Think Fast Talk Smart: Communication Techniques - 143. Adopt a VC Mindset: Achieve More by Thinking and Communicating Like a Venture Capitalist

Episode Date: May 21, 2024

In choosing who to date, what job to pursue, or how to invest our money, most people are just looking for a reason to move forward. But according to Professor Ilya Strebulaev, we should be looking for something else: a reason to bail."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. In this episode of Think Fast, Talk Smart, Strebulaev joins host Matt Abrahams to discuss how the venture mindset can help anyone — investor or not — weigh alternatives, make decisions, and move forward without looking back.Episode Reference Links:Ilya StrebulaevIlya’s Book: The Venture Mindset Ep.41 Speak Like a Founder: How Successful Entrepreneurs Communicate to Their TeamsEp.56 Lean Messaging: How Simple Messages Really StickConnect:Premium Signup >>>> Think Fast Talk Smart PremiumEmail Questions & Feedback >>> [e-mail] Transcripts >>> Think Fast Talk Smart WebsiteNewsletter Signup + English Language Learning >>> FasterSmarter.ioThink Fast Talk Smart >>> LinkedIn,  Instagram, YouTubeMatt Abrahams >>> LinkedIn ********Thank you to our sponsors.  These partnerships support the ongoing production of the podcast, allowing us to bring it to you at no cost.Strawberry.me. Get 50% off your first coaching session today at Strawberry.me/smartJoin our Think Fast Talk Smart Learning Community and become the communicator you want to be. 

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Visit strawberry.combe slash smart to get matched up with your coach today. That's strawberry. dot me slash smart and get 50% off your first coaching session. It's the most affordable time ever to see if coaching is right for you. Oftentimes the best way to achieve success in our ventures is to go beyond what is typical, to challenge ourselves to accept disagreement and to disrupt. My name is Matt Abrahams and I teach strategic communication at Stanford Graduate School of Business. Welcome to Think Fast, Smart, the podcast. Today I'm really excited to speak with Ilya Strebelov. Ilya is the founder of the GSP's venture capital initiative and a professor of private equity and finance. He teaches a popular class on venture capital and has won numerous teaching

awards. Along with Alex Dang, he has written the new book, The Venture Mindset, Make Smarter Betts and Achieve Extraordinary Growth. Ilia, thanks for joining me. I'm so excited for our conversation. Thank you, Matt. It's great to be here. Excellent. Shall we get started? Absolutely. Great. Can you describe what you mean by the venture mindset? Of course. Venture mindset, simply put, is just a new way of thinking, a new mental model, how every leader can and in many situations should approach decision-making, to make smarter, quicker decisions, to make decisions in unusual situations, when especially the world is uncertain, when there are a lot of unknown unknowns, when there's disruption.

And the reason why it's called venture is because after 20 years of doing research at Stanford on venture capitalists, I realized that for many, many decades, they've been facing very, I would say hostile environment. where they face a lot of failures, they face a lot of uncertainty. And they developed in order to survive and succeed a very different mental model, very different mindset of how they make decisions. And they backed the most successful companies of today's era from Netflix to Airbnb, from SpaceX to Google.

And the way to think like venture capitalists will make you better, leader, better decision-maker, even if what you do is far, far, far away from the world of venture capitalists and startups. I enjoyed reading the book, and there are many bits of advice and guidance that help anybody who has to make important decisions, especially under uncertainty. You describe venture capitalists as being failure champions. What does this mean and what lessons can all of us take from this notion? Let me start with the story. About 12 years ago, gaming was a very hot topic. In fact, it is a very hot topic today. And at the time, two young entrepreneurs, the names was Stuart Butterfield and Calh Henderson, started a company and they raised money

from a famous venture capitalists. One of the venture capital firms that invested in them was Excel Partners. It is the venture capital firm that was behind Facebook and many, many other famous startups. The company got a lot of money, millions of dollars. And then they developed a game called glitch. Well, and the truth to be told is the game was very glitchy. It didn't work properly. The fans did not like it. And very quickly, they realized, that's that.

They had some money left in the bank, about $5 million, non-trival amount of money met. And so they wrote to the investors and they said, you know what, the game is over. Teen spec is no more. It's a sad day for humanity. We're going to return you the money. And the investors, including Axel partners, replied back, we don't want your money.

