venture capital

Average loss ratio. Some sectors are higher risk than others. For the past couple of decades, for example, social media has been particularly challenging, with Meta acquiring or suffocating insurgents. If the sector you operate in has a high loss ratio, you may want greater diversification.

But the window doesn’t last long. As Paik thinks of it, “each time a new shift occurs, it is analogous to the formation of an unstable radioactive isotope. The radioactivity throws off a huge amount of energy in the form of capturable enterprise value, but is subject to half-life decay. Over time, the isotope decays and eventually becomes lead, at... See more

As a founder, the goal then becomes to metaphorically peel each layer of the onion — Each fundraising milestone turning into a set of risks being evaluated and sidelined. The earliest investors become the partners to help figure out what to focus on. Good pre-seed angels and investors are often described as “having taste” for good startups — In... See more

I won’t expand on the onion theory itself, but it roughly follows the following sequential steps:

Team Risk: Is the team capable of executing their vision? Will the team work together effectively?

Building Risk: Can they develop a viable product?

Market Risk: Is there a substantial market for the product? Will customers use and pay for it?

Go-To-Market... See more

Effective fundraisers have mastered the art of risk framing, demonstrating the ability to clearly articulate the risks associated with each milestone. And then, reassure the investors on how they will meet each one of them. In return, investors have developed standardized expectations for each round of fundraising.

In that context, the onion theory... See more