DeepSummary
In this podcast episode, Ilya Strebulaev, a professor at Stanford Graduate School of Business and the founder of the Stanford GSB Venture Capital Initiative, discusses the principles of the 'venture mindset' and how it drives decision-making and success in venture capital investing. He shares insights from his research on the critical role of venture capital in fostering successful companies and innovation in the United States.
Strebulaev delves into various aspects of the venture mindset, including sourcing and selection strategies, portfolio management, risk assessment, and incentive structures. He highlights practical mechanisms and best practices employed by top-tier venture capitalists in areas such as diversifying networks, meaningful connections, consensus decision-making, and striking a balance between doubling down and quitting investments.
The discussion also covers the applicability of the venture mindset beyond the VC world, such as in large corporations and personal life. Strebulaev provides his perspective on investing during economic downturns, the impact of AI and valuations of unicorns, and shares anecdotes and examples from his research and interactions with successful venture capitalists and founders.
Key Episodes Takeaways
- The 'venture mindset' encompasses a set of principles and decision-making strategies employed by successful venture capitalists, which can be applied beyond just the VC industry.
- Building diverse and extensive networks is crucial for successful sourcing and identifying investment opportunities in venture capital.
- Avoiding consensus decision-making and embracing the principle of 'agree to disagree' is essential for achieving success in venture capital investing.
- Focusing on potential 'home run' investments and not dwelling on failures is a key principle of the venture mindset.
- Venture capital firms need to take calculated risks and embrace failure to increase the likelihood of achieving significant successes.
- The venture capital industry in the United States has played a causal role in fostering the success of major innovative companies over the past 50 years.
- Economic downturns can present opportunities for venture capital investing due to lower valuations, increased deal flow, and the ability to conduct more thorough due diligence.
- The principles and mechanisms of the venture mindset can be applied to foster innovation and decision-making in large corporations as well as personal life.
Top Episodes Quotes
- “If you look at the LinkedIn profiles of many, many, many venture capitalists. If any venture capitalist is listening to us right now, likely. My team and I looked at their LinkedIn profile and we studied their connections. Interesting how many connections they have. Who are their connections? Okay. And then what we did is we looked also at the link to profiles of corporate venture capitalists. So those VC's who work in large companies. And then also we started LinkedIn profiles of corporate innovators.“ by Ilya Strebulaev
- “And indeed, when I work with venture capital firms, and these days I work a lot, because they come to me and ask and tell me, Ilya, you've studied these hundreds and hundreds of venture capital firms. Can you come to us and talk to us about best practices? And do you know, Nick, what I observe most often? I worked with five venture firms recently, and in every single one of them, interestingly enough, they're not taking enough risks. They are, startups, in fact, are not failing often enough, which means, of course, they're also unlikely to hit home runs.“ by Ilya Strebulaev
- “We showed that venture capital industry in this country, in the United States, is cosily, that is the critical word, cozily responsible for the vast majority of those companies. So had there been no venture capital industry in the United States in the last 50 years, we likely would not have had Google, Apple, Amazon, Microsoft, Airbnb, Netflix and Moderna.“ by Ilya Strebulaev
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Episode Information
The Full Ratchet (TFR): Venture Capital and Startup Investing Demystified
Nick Moran | Angel Investor | Startup Advisor | Venture Capitalist
5/20/24
Ilya Strebulaev co-author of the Venture Mindset joins Nick to discuss Deconstructing the Venture Mindset -- The Data and Decision-Making Driving Top Tier Investing. In this episode we cover:
- Venture Capital Mindset and Decision-Making Principles
- Venture Capital's Role in Creating Successful Companies
- Sourcing and Selection in Venture Capital, Diversifying Networks and Meaningful Connections
- Venture Capital Investing Strategies and Portfolio Management
- Venture Capital Best Practices, Including Risk Management and Portfolio Analysis
- Venture Mindset, Incentives, and Innovation in Startups and Large Companies
- Investing in Venture Capital During Economic Downturns, with Insights on AI and Unicorn Valuations
Guest Links:
The hosts of The Full Ratchet are Nick Moran and Nate Pierotti of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area.
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