Core Concepts
Skin in the Game
Also Known As
Personal StakesCommitment
Skin in the game refers to having personal risk, investment, or stake in an outcome, ensuring that decision-makers are aligned with the success or failure of the venture.
What is Skin in the Game?
The term, popularized by Nassim Taleb, describes having personal stakes in outcomes. In startups, it means founders and investors have real consequences from their decisions.
Why Skin in the Game Matters
- Alignment: Ensures everyone wins or loses together
- Commitment: Shows serious dedication
- Trust: Builds confidence in partners
- Decision Quality: Better choices when you bear consequences
Examples in Startups
Founders:
- Leaving stable jobs
- Investing personal savings
- Below-market salaries
- Equity vesting
Investors:
- GP commitment to fund (1-5%)
- Partners' personal investments
- Reputation on the line
Studios:
- Studio team equity in portfolio
- Personal investment alongside LPs
- Time and resources committed
Questions About Skin in the Game
Investors often ask founders:
- "Are you full-time on this?"
- "Have you invested your own money?"
- "What have you given up to do this?"
Example Usage
“The VC liked that the founder had skin in the game, having invested her savings into the company.”