Boardroom Governance with Evan Epstein

Ilya Strebulaev: Venture Mindset Takeaways for Board Members.

Jun 25, 2024

Ilya Strebulaev, author of 'The Venture Mindset,' discusses the importance of home runs in decision-making for large organizations, types of innovation, independent directors' role in fostering innovation, errors of omission, and promoting the venture mindset. He also explores red flags in decision-making, the balance between formal and informal control rights in corporate governance, the stay private vs. go public debate, and key principles like 'bet on the jockey' and 'double down or quit.'

58:15

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Episode guests

Ilya Strebulaev

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Episode notes

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Quick takeaways

Focus on high-impact successes like home runs in investments for substantial returns.

Distinguish between incremental and disruptive innovation to drive growth and seize opportunities effectively.

Deep dives

Emphasis on Home Runs in Venture Capital

The podcast episode delves into the significance of aiming for home runs in investments, a key principle in venture capital. It highlights the importance of focusing on high-impact successes, even if they are infrequent, to generate substantial returns amidst a landscape where most startup investments result in failures. By examining the strategies employed by venture capitalists to maximize home runs, the episode underscores how large companies can adopt similar principles to drive growth and innovation.

Intro

3min

Applying the Venture Mindset in Corporate Boardrooms

15min

Corporate Unicorns and Anti-Portfolios

9min

Spotting Red Flags in Venture Capital Decision-Making

7min

Venture Capital Investing: Balancing Formal and Informal Control Mechanisms

18min

Principles from the Venture Mindset for Corporate Directors

4min

Exploring Corporate Innovation Failure Rates and Decision-Making Challenges

2min

(0:00) Intro.

(1:39) About the podcast sponsor: The American College of Governance Counsel.

(2:25) Start of interview. Reference to E21 with Ilya Strebulaev from October 2020.

(4:01) On why he wrote his book The Venture Mindset: for decision makers in large organizations.

(5:37) About the first principle: Home Runs Matter, Strikeouts Don’t. Make small bets vs fear of failure.

(7:23) Two types of innovation: incremental (step by step) vs. disruptive innovation.

(13:32) The unique role that independent directors can play in innovation.

(18:20) On corporate unicorns and intrapreneurs.

(20:11) On errors of omission and building anti-portfolios.

(24:01) Promoting the venture mindset for large companies to be more innovative and become more like Silicon Valley.

(28:29) Red flags in decision-making ("why should I not invest?"), and the example of Theranos. Examples from Shark Tank.

(34:00) On Yuri Milner's investment in Facebook (2009) and investing without taking a board seat (informal controls and indirect influence).

(38:30) Formal vs informal control rights in corporate governance.

(44:13) Stay private vs go public debate. On "quasi-public" companies.

(49:11) On the pressures to go public for VCs and employees, and the evolution of secondary markets.

(52:20) On the principle (#5) to Bet on the Jockey (put people above process).

(53:22) On the principle (#7) to Double Down or Quit (allow flexibility, and phenomenon of escalation of commitment).

Ilya Strebulaev is a Professor at the Stanford Graduate School of Business and is an expert in corporate finance, venture capital and private equity, corporate innovation, innovation ecosystems, and financial decision-making. His recent work has examined the valuation of VC-backed companies, decision making by venture capital and private equity investors, corporate venture capital, and impact of venture capital.

You can follow Ilya on social media at:

Twitter: @IlyaStrebulaev

LinkedIn: https://www.linkedin.com/in/ilyavcandpe/

Venture Mindset Website: https://thevcmindset.com/

You can follow Evan on social media at:

X: @evanepstein

LinkedIn: https://www.linkedin.com/in/epsteinevan/

Substack: https://evanepstein.substack.com/

To support this podcast you can join as a subscriber of the Boardroom Governance Newsletter at https://evanepstein.substack.com/

Music/Soundtrack (found via Free Music Archive): Seeing The Future by Dexter Britain is licensed under a Attribution-Noncommercial-Share Alike 3.0 United States License