The Danger of Undefined Bets

Companies don’t usually die because the founders run out of ideas. They die because they run out of time and money — usually because there wasn’t enough customer demand.

“Most startups fail because they never find customer demand, not because they get outcompeted.” — Fred Wilson, The Postmortem

This is the danger of undefined bets.

“I think Google will use it” isn’t a plan. It isn’t a bet. It’s a fantasy. And fantasies drain runway.

A real bet has three parts:

• What we’re aiming for (measurable results: revenue, margin, growth, cash).
• What we’re risking (cash, time).
• When we’ll know if it worked.

And critically: a feedback loop to track bets, learn from outcomes, and compress the cycle so the next bet is sharper. Without this, you’re just burning and drifting.

Burn Is a Choice

Burn isn’t gravity — it doesn’t just happen. It’s the direct result of every decision you make.

Every hire. Every ad dollar. Every tool. Each one is a tradeoff.

Bill Gurley warned, “excessive burn without commensurate results” is a major red flag because it signals a company betting on hope, not evidence. Burn without feedback loops isn’t growth; it’s waste.

Before you commit to spending, ask yourself three questions:

• What am I buying with this burn? What customer proof will it deliver?
• What am I giving up? What else could I be doing instead?
• When will I know if it worked?

If you wouldn’t spend your own money on it, don’t spend your company’s. Runway is finite. Every time you burn, you’re making a bet about proving customer demand and building future revenue.

Thinking in Bets

In her book, Thinking in Bets, Annie Duke argues that every decision is a bet under uncertainty. You don’t know the outcome for sure. What you can do is define the bet clearly before you commit.

This requires you to think about three things:

• Stake — what you’re risking (burn: hires, ad spend, time).
• Odds — how likely you think it is to work (your belief, expressed in probabilities).
• Payoff — what you stand to gain if it works (customer demand, revenue, margin, runway).

That’s the mental model: every dollar of burn is a chip you’re putting into the pot. If the bet doesn’t point to customer revenue, it’s wasted.

Decisions in Uncertainty

Here’s the trap most founders fall into: they mistake outcome for decision quality.

As in poker, you can play a hand perfectly and still lose if the wrong card turns. Likewise, a well-structured product experiment can still flop. The quality of the decision isn’t whether it worked; it’s whether the bet was clearly defined.

To determine that, ask yourself:

• Did we know what we were risking?
• Did we state what outcome would count as success?
• Did we set a timeframe to know if it worked?
• Did we consider the alternatives we were giving up?
• Did this tie directly to customer demand?

If the answers are “yes,” you made a defined bet. Even if it fails, you learned. If the answers are “no,” you’re just spending and hoping.

Sequoia’s Arc PMF framework cuts to the heart: “Who desperately needs what you’re making?” and “How do you know?” These aren’t rhetorical. They’re the definition of a real bet.

What Is Progress?

“Raise enough money to achieve a set of milestones that will attract a subsequent round of investment from new investors.” — Tomasz Tunguz

That’s the game. Milestones aren’t vanity metrics or internal checklists. They’re external proof points that reduce uncertainty and show the market you’re real.

Motion is building, shipping, and hiring.Progress is testing assumptions and leaving evidence anyone can see.

Ask yourself:

• Who exactly is the customer?
• Why would they change their behavior?
• Will they pay, and how much?
• Can we reach them repeatedly at a sane cost?

Every bet should test one of these assumptions.Every milestone should turn an assumption into proof.

Proof looks like active users, conversions to customers, renewals, repeat purchases, conversion lifts. Things customers do with their money or their time. Things outsiders can verify.

If your “progress” doesn’t show up in milestones tied to future revenue, it’s not progress. It’s just burn.

Defining Progress Stage by Stage

The scoreboard of revenue, growth, margin, and cashflow never changes. But the bets that matter do.

Your job is to strip away risk stage by stage until only customer demand and revenue (alright maybe margin and profit) remain.

• Seed: Prove the problem matters and someone will pay.
  • Customer intent — real signals of purchase, not just interest.
  • Willingness to pay — at a price that makes a viable model.
  • Ease of acquisition — can you reach and convert them?
  • Progress = market risk reduction.
• Series A: Prove the model repeats.
  • Efficient, predictable customer acquisition.
  • Unit economics: CAC, LTV, payback.
  • Progress = repeatability.
• Series B and beyond: Prove you can scale and defend.
  • Distribution, moats, efficiency.
  • Progress = sustainable growth + margin expansion.

At every stage, the question is the same:  

Which assumptions must we prove, with visible evidence, to earn the next round of capital and survive?

Burn that doesn’t turn assumptions into proof is just wasted energy

If your bets don’t attack the biggest customer-related risk at your stage, the burn is wasted. It’s wandering off the path while the oxygen runs out.

Updating Odds

One of Duke’s most practical ideas is calibration: testing whether your internal odds match reality.

• “I think there’s a 70% chance this customer signs in 60 days.”
• “I think there’s a 40% chance this feature increases conversion by 25%.”

When the outcome comes in, you don’t just mark win/lose. You recalibrate. Did you overestimate? Underestimate?

Calibration is how judgment compounds. It’s the difference between guessing and learning.

• If you thought a deal was 70% likely but it only closed 10% of the time, you were fooling yourself.
• If you thought a feature was a coin flip but it worked 80% of the time, you left money on the table.

Founders who don’t define bets can’t calibrate. They can’t refine their instincts, so they keep making the same sloppy bets — bigger and bigger — until the cash is gone.

Defined bets turn every outcome, win or lose, into an asset: sharper judgment, better odds, and more disciplined use of burn. Undefined bets just drain you.

Why Undefined Bets Kill Companies

Runway is finite. Every dollar is a chip off your stack.

• Undefined bets: burn money, eat time, prove nothing.
• Defined bets: even if they fail, they teach you something about your customers, your market, or your model.

Accounting records the past. Strategy is shaping the future — and the future is only customers and revenue.

You don’t win by eliminating risk. You win by making sharper bets on customer demand, faster than anyone else.

How to Start Defining Bets

When you’re about to spend, write it down:

1. What are we aiming for? (connection to revenue / demand)
2. What are we risking? (burn: dollars, time, credibility)
3. When will we know if it worked? (timeframe)
4. Who needs to see this as success? (customer, investor, operator)
5. What alternatives are we giving up? (opportunity cost)

If you can’t answer those, it’s not a bet. It’s just setting fire to runway.

Staying Power

Most startups don’t collapse because of competition.They collapse because they burn without proving demand.

It’s easy to build — product is the one bet you control.

The hard part is making sure every dollar burned produces traction, not just motion.

First-time founders focus on product.
Second-time founders obsess about distribution.

Progress isn’t about speed — it’s about rhythm.
Define the target. Run the loop. Learn fast. Place the next bet sharper.

You can always build. The real test is whether customers will use — and pay.

Undefined bets waste energy. Your defined bets should move you closer to revenue, closer to survival, closer to the win.

Survival comes from discipline: the companies that last are the ones that turn burn into customer proof and future revenue.

⚡️ Companies don’t fail from a lack of ideas — they fail because customer demand never shows up and the cash runs out. Define your targets, run the loop, and make every dollar count. If you’re ready to run with discipline instead of theatre, let’s work together.