Today’s book is The Venture Mindset: How to Make Smarter Bets and Achieve Extraordinary Growth. Since its release in 2024, the English edition quickly rose to the top of Amazon’s new releases and earned strong praise from former Google CEO Eric Schmidt. At its core, this book explores how the mindset of venture capitalists can inform the everyday decisions of ordinary people.
When we think of venture capital, we often recall astonishing tales of wealth: a VC makes a snap decision to back a startup, hits on a unicorn, and walks away with returns of a hundred or even a thousand times the investment.
But we also know the harsher truth behind these dazzling successes. Venture capital is a field where losses are the norm. Most bets fail, and it’s only the rare, improbable wins that drive the lion’s share of returns. VCs make one rapid-fire decision after another in conditions of extreme uncertainty. How to string these decisions together to maximize long-term return—that’s the problem they wrestle with every single day.
So why should we, as ordinary people, care about how venture capitalists think? The answer is that in many ways, life itself is a series of venture bets. From choosing a career to starting a business, from investing capital to mapping out a life path, we often make high-stakes decisions under uncertain conditions, with limited information, high costs, and long time horizons.
The book’s author, Ilya Strebulaev, a professor at Stanford Graduate School of Business, urges us to take this a step further. In the past, the venture mindset might have seemed like a niche approach, relevant only to a specific corner of the finance world. But today, this niche thinking is being forced into the mainstream. We are living in an age of radical transformation—from artificial intelligence to the green energy revolution—where the old rules are breaking down. Traditional models of success, built on stability and predictability, are rapidly losing ground. No one can escape the wave of disruption.
As some have said: in times like these, you either get disrupted—or you learn to thrive in disruption. And venture capitalists may be the best case study we have. They are, perhaps more than anyone, trained to survive and create value amid chaos and uncertainty. Their decades of experimentation at the edge of technology offer a powerful blueprint for navigating what lies ahead.
So today, let’s follow the path laid out in The Venture Mindset and explore what makes the venture capitalist way of thinking so unique. This isn’t just about investing or entrepreneurship—it’s about learning how to survive and grow in the defining era of our time.
I. The Art of Saying “No”
Let’s start with a thought experiment: picture thirty people gathered around a piggy bank stuffed with coins. No one knows exactly how much money is inside. One by one, the participants begin bidding for the piggy bank, each writing down a price they’re willing to pay. The highest bidder wins it.
This simple game is, in fact, a vivid metaphor for how venture capital (VC) investing works.
There are two key decisions in this game: whether to bid at all, and how much to offer. This mirrors the VC process—first deciding whether to back a startup, and then determining how much to invest.
Let’s begin with the first question: to invest or not to invest? In VC, time is the critical constraint. If you spend too long deliberating, the opportunity may be gone. This dilemma is common in everyday life as well: you find a promising apartment but decide to view a few more before making a decision; you meet someone interesting on a blind date but want to do more background research; you spot a market opportunity for your startup, but hesitate, thinking more validation is needed. And by the time you're ready, someone else may have seized the moment.
All these situations resemble the piggy bank auction—opportunities are fleeting, and overcaution can mean missing out. That’s why speed becomes essential. But this raises a paradox: how do you make good decisions under such severe time pressure?
Venture capitalists confront this challenge daily—on a far greater scale. Consider Masayoshi Son, who decided to invest in Alibaba in just six minutes, even when the company had no clear revenue model (The Power of SoftBank). Or Peter Thiel, who backed Facebook after meeting Mark Zuckerberg only twice (The Contrarian: Peter Thiel and Silicon Valley’s Pursuit of Power). These legendary investments were made with limited information, and yet such decisions are made multiple times a day in the VC world.
So how do they dare to decide? Is it just a matter of gut instinct?
The author of The Venture Mindset, Ilya Strebulaev, professor at Stanford Graduate School of Business, conducted an insightful experiment. At a venture fair he organized, students acted as VCs and had to choose one startup to invest in from five real companies. The students dove deep into business plans, financial forecasts, market research—even trying the products themselves—before making their decisions.
But real-world VCs? To the students’ surprise, they don’t operate that way.
VCs don’t aim to gather and analyze every piece of available data. Instead, they focus on identifying reasons to say no. This is known as the fatal flaw filter. Imagine you’re speed-dating with plans to meet 50 people over three months. You can’t possibly get deeply involved with each one, so you set a few “dealbreakers”—non-negotiable red flags. The moment you spot one, you move on.
