Onion Theory Of Risk

In partnership with

What is the Onion Theory of Risk and how can it help you raise?
Read time 2.0 minutes.

Did you get rejected by a VC? It’s likely because there were still too many questions about your company. The next step for you is not to sulk but execute. Answer those questions and prove the VC wrong.

One of my favourite ways to think about this is what Marc Andreessen calls “the onion theory of risk.”

Every startup starts out as a ball of risk — and your job is to peel away each layer:

• Founder risk: Do you have the right team, with real founder-market fit?

• Product risk: Can you actually build what you’re pitching — and does it work?

• Market risk: Do customers want it, will they pay, and will they stick around?

• Competition risk: How will you defend your edge once others show up?

When investors pass, it’s usually because too many of those layers are still intact. That’s not a failure — it’s a roadmap.

And remember, this game is noisy. Timing, taste, even randomness play a role. Maybe they just lost money in your space. Maybe they had a rough morning. Maybe your pitch hit them on the wrong day.

You can’t control luck. You can control execution.

So don’t read too much into a “no.” It’s rarely about you — it’s about when.

Keep peeling the onion. Keep building. And make them regret not saying yes sooner.

Onwards and Upwards,

Liam Gill