Today I will be sharing an episode of the notes from The Builder’s notes
This podcast is a discussion with Alex Dang (Senior AdvisorMcKinsey & Company), who co-wrote the new book "The Venture Mindset: How to Make Smarter Bets and Achieve Extraordinary Growth" and the HBR article "Make Decisions with a VC Mindset."
HBR IdeaCast POdcast with Alex Dang
Link to the full pod: HBR IdeaCast Podcast
To start with
This pod, explores how VCs make decisions, how they seek value, and what makes them tick. The conversation opens with asking Alex Dan why he chose VC as his niche.
For Dan, decision-making is very different and unique because of the responsibility it carries and its ability to bring forth 80% of the largest companies out there.
The willingness to fail is one of the strongest factors that matter to VCs. They make decisions with the understanding that things will and should fail.
The way of thinking is not about individual companies or specific startups but about assessing risk—how many startups can take on and manage the associated risks.
For VCs a thing they look out for is the anti-portfolio. This relates to the ideas or projects they chose not to pursue.
How this is done is, you reflect on the ideas you filtered out before as bad and the ones you chose to work on. Afterward, look to see the outcomes of those projects, those who you went with, and the ideas you didn't choose.
Analyze the environment surrounding those outcomes, you are currently observing, good or bad, If you see that an idea you passed on as not good( meaning a bad idea) succeeded elsewhere, it's worth reevaluating your decision.
In relation to coming up with path-breaking ideas or decisions that lead to innovations rather than following the general working consensus, it's important to note that when it comes to new technology and new business, following a general consensus can be dangerous. VC firms often have a team dedicated to going the opposite way, directly opposing what everyone else has agreed on.
The Red Team
Another concept is the devil's advocate, also known as the red team. The devil's advocate's job is to challenge the idea, finding as many ways as possible that it could fail. These individuals may not always be seen as team players, but they are crucial to the team's success. However, these team members must be alternated constantly, change some people in the red team to the Blue team, and so on.
Another important aspect is the consensus-minus-x rule. This means that an investment will be approved even if only one of seven people agrees. As long as that one person brought up the idea, a level of investment will be made towards that idea, whether it’s seed investment or partnership of some sorts. This ensures that innovative ideas are given a chance.
Steps
In regards to improving decision-making, keep the team as small as possible.
Allow junior members to speak first so that when the boss speaks, it doesn't bias thoughts.
Provide feedback and read about the companies ahead of time.
At Amazon, for large teams, they follow the "two pizza rule", if two pizzas can't feed the team, then the team is too large. Ten is the closest to a big team, if it's more than ten, the team should be reassessed.
VCs often ask for individual feedback about a company before a general meeting and record it. This way, when everyone meets, they can see at what point they changed their minds compared to their initial feedback. And what questions might have caused this change of mindset?
Conclusion
VCs ask the experts to speak last in meetings because it helps the rest of the team voice their opinions without fear of starting an argument with the experts.
Set ambitious timelines for making these decisions.
VCs often give out 100 no's for every yes they say. One key method is by asking, "Why should we not invest in X startup?" Adding "not" allows red flags to appear faster than asking, "Why should we invest?"
This approach can be used for ideas, projects, and hiring. The end.
If you want to receive notes like this in your email every other week kindly check out our payment plans here
So, yeah, about that girl I was crushing on. I asked her about the guy she was talking to, and she said he was just a friend. I was happy then, but before I could say anything, she ended the sentence with, ”ah noo, we are just friends nah, just like how two of us, you and I are friends that's how me and him(the guy she is talking to) are just friends”
if you are lost just read the last email to understand t for thanks
Pitsss…
If you or someone you know makes podcasts, whether you're a seasoned pro or just starting, whatspodcasting offers editing and research services for almost free, making podcasting feel like a breeze visit the site.
Please like, subscribe, and share with someone you like (and tell me how it went?).
you can say hi at Drounz on X
Thank you for reading!!