“Decoding the Venture Mindset,” with Professor Ilya Strebulaev

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Venture Mindset Principles

Focus on achieving significant successes rather than avoiding failures.
Different funds have different risk appetites based on their size and existing portfolio performance.
Missing out on a big opportunity can be more costly than making a mistake.
Venture-minded organizations beyond VC firms also use these principles for success.

Venture capitalists invest in startups that offer different business models or disrupt existing ones, not just in tech companies.
The world of venture is driven by power law, where the best in class is better than everything else combined.
Companies should adopt a "Pyramid of Bets" approach: core, adjacent, and new/disruptive.
Amazon is a venture-minded organization that experiments in its core, adjacent, and disruptive businesses.
Failures in the disruptive space are common, but executives responsible for failed projects may be promoted to lead new disruptive projects.
Venture capitalists use "anti-portfolios" to learn and identify decision-making patterns that can improve investment success.

VCs spend a lot of time outside their offices to find founders and deals.
Some successful VCs respond to unsolicited emails from founders.
A study found that the response rate to cold emails from fake startups varied from 8% to 15%.
More successful VCs with larger funds and higher multiples responded more frequently and faster to cold emails.

VCs should have a "prepared mind" and be ready to recognize and seize opportunities when they arise.
Successful VCs spend time preparing themselves and learning about the industries they invest in before making investment decisions.
The "double down or quit" principle suggests that large companies should either fully commit to a new venture or abandon it rather than continuing to invest small amounts of money without seeing significant results.
Professional poker players are more likely to fold than amateur players, avoiding the escalation of commitment and sunk cost fallacy.
Amazon follows the principle of "start small, scale fast, fail fast" to minimize sunk costs and facilitate project termination.
The concept of "flexibility over commitment" emphasizes adaptability over unwavering commitment.

Industries such as pharmaceuticals, Hollywood, and mining can benefit from the venture mindset.
Light speed Venture Capital formed a reinvestment team to objectively evaluate investment decisions and reduce escalation of commitment.
Khosla Ventures seeks the perspective of reputable and credible venture capital firms before investing in subsequent rounds.
Independent consultants and non-executive board members can provide valuable insights and identify projects that should be terminated.
Successful venture capital firms don't follow the unanimous consensus rule, instead embracing the principle of "agree to disagree" to catch unconventional opportunities.
Small teams are more effective in decision-making. The "Two Pizza Team Rule" suggests that a decision-making group should be small enough to be fed by two pizzas.
Appoint a "Devil's Advocate" to challenge assumptions and encourage disagreement.
Demand feedback from team members in advance of meetings, and make it anonymous to encourage honest opinions.
Junior members of the group should speak first, and experts should speak last to avoid biasing the discussion.

Angel investors should stay informed about companies in their niche and identify the pain points they are trying to solve.
Entrepreneurs should adopt the Venture Mindset, especially the principle of "double down and quit" to avoid wasting time and resources on unproductive projects.
When choosing a startup to work for, it's important to consider the quality of its investors, the time since its last funding round, and whether it's profitable.
Startups in the escalation of commitment phase should be approached with caution.
Before accepting a job offer, candidates should conduct reference checks and gather information about the company's culture and decision-making processes.