the first thing that comes to mind?”

Leyla Seka: It’s interesting. Right? A lot of this … And these aren’t bad people. Right? They’re excited, but it just, there’s a lot of bias built into the way all of us function. Me too. I’m not saying I’m perfect by any means.

Small Business Trends: Right.

Leyla Seka: We all have tons of work to do.

Small Business Trends: Absolutely, yeah.

Leyla Seka: But it was interesting to me. I was very like, “Hmm, that’s so strange. Don’t you want to talk to me about really deep enterprise B2B, gnarly business problems, not lipstick?”

Small Business Trends: Yes. So do you see that … How has that perception changed? Is this what you guys are doing, is this one of the first steps and showing, “Hey, this is the kind of talent you guys have put together, we can do as well as anybody else in tech and enterprise tech in the cloud.”

Investor Diversity Takes to the Web

Leyla Seka: Yeah, and actually I see there are a lot of funds coming online right now, women led funds that are doing something similar. Moxie by Katie Stanton. Theresa just started a fund and then Aileen Lee has always had Cowboy Ventures. There have been, the interesting thing about what’s happening in venture right now is there have been All Raise, Aileen, #ANGELS, there’ve been a number of women that came before and started sort of paving the pathway for other types of people to enter venture. So I believe it’s been going on, and a lot of those are investing in heavy B2B tech too. Right?

The lipstick example is more to show how biases are built into the way we all think about investors and operators and companies and interests and stuff like that. We’ve invested in a lot of really great B2B tech that I’m super proud of. From IRONCLAD, which is going to change the way a lot of legal services are run, through to Guild and Rachel Carlson, who is just phenomenal and makes all of us sort of yay for the future.

In a Lucky Position

We find ourselves in a lucky position too where we have a lot of support inside of the valley. I got all this advice from people like, “Oh, it’s really cut throat in venture and no one’s going to help you and you got to fight for this and that.” And it’s early days, but that’s not what I’ve found at all. I’ve found a lot of warmth, a lot of, “We’re excited you’re in this, Leyla, how can we help you? Do you want to learn about this? Come to this, come to that.”

Which has also been very affirming. Right? It was very nice to see how much support we got as we launched the fund from so many different people and from a lot of people that I guess folks would say we were competitive with, although I don’t see it that way. It’s been a really positive experience and I’m very fired up about that.

Creating More Opportunities

Small Business Trends: If you looked at what you’ve done at Salesforce and kind of the progression of seeing more and more women get opportunities to be leaders in these kind of tech companies and enterprises, where in terms of that spectrum do you see what’s going on with gender and diversity from the investment side of the house? How many years is it behind where you were as a tech enterprise at a company like Salesforce?
Leyla Seka: Well, Salesforce really was leading edge. Right? I mean, I’ve always said this about Salesforce. I’ve never seen a company that was trying harder to do the right thing. I really haven’t. So, I was lucky to work at a company like that for so long. So I’ll definitely say that. Look venture’s a bit behind. Right? I mean, I think it’s a little behind. I can’t exactly qualify or quantify how much, but you can see from the influx of change that Operator Collective is bringing to the table as well as a lot of these other female and underrepresented minority led funds. When you see this much activity boiling up, this many people sort of engaging in a new way of thinking about a problem, you can tell that there’s a there, there. Right?

Why We Lag Behind with Investor Diversity

I think venture has been a little behind, and I think now that because of a lot of the good work of organizations like All Raise and all of these types of places which said, “Hey, women have a spot here. Underrepresented minorities have a spot here.” We’re starting to see a shift.

Now shifts take a while. Right? In the moment they never feel like they’re happening fast enough. And over a lifetime you’re amazed at how much happened. Right? But so that continues to be sort of where we see ourselves. But again, I am seeing this network of women and underrepresented minorities in venture. And from our launch at least, what an amazing reception and how kind everyone was in deal flow and advice and meet this founder, meet this person. It’s been very welcoming for a business that I was told was very competitive and sort of cut throat. So I think the shift is beginning but we’re in early days still.

A Look at the New World of Investment

Small Business Trends: What’s been the most surprising aspect of coming into this new territory for you?

Leyla Seka: Well I continue to be pretty amazed at how many good ideas are out there. Right? And how many interesting ways people are thinking about solving, problems that we may have already solved. Right? But just tinkering it a bit and shifting it a bit to make it that much more compelling. So that I find very exciting. I think that probably the most surprising thing … I’m an operating executive, I still sort of think about myself that way. So not having a number, a daily, monthly, hourly number that I’m obsessing about and worrying about. I mean, I have a number. It’s just my span is a little longer. It’s not a monthly, I have a couple of years to hit the number or some years.

And I also, I mean this is another thing that I find sort of funny. I come from a operating job where I would say, “Do this, let’s do that.” And then a whole bunch of very smart people would run off and go do it. And now I say, “You should do that, we should do that. You should do that.” And a lot of people were like, “Yeah.” And then no one does it.

The Other Side of the Equation

So that’s a new experience. But it’s cool too. It’s learning, it’s sort of the other side of the equation. I joined some boards as well. That also has proven very interesting. It’s sort of learning how to exercise a different muscle. It’s a persuasion muscle versus a power muscle, if you will. You don’t work for me, so you don’t have to do what I say. But if I have a good idea, I want to make sure you hear it for you to consider. And I no longer walk out of a board meeting or walk out of a meeting with a founder and think, “Oh, they’re going to implement my ideas.” I think the first couple of months I was like, “Oh, they’re going to do that. And if they do what I told them this will work and that’ll work.” And then now I sort of get that it’s much more of a dialogue and way more up to them. So that took me a second.