Venture capitalists work the same way. On the American show Shark Tank, investors often ask pointed questions: What’s your customer acquisition cost? Does the team have relevant experience? Why launch this now? While they may seem like casual queries, each is designed to uncover potential fatal flaws. The moment they detect one, they don’t hesitate to say, “I’m out.”
Contrary to the popular image of VCs casting a wide net in hopes of hitting the next unicorn, the truth is that they are constantly saying “no.” Top VC firms typically review around 150 startups before investing in a single one. In other words, they spend over 99% of their time rejecting ideas.
The decision-making process resembles a two-layered funnel. First, they use the fatal flaw filter to eliminate 90% of startups quickly. Then, the remaining 10% undergo rigorous due diligence—only to filter out another 90%.
If we want to apply this method to our own decision-making, how do we identify fatal signals? One technique mentioned in the book is the pre-mortem. Before committing to a decision, assume it has already failed. Then ask: what most likely caused it to fail? List 3 to 5 reasons. These become your “fatal flaws” to watch for.
So yes, VCs spend most of their time saying “no.” When evaluating a project, their default mindset isn’t “Why should I invest?” but rather “Why shouldn’t I?”
This raises another question: If VCs are so focused on rejecting ideas, how do those rapid-fire investment stories happen—the ones where millions are committed in minutes? Aren’t those just love-at-first-sight moments?
The book cautions us not to be fooled by appearances. What seems like impulsive decision-making is usually the result of deep, long-term preparation.
Take Airbnb. When it was still a fledgling company, Sequoia Capital jumped in with a $600,000 seed investment. It looked like a sudden, risky bet. But in reality, Sequoia partner Greg McAdoo had long studied the vacation rental space and was deeply familiar with online platforms in that sector. This background enabled him to instantly recognize that Airbnb was “doing something different” while others hesitated.
This kind of premeditated love at first sight also happens with entrepreneurs. In 1979, Steve Jobs visited Xerox PARC and saw the graphical user interface for the first time. He reportedly leapt with excitement, calling it “revolutionary,” claiming he saw the future of personal computing in just ten minutes.
Why did Jobs see what Xerox executives didn’t, even though they had access to the same tech? Because Jobs had spent countless days thinking about the future of computing. His intuition was the product of intense, sustained inquiry. Xerox, despite its resources, lacked that visionary lens—and missed its own revolution.
This is a critical principle in the venture mindset: VCs aren’t gambling on the future—they are recognizing trends they’ve already studied deeply.
That’s also why, contrary to the stereotype of VCs as opportunistic speculators chasing fast money, this book devotes an entire chapter to long-term thinking. The best VCs are always scanning for transformative, slow-burning trends in each industry. These trends often begin imperceptibly.
Think of your neighborhood auto repair shop. It might seem fine today—but will it go the way of travel agencies or video rental stores? Weight loss is a timeless demand—but what happens if a truly effective weight-loss drug hits the market? Gaming is still thriving—but while developers are polishing AAA titles, VCs are already asking: could AI-generated content reshape the entire development process?
These “love at first sight” moments, then, aren’t driven by impulse. They are moments when long-term thinking finally meets reality.
Finally, VCs don’t just evaluate trends—they evaluate people. One vivid analogy from the book compares seasoned VCs to veteran gamblers at the racetrack. They focus more on the jockey than the horse. In the uncertain world of startups, a great founding team matters more than a perfect business plan.
For example, Accel invested in a game company called Tiny Speck. Its first product, Glitch, was a total flop. But when the founders offered to return the remaining capital, Accel declined. “We believe in the team,” they said. “Try something else.”
That faith paid off. The team went on to build Slack—now one of the most widely used workplace collaboration tools.
To a VC, startup failure and founder failure are two very different things. They’re not just betting on an idea—they’re betting on a team that can evolve through uncertainty.
So if you ask a venture capitalist whether to join a startup, they’ll likely respond: "First, figure out what kind of team you're joining."
II. Discipline Above All
Previously, we discussed the first key decision a venture capitalist (VC) faces: whether to invest. Now let’s examine the second major decision: how much to invest.
