Adopt a Venture Mindset by approaching corporate strategy with a long-term perspective, understanding the extended timelines and unique dynamics of market evolution. Patience and realistic expectations are critical for navigating this journey successfully. 
Unlocking ‘The Venture Mindset’: Insights from Ilya Strebulaev
Interviewed October 29th, 2024
In today’s rapidly evolving business environment, corporations face mounting pressure to innovate or risk irrelevance. The challenge lies in adopting the agility and risk tolerance of successful venture capitalists while staying true to their core missions. Professor Ilya Strebulaev, a renowned expert in venture and corporate venture capital (CVC), has dedicated his career to addressing this challenge, guiding corporations toward innovation through actionable strategies and insightful research.
In October 2024, Professor Strebulaev joined his former student, Nicolas Sauvage, President of TDK Ventures, on the Corporate Venturing Insider podcast. “Ilya Strebulaev, who was my professor at Stanford, gave me all the important tips on how to design TDK Ventures,” Sauvage remarked. Together, they explored the principles behind Strebulaev’s latest book, The Venture Mindset, which provides corporations with a framework to think and act like venture capitalists. Reflecting on his journey, Strebulaev noted, “First of all, I came to Stanford 20 years ago as a professor of finance.”
The Genesis of Strebulaev’s Research
Early in his academic career, Strebulaev noticed a stark difference between the career paths of his students. While many followed traditional finance principles and succeeded in corporate or investment banking, those who entered entrepreneurship or venture capital diverged dramatically from these teachings. “They violated every single principle I gave them,” Strebulaev recounted, initially perplexed by their approach.
Fifteen years ago, he launched a survey comparing institutional venture capitalists and CVCs. The findings revealed stark inconsistencies. Institutional VCs adhered to established practices, while CVCs varied widely in structure, culture, and strategy. Many lacked the consistency needed to succeed. “What surprised me,” Strebulaev shared, “is that the way corporate VCs were designed likely would not position most of them for success.”
To track the performance of these ventures, Strebulaev kept a detailed “betting book,” cataloging hundreds of CVC initiatives. The results were sobering: within five years, more than 50% of CVCs failed, with many devolving into “zombies” — units barely functioning but occasionally resuscitated with cash infusions.
A recurring issue was misaligned reporting structures. Many CVCs reported to CFOs or CEOs, whose short-term financial focus conflicted with the long-term nature of venture investing. Despite these challenges, Strebulaev’s research revealed that well-designed CVCs could thrive. “The CVC almost never works,” he admitted, “but if you design the CVC correctly, not only should it work, but it would.” This realization inspired The Venture Mindset, a framework of principles to guide corporate innovation.
Core Principles of the Venture Mindset
At the heart of Strebulaev’s work are nine core principles, each addressing common pitfalls in corporate venturing while offering actionable strategies for leaders. He highlighted went into five on the Corporate Venturing Inisder.
1. Home Runs Matter, Strikeouts Don’t
In venture capital, one major success can compensate for numerous failures. Corporations, however, often adopt risk-averse cultures that penalize failure and stifle innovation. “If you are the CEO or the owner of a large company,” Strebulaev argued, “failure should be the best thing that happened to you, because that means your organization is trying something new.”
He cited Amazon’s Fire Phone as an example. The $800 million project was a commercial failure, but the lessons learned paved the way for revolutionary products like Alexa and the Echo. Amazon’s willingness to take risks highlights the importance of embracing a portfolio mindset, where each venture represents a calculated bet.
2. Get Outside of Four Walls
Corporations often suffer from insularity, relying too heavily on internal resources and perspectives. Strebulaev emphasized the need for external engagement: “There are many horses in every single race.”
His research found that successful VCs cultivate diverse networks, spanning industries, geographies, and educational backgrounds. “We looked at the LinkedIn profiles of VCs, CVCs, and corporate executives,” he explained, noting that institutional VCs were far more connected to external stakeholders. Corporate leaders can replicate this by attending industry conferences, partnering with startups, and collaborating with academic institutions to foster a culture of innovation.
