In this episode of Think Fast, Talk Smart, Stanford GSB Professor Ilya Strebulaev joins Matt Abrahams to discuss how the venture mindset can help anyone — investor or not — weigh alternatives, make decisions, and move forward without looking back."
The smartest venture capitalists ask a very different question from what most of us ask," says Strebulaev. Instead of asking “‘Why should we invest?’, venture capitalists approach every new opportunity with [the] question: Why should we not proceed?”
This contrarian mindset is at the heart of Strebulaev's new book, The Venture Mindset, which reveals how the strategies of top VCs can help anyone make sharper decisions. As he explains, VCs will say "no" over 100 times before making a single investment — because evaluating what to reject is far more efficient than overanalyzing every prospect.
Summary and Key Insights:
- Introduction to the Topic:
- Gaming Failure: The story begins with two entrepreneurs, Stuart Butterfield and Cal Henderson, who started a company called Tiny Speck, backed by Accel Partners. They developed a game called Glitch, which failed to gain traction.
- Constructive Failure and Pivot:
- Investor Confidence: Despite the failure, Accel Partners chose not to take their money back because they believed in the team’s potential. This highlights the importance of constructive failure and learning from mistakes.
- Amy Edmondson’s Perspective: The discussion includes insights from Amy Edmondson on the opportunities provided by failure and how leaning into failure can lead to significant innovations.
- Successful Pivot: With the remaining funds, Butterfield and Henderson pivoted and developed Slack, a highly successful company, illustrating the significance of persistence and adaptability.
- Constructive Failure: Emphasis on the idea that failure should be seen as an opportunity to learn and grow, rather than a setback.
- Decision-Making in Venture Capital:
- Negative Screening: Successful venture capitalists often start by asking why they should not proceed with an investment, looking for red flags to avoid. This approach helps them focus on the most promising opportunities.
- Encouraging Dissent: Encouraging dissent and diverse opinions is crucial in decision-making processes, as it helps uncover potential pitfalls and fosters innovation. For example, Qualcomm Ventures used this approach when they decided to invest in Zoom despite initial internal opposition.
- Questioning Assumptions: Asking why a project should not proceed rather than why it should, to identify potential risks early.
- Applying Venture Capital Principles to Personal and Professional Growth:
- Saying No: Emphasizing the power of saying no to opportunities that do not align with long-term goals.
- Long-Term Thinking: Focusing on long-term potential and lifetime achievements rather than immediate gains.
- Networking and Building Relationships:
- Meaningful Connections: Building a diverse network of meaningful contacts across different industries, educational backgrounds, and geographies. Being intentional about networking and looking for opportunities to connect with new people, even in casual settings.
- Communication and Passion:
- Describing Passions: Using accessible language mixed with unique terms to engage and expand the audience’s understanding.
- Importance of Listening: Listening is highlighted as the most critical ingredient in effective communication, especially in understanding diverse perspectives and fostering innovation.
- Personal Reflections and Changes:
- Implementing Principles: The author reflects on applying the principles from the book to their own life, becoming more positive about failures and more proactive in networking.
- Learning from Failure: Embracing failure as part of the research process and being more open to networking and engaging with others.
Key Takeaways:
- Constructive Failure: Embrace failure as a learning opportunity and a stepping stone to success.
- Strategic Decision-Making: Use negative screening and encourage dissent to make more informed decisions.
- Networking: Build a diverse and meaningful network for long-term growth and opportunities.
- Effective Communication: Prioritize listening and use a mix of familiar and unique language to engage others.
- Persistence and Adaptability: Be willing to pivot and adapt in the face of failure to achieve greater success.