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How to Think Like a Venture Capitalist

Venture capital is behind a huge number of today’s most successful companies. And Professor Ilya Strebulaev wanted to know: What goes on in the mind of a VC investor?

Since the 1970s, venture capitalists have backed about one-third of all large publicly traded companies started in the U.S. Think Google, Microsoft, Facebook, and Zoom. It’s clear these startup investors know how to pick winners. So how do they choose?

Strebulaev identifies what he calls “the VC mindset,” which “is very different from other financial investors’.” In their selection process, VCs put every potential investment through a rigorous vetting funnel. On average, 100 startups go in, and only one comes out.

In speaking with almost 900 VCs at over 700 firms, Strebulaev found that many are focused more on the founder than the business. “Most VCs will not invest unless they have complete trust that [the] early management team can execute on the idea,” he says. VCs know that even with a good horse, you need a great jockey to win the race.

As Strebulaev says, we all can benefit from the VC mindset by doing research before making decisions, experimenting, and keeping an open mind. “That’s how you win big in business, and the same is true in life,” he says.

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