3. The Prepared Mind
Recognizing opportunities requires preparation. Strebulaev highlighted NVIDIA CEO Jensen Huang as an exemplar. “Despite his success, Huang dedicates two to three hours daily to studying emerging technologies,” he noted.
A “prepared mind” involves continuous learning and deep dives into areas of interest. For CVCs, this means staying informed about trends and potential disruptions, enabling them to quickly identify and act on promising opportunities. “How do you know that [a space] is potentially interesting?” Strebulaev asked. “Because you’ve studied it.”
4. The Jockey Versus the Horse
In venture capital, the team behind a startup — the “jockey” — is often more important than the product or business model — the “horse.” Strebulaev explained, “In the VC world, the jockey is effectively the human capital of the startup: the founders and the early employees.”
Corporations, however, tend to overemphasize financial projections and business plans, often neglecting the human element. “When we go to a large corporation… are there people mentioned there?” he asked. Prioritizing talent over rigid plans allows organizations to navigate uncertainty and adapt to changing circumstances.
5. Agree to Disagree
Consensus-driven cultures can hinder bold investments. At Microsoft’s M12 venture arm, founder Nagraj Kashyap implemented an “anti-veto rule.” This system allowed deals to proceed even if Kashyap or other team members objected, ensuring that groundbreaking opportunities weren’t missed due to groupthink.
Additionally, the rule included a “silver bullet” provision, enabling Kashyap to greenlight deals even if the investment team opposed them. This approach fosters conviction over consensus, empowering teams to take calculated risks.
Practical Implications for Corporate Leaders
Strebulaev’s Venture Mindset extends beyond theory, offering actionable strategies for corporate leaders to thrive in an era of disruption.
- Conduct Pre-Mortem Exercises
Instead of waiting for failure, anticipate it. “Pre-mortem is asking ourselves a very uncomfortable, unpleasant question: It’s five years down the road, and our company failed,” Strebulaev explained. By identifying risks early, companies can develop proactive strategies, including expanding networks and seeking diverse perspectives. - Leverage Unfair Advantages
Corporations possess unique strengths, such as brand recognition, market access, or technical expertise, that can create value for startups. “Every single corporation earning more than one billion has an unfair advantage,” Strebulaev asserted. By leveraging these assets, corporations can position themselves as indispensable partners in innovation ecosystems. - Strategic Location and Team Composition
Positioning matters. “Do not position your CVC in the same building as your CEO,” Strebulaev advised, advocating for locations in innovation hubs. Additionally, CVC teams should include a mix of internal and external talent to balance institutional knowledge with fresh perspectives. - Expand Networks
Building relationships with external stakeholders — startups, academics, and industry leaders — uncovers opportunities and fosters innovation. “Getting outside of the four walls is uncomfortable,” Strebulaev admitted, “but it’s necessary.”
Looking Ahead: The Future of Corporations and Disruption
As industries grapple with accelerating disruption, the ability to innovate and make informed, agile decisions will determine which corporations thrive and which fade into obscurity. Professor Ilya Strebulaev’s The Venture Mindset offers a vital framework for navigating this complexity, tailored for a modern decision maker in today’s disruptive environment.
“The book is really for a modern decision maker who lives in a new disruptive environment,” Strebulaev explained. It is designed for leaders across domains — corporate executives, nonprofit leaders, and regulators — who face challenges similar to those venture capitalists have navigated for decades. “VCs had to come up with new ways of making decisions…to survive and succeed in a hostile environment. It behooves the modern decision maker today to use that knowledge.”
Looking ahead, the principles of the Venture Mindset will become increasingly critical as the pace of change accelerates across industries. “The next 10 years are going to be different,” Strebulaev predicted. “I’ve never seen such variation in industries that my students start their companies in.” His students, now leaders in diverse fields, exemplify the adaptability required to thrive in this era of constant upheaval.
By embracing the adaptive strategies pioneered by venture capitalists, decision-makers can create value, mitigate risks, and seize opportunities in ways that position their organizations for long-term success. As disruption reshapes industries globally, the lessons from The Venture Mindset provide not just a roadmap but a critical advantage for those ready to lead into the future.