Let’s revisit the scene of the piggy bank auction. Thirty people gather around a piggy bank stuffed with coins. One by one, they place increasing bids. The highest bidder gets to buy the piggy bank for their final offer price. It’s a simple setup, yet in most cases, the person who wins the auction ends up the actual loser. Why? Because they often pay far more than what’s inside the piggy bank. In one instance, someone won with a $125 bid—only to discover there was less than $13 inside.
This is a textbook example of the “winner’s curse”. In competitive settings with incomplete information, people often fall into a psychological trap: bidding aggressively just to win. Everyone assumes there’s some value in the piggy bank, but nobody knows exactly how much. As the bidding intensifies, fear of missing out takes over, and rational judgment is clouded. The result? Bids shoot past the item’s real worth.
This phenomenon is especially common in venture capital. Whenever a startup becomes the “next big thing,” VCs are prone to FOMO—fear of missing out.
“What if this is the next Alibaba?”
“They’re offering $5 million—should we go up to $6 million?”
“If we pass on this deal, how will we explain it to our LPs?”
Letting these thoughts drive the decision can lead to overpaying—and regrettable investments.
So how do elite VCs avoid this trap?
First, they establish a strict investment discipline internally. While their offer might seem casually thrown out, it’s almost always backed by a robust decision framework. Beyond the “fatal signals” we discussed earlier, they often maintain a matrix of validation criteria that corresponds to different levels of pricing.
For example:
- If Signal A is met but not B, the maximum bid is X.
- If Signals A and B are met but not C, the cap is Y.
- Only when A, B, and C are all validated can they justify going up to Z.
More importantly, even if the project is red-hot, these pricing boundaries are rarely overridden. This discipline keeps them grounded when the market gets noisy.
If you ask a top-tier VC how they manage to stay rational in high-stakes decisions, they’ll likely tell you:
Don’t count on your willpower. Design systems that limit your behavior before the heat of the moment arrives.
It’s akin to the Greek myth of Odysseus, who tied himself to the mast to resist the Sirens’ song. He didn’t rely on sheer discipline—he anticipated temptation and prepared accordingly.
Some VC partnerships also implement internal constraints. For instance, each partner might be allocated a specific investment budget. If one wants to exceed that amount, they must convince another partner to allocate part of their budget. This ensures that the larger the investment, the stronger the consensus and supporting rationale.
Another common mechanism: tiered approval thresholds. If a partner wants to make a small early-stage bet, they can act independently. But the larger the check size, the more partners they need to persuade. Say a VC firm has seven partners. One partner can approve a $1M deal on their own. To invest $2M, they need one other partner’s support. For $3M, they need three sign-offs, and so on. This serves as a built-in braking system—maintaining agility for small bets while ensuring caution for bigger plays.
How Can You Apply These VC Strategies in Daily Life?
The author offers a few practical tips.
If you’re a manager, the next time an employee pushes for an unconventional idea, don’t shut it down. Instead, give them a small budget to build a prototype or run a test. Let data—not opinion—do the convincing. In uncertain territory, it’s often the minority that discovers new ground.
Similarly, for yourself, consider allocating a monthly exploration budget—a set amount just for experimenting with new tools, ideas, or side projects. Even if some of them flop, the cost is controlled. And who knows? You might just stumble upon your own version of Slack or Airbnb.
III. Embrace Constructive Conflict
So far, we've discussed how venture capitalists (VCs) make decisions as individuals. But what about group decision-making? In traditional settings, consensus is often considered the ideal. The more unanimous the vote, the better. But in venture capital, the opposite is often true: they prefer disagreement.
Reid Hoffman, a veteran VC partner, once remarked:
"Our favorite investments are the ones where half the partners think it’s a great idea—and the other half think it’s terrible."
Another Silicon Valley veteran echoed this:
"Looking back over the past 40 years, every one of our biggest wins was accompanied by debate, dissent, and controversy. Deals that reached easy consensus from the start almost always turned out to be disappointments."
This is not anecdotal. The author and his team gathered decision-making protocols and performance data from hundreds of VC firms and uncovered a clear pattern: firms that required unanimous agreement before investing consistently underperformed those that allowed internal disagreement.
Yet, embracing disagreement is counter to human nature. Conformity is instinctive.
One illuminating study from South African scientists involved two groups of monkeys. Each group was given two different colors of corn, one soaked in bitter aloe to make it unpalatable. In Group A, the pink corn was bitter, and the blue was sweet; in Group B, the opposite was true. Over time, each group naturally developed a preference for the sweet color.