And the reason is because Andrew Bratcher, who was an Excel partner, who was leading this investment, in his investment memo that he proposed to invest in Tinni Speck, said, we invest because of the team, because of the founders. They are in it together. We observed them. They failed together. So when I say VCs are failure champions, it means that the real smart bench capital, and venture-minded people.

In fact, not only are not afraid of failure, but they know that in some situations, you have to seek constructive failure. So Exile decided to proceed with investment, and Stuart Butterfield and Calhanderson develop a new game, which turned out to be not a game, but one of the most successful companies around.

And maybe Matt, you're using it. It's called Slack. Absolutely. I use it every day. Right. So, but had the venture cap has not been failure champions, maybe Slack would not have existed. So this notion of trying new things that might result in failure and then persisting can be really important. We had the good fortune of talking to Amy Edmondson about the opportunities failure provides and how we can lean into failure.

So it's not just the willingness to try something new with failure being potential, but it's also learning from that failure and then developing something beyond it. I think it's what I call swinging for the fences. It's trying something unusual. It's going for outliers, because at the end of the day, it is outliers, if successful, that are going to determine our future and will make leaders very successful. You provide several tips for how we can all make better decisions based on what venture capitalists do. Can you provide insight into the question, why should we not do this? Sure. I've been studying for many years how venture capitalists make decisions. And successful venture capitalists, you know, they start with identifying.

hundreds, if not thousands, if not tens of thousands of opportunities. But if you are met very successful in identifying these thousands of opportunities, you need to find a way to very quickly kind of squeeze them from thousands into hundreds or maybe ideally dozens. The smartest of venture capitalists ask a very different question from what most of us ask. Let's say I've been working a lot with the executives and large organizations, and they consider all these projects and budget allocation decisions. and what kind of question they're asking, why should we invest?

So the entire presentations and 100-page decks are built around this. Venture capitalists are going to approach every single new opportunity with a very different question, which is why we should not proceed. That means that they're looking for red flags. And if they see a very clear red flag, let's say, for example, the founding team is untrustworthy, then they will stop. They make a very quick decision not to be. continue. And this works because this allows them to spend much more effort on opportunities

that are potentially much more profitable. And notice that they communicated differently among themselves, which I think is a critical point. By asking a negative question why we should not, they communicate to each other that they would like to ensure that this decision is efficient, this decision is quick, and this decision is not final. which is when I tell my students, if you meet with the venture capitalist and then the venture capitalists will invite you back, it does mean that they want to invest in you. It means that you proceed it to the next stage.

Now, an important point is that at the next stage, the line of questions changes, what I call from fast lane to slow lane. And I think that all of us can take it on board, especially because I believe that we should strive for having more opportunities. I really like this idea of assuming you will proceed and are looking for the things that require you to stop. versus what are all the reasons why we should do something? It's a very different mindset. And I can certainly see how it would drive for efficiency

because you're moving faster, you're proceeding, and you're only looking for things that cause you to stop. And I think many of us can apply that in some of the decisions we have to make. And we've had several guests, Jeremy Utley being one, who talks about creativity and generating new ideas. And it seems to me that this would help generate new ideas and keep things moving rather than stop them. You wrote an article that provided three things venture capitalists do that can help all of us get our dream jobs after being laid off. Can you share what those things are and how we can put them into practice in our own lives? Sure. In fact, what we've discovered is that this venture mindset principles can be applied elsewhere. Because originally, we thought, of course, of applying these principles to the investment decisions, to large organizations.

But now we feel that it can be applied also to our professional life and our personal life. In fact, I'm applying this venture mindset principles all the time. We indeed thought deeply about how we can help people who are laid off. And unfortunately, we know that it's happening not infrequently these days. But the venture mindset says, you have to think about this as an opportunity to discover yourself and to level up your abilities. So first is try to say no more often. And there are a lot of opportunities that will come your way.