Small Business Trends: Well let’s talk about maybe some of the kinds of companies. Have you already started investments? Is it just now that you’ve got the money, you’re starting to look at what kind of companies you’re looking to be a part of?

Leyla Seka: So we’ve done some investments, we’ve done some very cool investments in about five companies. We have an interesting take on how we do investments. So of course the thesis is enterprise B2B SAAS, we’re going to stick to that thesis more or less. We have a little slush fund for things we think that are really interesting that are a little bit …

Solving Interesting Problems

We’re looking for companies that are solving interesting problems or solving existing problems in interesting ways. Another big point for me and Mallun is we want to invest in companies we know we can help. Right? And our premise is a little bit different in that we engage our community, we engage with the company, we really try to help them understand what are you doing in marketing? What are you doing in product, what’s going on in sales? How are you thinking about legal? We really, because we all come from being operators, it’s very important to us that we engage with companies that we believe have the right types of founders and the right types of teams to build the next generation of companies.

Our due diligence process is standard like everyone else’s. We look at all that stuff, but then we spend a lot of time thinking about the founder or the founding team, what they’re trying to do, their willingness to be open to new sorts of things as far as how they create their teams and think about their culture. So it’s fun but it’s more intense than I think the typical diligence process is perhaps because Mallun and I spend so much time thinking about the company and would we want our LPs to work at that company? Would they want to work at that? We think about it in multiple frameworks before we make the call.

Investor Diversity Gives Chances to New Kinds of Companies

Small Business Trends: You are looking for certain kinds of companies in terms of just their potential of course, but then you’re also looking to expand opportunities for folks that have been underrepresented or it’s been more difficult for them to get the capital that they need. What’s the mix? How do you make sure that you find the right companies that will, with hope, become very successful in the future, but also leave the opportunity open, a little bit more open for companies that would traditionally be overlooked? Companies that are headed by women or folks that are underrepresented by … whether they are from a race or a color perspective. How do you balance that?

Leyla Seka: We talked about that a lot. Right? One of the big differences in our fund was the thesis is we’re getting more women and underrepresented minorities into investing. Right? And then the actual investments are just based on the product, the team, the potential of the company. Now our network is leaning towards that. We’ve already invested in two women led companies out of the five. So I mean without even trying, it’s happening candidly, which I love and which was sort of my dream that we wouldn’t have … There’s still much to do, mind you, there’s no finish line in any of this. But so it is sort of happening naturally and … But yeah, our thesis was not. A lot of funds are created with a thesis to invest in underrepresented minorities or women, which I think is wonderful and 100% support them.

Getting More Underrepresented Groups Involved

That is not our thesis per se. Our thesis is more women and underrepresented minorities need to be involved in the investing cycle. And I will tell you how we made that happen. So we were creating the fund. Right? And we were raising money from all of these different LPs, and we also got institutional money in the fund in the first round in the first raise, which is almost unheard of. And which Mallun deserves full credit for. It was a Herculean effort and she did all of it. But when we were creating the fund, there were some people I wanted in the fund and quite frankly the initial, sort of the median, the price everyone came in roughly at was around 200, 250K. Right? Which is pretty high, pretty high. And there was someone in particular that I really wanted in the fund and there was just no way she could come in at that.

Building a Scale for Investor Diversity

Mallun and I started talking and we created a scale. Right? And it really was based on equal pay, no surprise. So the idea being that not all of the people we want inside of the LP network would have been afforded the same opportunities as even us within the LP network. So we created a scale that took into account years in job, promotional opportunities, promotional advancements, pay. And we talked to the people quite a bit. So we created a scale that let people join his LPs at 10K, which is incredibly … most funds don’t do that. It’s expensive to have that many people in the fund. But the whole idea of our fund was that we were creating one that would be inclusive and different for everyone.

We have folks in the fund that started at 10K and we have people that are well over a multimillion dollar investment, so we have a very wide range of LP. We treat them all the same and no one knows how much anyone gave. Right? That’s not the game we play, only Mallun and I really know that and our operating partner, Ambrosia. But we did that because we felt that that would be the most equitable way to get as many people on the cap table and thinking about investing as we could with sort of the tools we had at our disposal.

A Different Mix of Investors and Founders

Small Business Trends: That’s really cool. So then the net effect will be you’re going to be seeing a different makeup of the actual investors, not just a different makeup of the actual founders.

Leyla Seka: Exactly, exactly. I get cap tables all the time now and I look at these cap tables and I’m like, “Wow, they’re all very homogeneous.” I’m looking forward to a different looking cap table that has all kinds of names on it and all different. Not not Mike, Adam, Joe, John, Bob, something else, let’s have a different name on that thing sometimes. But it’s exciting and it is really. I think one of the most exciting things has been the reception from our LPs and from the valley at large, but really from the LPs that joined our fund, these people that sort of put their money where their mouth was and engaged with us in this journey as well as the founders who are letting us sort of engage in helping them create their companies.

A Unique and Awesome Relationship

It’s a very unique and awesome relationship. I felt this on the AppExchange in the early days, and when AppExchange was about a year old and it was still very new, there was this energy underneath it. There’s lots of things that needed to be fixed and lots of processes that needed to be put in place and all that, but there was sort of an energy, a tide underneath the AppExchange, and I could feel that something very different and very wild was happening. I feel that current with Operator Collective as well, it’s something is changing again, which is very exciting to me.

This article, "Leyla Seka of Operator Collective: More Women and Underrepresented Minorities Need to be Involved in the Investing Cycle" was first published on Small Business Trends



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