Ilya Strebulaev and Alex Dang discuss the venture mindset, the benefits of building an 'anti-portfolio', getting outside your comfort zone, lessons from a piggy bank auction, and the importance of strong teams in investments. They also explore innovative strategies in corporate survival and diverse industries disrupting traditional sectors.
Venture capitalists prioritize A-list teams over ideas for successful investments.
Established companies innovate by sourcing ideas externally to remain competitive in evolving industries.
Deep dives
Winners Curse in Investing
In venture capital and stock market investing, the threat of the winner's curse looms large. Investors often overestimate the fruits of victory, leading to disappointment. Venture capitalists aim for home runs with 100X returns, with most investments resulting in failure. The focus is on increasing the odds of hitting home runs to offset losses.
The Importance of A-List Teams
Venture capitalists prioritize A-list teams over ideas due to their charisma, passion, and resilience. Charismatic founders who can convince others, passionate individuals committed to the long-term, and resilient teams that endure failures are highly sought after. Investors value team quality more than groundbreaking ideas.
Strategic Investment Decisions
Venture capitalists make strategic investment decisions based on milestone-oriented valuations for young companies. They calculate how much funding a startup needs to reach a milestone and determine ownership stakes accordingly. Valuations are derived from the funding needed and the investor's stake, providing clarity in valuation strategies.
Innovation in Established Companies
Established companies like Procter & Gamble and Johnson & Johnson innovate by sourcing ideas externally and fostering disruptive innovation. By leveraging innovation scouts and external partnerships, these companies combine incremental and disruptive innovation to stay competitive. Innovation beyond corporate boundaries is essential for survival in rapidly evolving industries.
Venture capitalists don’t mind strike-outs, so long as they get their home runs. What can stock investors learn from that approach?
Ricky Mulvey talks with Ilya Strebulaev and Alex Dang, co-authors of “The Venture Mindset: How to Make Smarter Bets and Achieve Extraordinary Growth,” about:
The benefits of building an “anti-portfolio”
Why it pays to get outside of your own four walls
Lessons from a piggy bank auction
Strebulaev is also the founder of the Venture Capital Initiative and a Professor of Private Equity and Finance at Stanford’s Graduate School of Business. Dang is a CEO, technology executive, and advisor who’s worked with Amazon, McKinsey, and across Silicon Valley.