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Marc Andreessen: The Onion Theory of Risk — Peel One Layer at a Time

By Marc Andreessen · Investing · 1 min read

Andreessen says a startup is a stack of risks. Your job is to remove them one layer at a time.

Key Points

A startup has many risks stacked: technology, market, team, regulation, competition
Remove them one at a time — each removed layer makes the company more valuable
Investors fund companies that have peeled the most layers

A startup is like an onion of risk. Your job is to peel it one layer at a time.

The Onion

A new startup is all risk. Can you build it? Will people want it? Can you sell it?

Each of these is a layer. Your job is to peel them.

Build a prototype — technology risk removed. Get 10 users — market risk reduced.

Peel and Raise

Each layer you remove makes the company more valuable. And more fundable.

Seed round: we removed technology risk. Series A: we removed market risk.

Investors are buying de-risked companies. The more layers peeled, the higher the price.

Peel one layer at a time.

The Order Matters

Peel the biggest risk first. If you cannot build the technology, nothing else matters.

Then market risk. Then unit economics. Then scale.

The wrong order wastes time and money on risks that do not matter yet.