Idea in Brief

The Opportunity

Venture capitalists’ unique approach to investment and innovation has played a pivotal role in launching one-fifth of the largest U.S. public companies, demonstrating the power of the venture mindset.

The Challenge

Traditional companies often struggle to replicate the success of venture firms because of their aversion to risk and failure and their preference for consensus and stability.

The Solution

When faced with market changes or disruptive technology, big companies should adopt the venture mindset, prioritizing the individual over the group, disagreement over consensus, exceptions over dogma, and agility over bureaucracy.

Venture investors are the hidden hand behind the most innovative companies surrounding us. According to research conducted by one of us (Ilya), venture capitalists were causally responsible for the launch of one-fifth of the 300 largest U.S. public companies in existence today. They have played an essential role in unlocking the power of the internet, the mobile revolution, and now artificial intelligence in all its forms. Apple, Google, Moderna, Netflix, Airbnb, OpenAI, Salesforce, Tesla, Uber, and Zoom—these firms disrupted entire industries despite initially having fewer resources and less support and experience than their mature, successful, cash-rich competitors. All these businesses could theoretically have emerged from within an established company—but they didn’t. Instead, they were financed and shaped by VCs. Indeed, we estimate that three-quarters of the largest U.S. companies founded in the past 50 years would not have existed or achieved their current scale without VC support.
A version of this article appeared in the May–June 2024 issue of Harvard Business Review.
Read more on Organizational decision making or related topics Innovation, Decision making and problem solving, Risk management, Venture capital, Investment management and Disruptive innovation