#22 Angelinvesting.it - From idea to Series A - Weekly Newsletter

The onion theory

3 Minutes to reflect

"More money, faster closing, better terms" is the "highly sophisticated" strategy that many founders adopt when it comes to fundraising. However, this strategy often fails to align with the perspective of investors.

Ultimately, investors are asset allocators who take risks in pursuit of rewards. While a small risk with a high return brings a smile to their faces, a high risk with a low return leaves them feeling disheartened.

In this context, the intriguing concept of the "Onion Theory" comes into play. Coined by the visionary Marc Andreessen, a tech entrepreneur and venture capitalist extraordinaire, the Onion Theory presents a captivating analogy.

Similar to an onion with its multiple layers, a startup at its inception is characterized by a multitude of risks. These risks encompass factors such as team dynamics, execution challenges, market uncertainties, and technological hurdles, forming a complex tapestry of uncertainty.

Each round of fundraising presents an opportunity for founders to achieve milestones that peel away one layer of risk, gradually reducing the overall risk profile of the startup and increasing its value.

Founders who grasp this concept hold the key to crafting a compelling pitch that showcases the milestones achieved and the risks overcome.

At any given moment, founders should be able to describe the specific risks they are planning to overcome and outline the milestones they are striving to achieve. By clearly articulating their plans to address these risks, founders can build trust and confidence among investors.

2 Resources to pro level

In the dynamic world of startups, understanding the Onion Theory can be a game-changer. It provides a framework for founders to communicate their vision, milestones, and risk management strategies effectively. Check the video directly from the voice of Marc Andreesen. Check the video here.

Talking about asset allocation, two weeks ago, I was in Berlin, where VC firm Atomico introduced a preview of their annual publication on the state of European venture capital. It is a super insightful document, and I highly recommend check it out!

1 Reason to be happy

Talking about onions, I have some great weekend recipes for you! These recipes require only 5 ingredients and are super easy to put together. Not only are they delicious, but they are also sure to make your weekend even more enjoyable! Check it out!

Have a great weekend,

Simone

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