But the surprising part came when a monkey migrated from one group to another. It immediately conformed to the new group’s preference—even when it contradicted its own prior experience. This is group conformity in action.
Humans are no different. In corporate settings, when a leader voices support for an idea, few dare to disagree. When most people raise their hands for a proposal, the rest tend to follow suit. In stable environments, such conformity may maintain harmony. But in uncertain, innovation-driven contexts, it can be disastrous.
So how do top-tier VCs overcome this tendency?
Recognizing the value of dissent is not enough. Embracing conflict requires deliberate systems to counteract both the human instinct to conform and the organizational inertia toward “keeping the peace.” Many firms have developed structured mechanisms to ensure every major decision is exposed to rigorous challenge and scrutiny.
Mechanism 1: The Devil’s Advocate System
For every investment proposal, VCs assign individuals to intentionally argue against the deal. At Andreessen Horowitz, for example, a “Red Team” is designated to oppose each deal from a critical perspective.
Some firms go further, requiring everyone except the deal champion to serve as a devil’s advocate—turning the entire room into a gauntlet of opposition. While extreme, this process forces all assumptions to be stress-tested and blind spots to be surfaced.
Mechanism 2: Junior Voices First
Many VC firms enforce a “junior-first” speaking rule, requiring less experienced team members to share their views before senior partners speak.
This isn’t just because younger analysts may be more attuned to emerging trends or less anchored by past experiences. It’s mainly to prevent anchoring bias—where early opinions, especially from authority figures, skew the discussion and silence dissent.
Mechanism 3: Pre-Meeting Written Feedback
Some firms require each team member to submit independent written analyses before the official investment meeting. This serves two purposes:
It prevents opinions from being unduly influenced by others.
- It makes it easier for contrarian views to surface—since many people are more candid in writing than in live discussion.
- Mechanism 4: Small Decision Teams
Most VC investment meetings are limited to three to five people. This isn’t about exclusion—it’s about decision quality. In larger meetings, half the room stays silent, some are distracted, and only a few dominate the conversation. Smaller groups allow everyone to speak, keep discussions focused, and lead to more in-depth evaluations.
Amazon, in fact, has a similar principle: the “two-pizza rule”—no team should be too large to be fed by two pizzas.
After Debate, Who Decides?
In most top firms, unanimity is not required. Even if some partners strongly object, an investment can proceed as long as the lead advocate persuades a minimum number—or proportion—of partners.
But there's one sacred rule: no "I told you so" after the fact.
If an investment fails, no one is allowed to say:
"I knew this would happen."
Why? Because every decision is expected to have been thoroughly debated beforehand. As one investor puts it:
“Speak now or forever hold your peace.”
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IV. Be Ready to Walk Away at Any Time
Now let’s talk about what venture capitalists (VCs) focus on after they’ve made an investment. This brings us to one of the most distinctive features of VC thinking: always be prepared to exit.
Yes, while society often glorifies perseverance as a virtue, in venture capital, the opposite can be true.
This book devotes significant space to describing how professional poker is played—because poker and venture capital share one essential trait: both involve a long, uncertain journey broken down into multiple decision points, and at every stage, players must be ready to walk away.
Why? Because in high-uncertainty domains, the biggest risk isn't missing an opportunity—it’s doubling down on the wrong one.
This stage-based investment mindset in VC is known as “round-based thinking.” Like poker, each funding round serves as a new moment of truth:
The Seed Round is like being dealt your hole cards—there’s potential, but limited information.
The Series A Round is when the flop comes down—you get your first look at how the market might respond.
Series B brings the turn—more data, but still far from certainty.
Later rounds, like Series C and D, provide deeper validation—or deeper risk.
At every stage, VCs face three choices: fold (stop investing), follow (maintain current stake), or raise (increase exposure).
This staged commitment is key to how VCs generate returns. Take the example of Sequoia Capital’s investment in Airbnb:
In 2009, when Airbnb’s founders first approached Sequoia, the firm invested $600,000—an exploratory bet, at a company valuation of just $2.5 million.
By 2010’s Series A, some traction had emerged: listings in over 8,000 cities and 700,000 nights booked. Sequoia added another $1.9 million.
In 2011’s Series B, bookings had grown to 10 million, but regulatory risks and customer complaints surfaced. Still, a16z (Andreessen Horowitz) led the round, seeing it as a once-in-a-lifetime opportunity. Sequoia followed.