They don't come all at the same time. but I think this power of saying no is very, very valuable. And interesting enough, when we go to venture capitalists, they say no 100 times before they make that one investment. I'm not arguing that in our personal life we should say no 100 times. But I think that if you try to say yes to the very first offer that comes along, I think you're going to miss a lot of other opportunities. Another, I think, very important point about the venture capital,

venture capitalists and the venture mindset is that they try, to think long term. And long term is important because at the end of the day, this is an opportunity to think about your life and lifetime income or lifetime happiness. So it's an opportunity for you to stand back. And when you think about long term, you level up the conversation, that in fact you will see a lot of other opportunities. So it seems to me that the ideas you're suggesting are don't necessarily rush to the first thing that comes to you when making decisions or opportunities, especially around your career, and think about the long term, not in a short term. And it's very easy to, in that moment, think, you know, I've got these debts, I have these things

I was trying to achieve that are short term. So adopting those principles of being more willing to say no and seeing the long view can be very helpful. I wanted to talk a little bit about the class you teach. You teach a very popular class. Let all of our listeners be students of you for a moment. What are two big takeaways you hope your students have when they leave your class? So the class I said is the venture capital class that I could teach with Brian Jacobs, who is a well-known venture capitalist and a fund of a large venture capital for emergence capital. Takeaways. One takeaway that I think I would love my students to use from the class is the ability to think differently. So whenever we discuss any

issues around startups, around founders, around business models, around fundraising. There are so many ways to think differently, to look differently from different angles at the same problem, and some of these ways to think or to look at are much more efficient than others. And I would like to imbue students with this ability. And you know what? I've been lucky and happy because I keep in touch with so many of my students after they graduate, and they come back and very often they say, you know what, this has really helped me because there was a situation and I looked at it completely differently. And I think that's

really helped me. And again, I would say that is one of the venture-minded principles trying to get out of your four walls, get out of your cage and try to look completely differently. And another one that is, I think both Brian and I care a lot about, I mentioned get outside the four walls. So my co-teacher Brian Jacobs loves telling our students that the right to build your network was yesterday. But I think an important point about network is just not increasing the number of contacts, but increasing the number of meaningful contacts and diversifying those contacts. And very briefly, I've done this research with an unusual insight.

I compared the LinkedIn profiles of venture capitalists with the LinkedIn profiles of corporate innovators. It's not surprising that venture capitalists have more connections on LinkedIn than corporate innovators, let's say chief innovation officer at a large company. But I think it was much more interesting to observe how diverse the connections of venture capitalists were in different industries, different educational backgrounds, different geographies. And if you look at corporate innovators, not only they had smaller network, but also those networks more homogeneous, similar, the same company, you know, the same university,

and so on. So try to diversify your network. In fact, If you happen to have a LinkedIn profile, you know what, Matt? My advice to the audience is to check right away what is your network, how diverse it is, and build a plan on how to go outside your four walls. I think that notion of building a network yesterday, one of the biggest advantages you have in making decisions and growing your career is to have a broad network. But this notion to really strategically diversify, I think, is very important. I also like this idea of questioning the way we make decisions and think and then challenging ourselves to do it differently for sure.

You know, I, when Jenny, our executive producer and I were talking about this episode, we joked that we should change the name of this particular episode to drink fast and talk smart. You are a connoisseur of both tea and wine. When we first met to talk about you being a guest, you shared some lovely tea with me. I later learned you were the faculty leader of the Stanford Blind Tasting Wine team. I didn't even know that existed. And when you talk about tea and wine, you use elegant, amazingly descriptive language. What advice do you have for people in the way that they describe the things that they're passionate about? It just permeates from you when you talk about those things.

Do you strategically think about that? And what advice would you give to others who are talking about their passions? Well, Matt, I hope to share a glass of wine with you, too, first of all. not just a vintage, aged, old tea. I think I am trying to mix the traditional mindset and the venture mindset. When I describe things I'm passionate about, what I mean by this.

When I say traditional mindset is using a language that however beautiful and exquisite, everybody understands, so that you're comfortable, you're familiar with. And then when I say the venture mindset language, I will try to go outside four walls, but also maybe outside the comfort zone, Maybe I'm going to use some terminology or words with some unusual meanings.

