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You’re risking everything in DeFi for a few extra % EllioTrades thinks putting money in DeFi right now is one of the worst risk/reward trades you can make. "The risk of losing all your money in exchange for a few percent is not worth it." "AI is creating a...

26,029 Aufrufe • vor 5 Monaten •via X (Twitter)

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Q: Should startups always raise as much money as possible? In the clip below, Marc Andreessen shares a framework that Benchmark co-founder Andy Rachleff taught him called "The Onion Theory of Risk". You can think of a day 1 startup as having every conceivable kind of risk: founding team risk, product risk, technical risk, market acceptance risk, revenue risk, cost of sales risk, viral growth risk, etc. A startup is basically just a long list of risks, and as Marc explains: "The way I think about running a startup is the way I think about raising money. It's a process of peeling away layers of risk as you go." You raise seed money to peel away the first two or three risks (e.g. founding team risk, product risk, initial launch risk). You raise the Series A round to peel away the next layer of risks (e.g. recruiting risk, customer risk, revenue risk, cost of sales risk) And so on. Basically, you're peeling away risk as you're achieving milestones. And as you achieve milestones, you're both: making progress on your business and justifying raising more capital. So in terms of fundraising, you should be calibrating the amount of money you're raising to the risks you need to pull out of your business for you to raise your next round. For example, if you're raising your Series A round, the best way to do that is to say to investors: "I raised a seed round then achieved ____ milestones and eliminated ____ risks. Now I'm going to raise $X for the Series A to achieve ____ milestones and eliminate ____ risks. This will get the company to ____ state for the Series B round. " This seems fairly obvious, but as Marc points out, it's a much more systematic way of going about things versus just raising as much money as possible, renting fancy offices, and hiring as many people as you can to grow as fast as you can. The more money you raise, the more you dilute your ownership stake in your business so it pays to be thoughtful. Raise the capital you will need to achieve the milestones and eliminate the risks required for your next financing round. It also probably makes sense to give yourself some margin as safety because things never go exactly as planned in startup land. Follow Startup Archive for more tactical startup advice!

Startup Archive

178,597 Aufrufe • vor 3 Jahren

Q: Should startups always raise as much money as possible? In the clip below, Marc Andreessen shares a framework that Benchmark co-founder Andy Rachleff taught him called "The Onion Theory of Risk". You can think of a day 1 startup as having every conceivable kind of risk: founding team risk, product risk, technical risk, market acceptance risk, revenue risk, cost of sales risk, viral growth risk, etc. A startup is basically just a long list of risks, and as Marc explains: "The way I think about running a startup is the way I think about raising money. It's a process of peeling away layers of risk as you go." You raise seed money to peel away the first two or three risks (e.g. founding team risk, product risk, initial launch risk). You raise the Series A round to peel away the next layer of risks (e.g. recruiting risk, customer risk, revenue risk, cost of sales risk) And so on. Basically, you're peeling away risk as you're achieving milestones. And as you achieve milestones, you're both: making progress on your business and justifying raising more capital. So in terms of fundraising, you should be calibrating the amount money you're raising to the risks you need to pull out of your business for you to raise your next round. For example, if you're raising your Series A round, the best way to do that is to say to investors: "I raised a seed round then achieved ____ milestones and eliminated ____ risks. Now I'm going to raise $X for the Series A to achieve ____ milestones and eliminate ____ risks. This will get the company to ____ state for the Series B round. " This seems fairly obvious, but as Marc points out, it's a much more systematic way of going about things versus just raising as much money as possible, renting fancy offices, and hiring as many people as you can to grow as fast as you can. The more money you raise, the more you dilute your ownership stake in your business so it pays to be thoughtful. Raise the capital you will need to achieve the milestones and eliminate the risks required for your next financing round. It also probably makes sense to give yourself some margin as safety because things never go exactly as planned in startup land.

Michael McGuiness

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You have 100 dollars and you want 200. Betting red one dollar at a time, your chance is one in 33,171. Betting the whole 100 on a single spin, it is 47.4 percent. The careful version is fifteen thousand times worse. This is also the arithmetic of your trading account, and it means almost everything you have been taught about managing risk is, in the strict mathematical sense, a method for losing more reliably. An MIT professor works this out on a blackboard in a lecture on random walks. The result is called gambler's ruin. Two and a half points of disadvantage is nothing on one spin. But a dollar at a time you are not making one spin, you are making hundreds, and the edge gets a fresh attempt at you on every one of them. It was never the size of the disadvantage. It is the number of times you agree to face it. One hundred on red, once: 47.4 percent. Twenty dollar bets: 37.3 percent. Five dollar bets: 11.1 percent. One dollar bets: 0.003 percent. Mathematicians call the right answer bold play. It was proved optimal for unfavourable games in 1965. It is not a strategy for winning. It is the least ruinous way to play a game you should not be in. If your edge after spread and fees is negative, and for most active retail accounts it is, then your position sizing rule is not protecting you. Risking one percent per trade is the one dollar bet. It arrives at zero with near certainty, just politely, over a longer period, with a spreadsheet. Discipline does not beat a negative edge. It schedules it. All of this reverses if you have a real edge. Then small and frequent is correct and bold play is madness. So the only question that has ever mattered is whether you have one, and the number of people certain they do has never resembled the number who do. Your broker does not need you to be wrong. It needs you to be frequent.

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