In 2013’s Series C, Founders Fund invested $150 million at a $2.5 billion valuation—startling the Valley. Sequoia again followed suit.
By 2014’s Series D, Airbnb remained unprofitable. Yet investors believed the evidence now pointed to a generational opportunity. Sequoia doubled down. In April, Airbnb’s valuation soared to $10 billion.
At every step, Sequoia and others reassessed, asking: Should we continue? How much more should we invest?
By the time Airbnb went public in 2020, Sequoia’s return from the investment exceeded $12 billion.
This isn’t an isolated story. Many major VC successes follow the same iterative process. The book emphasizes that this mindset of staged commitment isn’t just for investing—it’s also valuable for personal decisions.
When investing your time, money, or energy into something, don’t go all-in up front. Break your investment into smaller milestones and leave yourself room to pivot. At every stage, define clear metrics, and based on outcomes, decide whether to double down, hold steady, or walk away—just like a VC.
Of course, knowing when to exit is one thing. Actually exiting is much harder.
Why? Because of loss aversion, sunk cost fallacy, and escalation of commitment—psychological traps that bind us emotionally to a failing course of action. To combat these biases, the VC world has developed three key mechanisms:
Mechanism 1: Regular Re-Evaluation with Outsiders
Top VCs conduct periodic reviews of portfolio companies—but the most critical element is inviting outside perspectives.
For example, many firms set up advisory boards made up of external domain experts. More importantly, they ask partners who were not involved in the initial investment to lead the evaluation and weigh in on whether to continue.
This isn't just about getting a "fresh pair of eyes." It's also because outsiders are more willing to say “stop.”
Why? Because of personalization—the root of loss aversion and commitment bias. When a decision is mine, I’m far more likely to defend it. But when it’s someone else’s, I can be objective.
This is confirmed by research: In corporate settings, when people review failing projects, they’re far more likely to continue investing if the project was their own idea. If the decision was made by a predecessor or a different team, they’re more willing to cut losses.
That’s why VCs emphasize outside evaluations. It’s also why individuals benefit from what this book calls a “quitting coach”—someone who has your best interest at heart, but no stake in the outcome. They can help you enforce your own exit rules when you’re too emotionally invested to act rationally.
Mechanism 2: External Braking Rules
Many top-tier VC firms have another unusual rule:
They won’t participate in a new funding round unless there’s a new lead investor.
This isn’t due to lack of funds—it’s a discipline mechanism. Once a firm is deeply involved in a project, it becomes harder to stay objective. But new investors aren’t emotionally attached—they bring a clean slate and sharper judgment.
Empirical data backs this up: Funding rounds that involve new lead investors consistently outperform those that don’t.
These principles may sound simple, but they're powerful. Venture capital isn't just about betting on winners—it's about knowing when to stop betting on losers.
And in our own lives, we would do well to adopt the same mental model:
Invest in stages. Track the data. Stay flexible. And above all—know when to walk away.
V. Conclusion
That wraps up our discussion of The Power Law.
Through this book, we’ve explored three defining characteristics of venture capital thinking:
Constantly saying “no,” constantly debating, and constantly being ready to exit.
On the surface, these principles seem simple. But in reality, each of them challenges core aspects of human nature:
- To constantly say “no” is to resist our instinct to chase every opportunity.
- To constantly debate is to push back against our desire for harmony and consensus.
- To constantly exit is to fight our urge to stand by past decisions and prove ourselves right.
These behaviors highlight a powerful truth:
In uncertain environments, the greatest danger isn't being wrong—it's not giving yourself the chance to be wrong and to correct it.
Venture capitalists aren't immune to making bad calls. The difference is, they build systems that allow them to be wrong faster, recognize it earlier, and recover more effectively.
They use:
- The “killer signal” method to swiftly screen out weak opportunities,
- The “devil’s advocate” strategy to stress-test their assumptions,
- And round-based investing to control downside risk.
These mechanisms all serve a deeper purpose: enabling a decision-making process that embraces iteration, error, and course correction.
And that’s the deeper lesson for all of us:
In the face of uncertainty, success isn’t about making perfect decisions—it’s about designing a system that lets you learn, adapt, and improve as you go.
In this age of rapid change, your real competition isn’t the person who never makes mistakes.
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