419. Embracing the Venture Mindset feat. Ilya Strebulaev
unSILOed with Greg LaBlanc
Exploring the Transition to Real Options in Corporate Finance and the Venture Mindset
Delve into the shift from NPV to real options in corporate finance, examining asset valuation like oil wells and movie sequels. Learn about double done acquit, reversible decisions, and the venture mindset.
What is the mindset that's reshaping how companies and investors forge paths to success from beyond the balance sheets? How are the staunch principles of Net Present Value giving way to strategies that are as nimble and adventurous as the startups they finance?
Ilya Strebulaev is a Professor of Private Equity at the Stanford Graduate School of Business, Director of their Venture Capital Initiative, and the co-author of the new book The Venture Mindset: How to Make Smarter Bets and Achieve Extraordinary Growth with Alex Deng.
Ilya and Greg discuss the layers of a dynamic business landscape, revealing how traditional corporate strategies are being outpaced by those who dare to think like venture capitalists. Ilya describes how top venture capitalists operate and why embracing their methodologies is critical in a world where change is the only constant. Ilya shares tales of contrarian investment decisions, the growing presence of corporate venture capital, and the converging paths of institutional and corporate VCs.
*unSILOed Podcast is produced by University FM.*
Episode Quotes:
The venture mindset
42:02: The venture mindset doesn't mean that you have a perfectly crystal ball recognizing these great founders and great ideas. The venture mindset means that you, in an organization, build structure, build decision-making process, what we also call it, build racetracks, so that again and again and again, you will be able not just to spot but also to realize those unusual contrarian investment opportunities. And I think that most successful VC firms that I studied—well, actually all successful VC firms that I studied that have been successful for quite a bit of time, all follow these principles.
How having a prepared mind helps you to invest right away
16:27: In fact, the smartest decisions are never fast. You just prepare yourself for this decision.
Institutional VCs vs. Corporate VCs
25:50: Institutional VCs have, first, much larger LinkedIn profiles. Larger meaning, not just that they have more information there, but have more connections. Their network is much, much larger. 26:10: Corporate VCs' LinkedIn are much, much smaller. But there's something else: if you look at corporate VCs' LinkedIn profiles, very likely, in fact, their connections will be within their four walls. Or maybe if you come from another organization, there will be these two four walls. So that there will be fewer organizations where their connections are coming from. And you could see it if you map them. But for institutional VCs, it's not just that you have three times more connections. But they're very different. 26:53: Because I think the diversity in constructive networking, as I call it, also brings a lot of new opportunities. And again, you need this, and this is a part of the venture mindset.
Is dissenting from the consensus important in the venture mindset?
35:20:There is something else, which I think is a huge part of the venture mindset, that if everybody invests and there's a craze about it, obviously, it means there are also going to be crazy valuations. That also means that you're likely too late for the party. It's likely that even if everybody is right, your return is going to be right. And as a result of that, I think the best way those who follow the venture mindset think about this is that we have to be right, but there should be a lot of disagreement. If there is consensus that you know, crypto is going to be the next craze. Well, right now, generative AI is going to be the next craze, okay? If everybody is right, then, in fact, you're going to be right, but your returns are going to be relatively small. You would like to be right when you are what we call in the book Mr. Contrarian—somebody who goes against the crowd.
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