And the reason I think is that when you mix these things together, you make people comfortable at the same time and also make them think. And both tea and wine, I view them, is mostly the means of convivial conversation. And so when you use some unusual words or unusual analogies, that leads to a lot of interesting discussions. I knew you were purposeful in this, because it's just. just enjoyable to listen to you talk about these things. So this notion of using accessible terms and language that people know and then bringing in things that people might not know to really expand,

not just how they're thinking about whatever it is you're describing, but to also have an experience that gets them excited or interested as well. We'll be right back to finish our conversation. But first, a quick word from one of our sponsors. Their support allows us to bring you this show free of charge. If you've ever felt like you're trying to do ever. everything yourself, especially when the stakes are high. You're not alone. One of the biggest shifts I see in effective leaders growing their organizations comes from focusing on the right things. But that's hard to do when you're stretched thin. You need to be able to delegate some tasks to competent professionals. That's where Upwork can really help. Upwork is a one-stop platform to find, hire,

and pay expert freelancers across areas like marketing, development, data and analytics, and more. It gives you fast access to specialized talent so you can move quickly, fill key gaps, and scale your work without taking on full-time overhead. You can browse profiles, review past work, and get support scoping your project so you can hire with confidence. It's a simple way to focus your time where it matters most. Visit upwork.com right now and post your job for free. That's upwork.com to connect with top talent ready to help your business grow. That's upw-w-R-K-com. Upwork. And now back to our conversation. Before we end, and this has been a delightful conversation, I'd like to ask you some questions.

The first one is created just for you, and the other two are similar to what I ask everybody. Are you up for that? Of course. So you've written a great book, The Venture Mindset. As an author myself, I know that the writing of a book can change you in the way you perceive things and think of things. I'm curious, how have you changed in your approach to the work you do or the communication and relations you have as a result of writing your book?

This is a great question, Matt. Thank you for asking me. I've changed a lot and I think that I'm implementing myself every single one of those nine principles that we identify in the book because, yes, I researched them for so many years. Two examples. One, you mentioned failure champion. I think I am much more positive about many failed research projects.

When you're doing research, I think that series successful research cannot. proceed without a lot of failures. So from this point of view, I think I have become much more of a failure champion in my own work than I was before. Another example is we mentioned getting outside the four walls. So I'm sure that a lot of our viewers travel all the time. Well, I travel all the time, you travel all the time, Matt, and I would not talk to anybody. After I worked on this, getting outside the four walls and networking, I changed my approach. Whenever I now travel, my goal is to talk to some people whom I don't know, whether it's queuing in the passport line or sitting next to somebody in the plane. So I think those are two things that really had an impact on me.

I always find it fascinating that the work we do to help others through the things we write and the things we produce can have a fundamental impact on us as well. And it's great that you've changed in those ways and it sounds like you're benefiting from it. I'm curious for our second question, who is a communicator that you admire and why? Winston Churchill. The way he communicated, especially in a very tough situations, simple truths and I think controversial thoughts that everybody understood and everybody was fascinated with. I still resonates with me. Truly a gifted orator who came from some challenging circumstances in terms of some speech impediment issues, as you said, very controversial but effective in accomplishing the goals that he had. Final question. What are the first three ingredients that go into a successful communication recipe?

Listen, listen and listen. Excellent. Tell me why listening is important, especially from the view of the venture mindset. Where does listening fit into that? It is the notion of the venture mindset is that by doing something that will change the world, you need to understand better. everybody's opinion. Definitely one of my personal implications of writing this book was, I'm trying to become a much better listener. I don't always succeed yet, but I'm on the way there. My wife certainly keeps me in check on my listening, but this notion of listen first so you can

understand others' opinions and then respond is absolutely critical. Ilya, it has been wonderful to chat with you. Thank you for sharing how all of us can learn from what venture capitalists do. And you've produced just an amazing book, The Venture Mindset. Best of luck with this. And thank you for sharing your insights. Thank you so much, Matt, for heading me. Thank you for joining us for another episode of Think Fast, Talk Smart, the podcast from Stanford, GSP.

To learn more about entrepreneurship and communication, please listen to episode 41 with Stephanos Xenios in episode 56 with Steve Blank. This episode was produced by Jenny Luna, Ryan Campos, and me. Matt Abrams. Our music is from Floyd Wonder. Please find us on YouTube and wherever you get your podcasts. Be sure to subscribe and rate us. Also, follow us on LinkedIn and Instagram and check out Faster Smarter.io for deep dive videos, English language learning content, and our newsletter. Before we wrap up, I just want to say thank you for listening. It really means a lot to hear how people all over the world are using these ideas in their own lives. It inspires me and the whole team that brings you this show. If you want more episodes and resources, feel free to

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