Trying to get back to the basics of great products power comes from sharing information. I tried to convince people to slow down Before we go to the episode here's a quick word from our sponsor cap chase Imagine if all your customers paid a front at the moment of signing a contract. What would that mean to you? Capchase helps fast-growing occurring revenue companies finance growth without taking on debt or dilution Whether you want to invest in growth or R&D cap chase turns your predictable revenue into growth capital today Capchase has helped founders unlock hundreds of millions in financing to fuel their growth and on average extend their runway by eight months and Spared upwards of sixteen percent dilution So go see how insanely easy it is by visiting the link in our show notes Oh, go to capchase.com slash slash to learn more Thanks, let's go to the episode Hello, hello, welcome back to the show by slash podcast My name is William from that ball and with me in the studio in Helsinki's is a crowd. Oh, hi, William It's nice to be here at the studio again. It's been a while. Yeah, super nice to to be back at it And today our guest is Nicole Quinn. Welcome to the show Thank you so much for having me do you want to start off by Telling the the listeners and viewers who you are and what you do Yeah, of course. Hi everybody. I am Nicole Quinn. I'm a general partner at Lightspeed Venture Partners I split my time half and half between Europe and the US So home for me is both London and Silicon Valley. I Love that world in between and even during the pandemic. I have also been moving back and forth So for me, you know, I grew up with a very curious mother and a very entrepreneurial father So I was actually building online pharmacies with him just outside London in the 1990s And while we had about five or six of different online pharmacies in different European countries I would say it was a good idea, but the wrong timing And so it really taught me a lot of lessons about entrepreneurship and the right timing at a young age I'm a believer that you learn more from the ones that don't work out than the ones that do So I learned that early. I then went and spent gosh far too many years nearly a decade at Morgan Stanley Because I studied math and it felt like the right thing to go into pre-financial crisis But you know what? I actually loved it because I got to cover the e-commerce companies in London And then the internet names in New York did the Facebook Pandora Group on IPOs So it was fascinating But the whole time I'd be an angel investing and I found myself so compelled and fascinated by that world I was like, how do I do this full-time? So actually left I went to nutmeg the UK FinTech startup that actually just sold For nearly a billion which was exciting And I have to say that company was never straight up into the right lots of zigs and zags along the way to get to that outcome So it was exciting working there between their A and B round I then went out to Stanford to do an MBA and started a startup of my own worked on that for a little while pitched it to lightspeed along with about 10 15 other firms and I was just blown away by the type of questions that lightspeed on asked me I felt like they were really furthering my thinking In every interaction I had with them and also these are the kind of thought partners that I want around the table So I joined them five six years ago now And have invested in some really exciting companies, you know some in the UK like multi-verse zap clean liquor Now calm is half in the UK half in the US and ones in the US like cameo Zola Lunch club real in the mental health space And also house labs such as Lady Gaga's company. So that's fun Sounds amazing. What did they ask you? What did lightspeed ask me? Yeah So I had meetings with Barry Ravi and Jeremy and I always say that Spending time with Jeremy's like going to the gym It breaks down your muscles and it builds them up stronger. And so you have to be somebody that Has a growth mindset because I remember I did a presentation for Jeremy and Kind of like took the work and see it across the table. He was like You can do better And he was right I could do better and I went away for two weeks and I was like wait a second So didn't he just pitching him my ideas? I want to get on the phone. I'm gonna speak to these CEOs I'm gonna tell them. Hey, I'm at Stanford Business School I really want to be able to speak to you about these companies So go on the phone with real real before their IPO.  So it was great in terms of you sourcing this getting good access getting good diligence And so that was much better than the first piece of analysis you did And when I was a founder pitching to them Yeah, they asked me very different questions to others. They asked me like Who is a competitor that you admire in the marketplace and why do you admire them? And so very different type of questions to the others that I was being asked You've obviously had quite an illustrious career already. You've you've done a very wide variety of things so far. So What do you think? With this experience is the most important things you've found in successful founders You know, is there some common characteristics? Is there an archetype of Successful entrepreneurs that you can somehow pinpoint a few words or is it something more mysterious than that? Let's say it's something more mysterious than that So there are definitely Traits that I Look for I think you know before we were talking about You know founder who has that real grit and determination and can run through walls but I would say like After a few years of doing this, I realized like there's so many different types of successful founders And the much more important thing is actually like the founder product fit or the founder market fit That is so much more important because if you have somebody like you know Travis from uber like his Personality was very much like it doesn't matter about anything. I'm not taking no for an answer I'm just gonna keep driving to make this happen That's exactly the right thing that you needed for a business like uber Whereas if you take one of our portfolio companies a firm and max Levchin like max is just such a deep Like product engineering mind, and he's so thoughtful And so that's exactly the sort of person that you need to be you know driving that culture and driving that business and being very strategic in terms of which Partnerships to take and not take and when to really you know put Pedal to the metal and drive forward versus like thinking through like what needs to change in the business And so for me, I think that it is much more about You know the right founder or founding team to the problem that is trying to be solved Yeah, I think that's that's a good point and also what often is emphasized. I think Teams are under emphasize. It feels like in stories. We have this halo effect. We want to talk about individuals We talk about you know someone from some company, but very seldom There's one founder in any successful company or that's at least not the more common case. So How do you feel like can is it something you can build into the team? or you know the grit side of things or Is it there's a lot of talk about the teams themselves that you need to have a good Variety of skill sets very they may be a mindset as well, but you need someone to be kind of this you know leader this this kind of Guy who just or person not a guy, but like like a person who just he's able to run through the walls He's able to persuade it doesn't take no for an answer because it's very hard building most companies. I Think it comes down to The obsession that the founding team has with that product and that's what gives them that Grit and determination and run through all the mentality because they're so obsessed with the problem So just before speaking to you right now. I was on the phone to you and Blair Who's the CEO and founder of multiverse? Now you and I've actually known him for many years. We used to work together in Morgan Stanley Gosh, my probably 15 years ago and even back then you was obsessed with education He was obsessed with like, you know changing things from you know, political sense But it also like really education and like wait a sec like when we were up Like universities in London were a thousand Pounds a term to three thousand a year and now they're much more similar to the US, you know We can cost like 30 to 50 thousand a year some dollars, but it suddenly makes like The decision set of whether to go to university or not a really big one and so it's a way to say instead Why don't you work with multiverse and you know, you can have this really strong cohort of others You can go and do an apprenticeship in a really terrific company like a Google or a Microsoft or an earlier stage company And you can really work with multi set multiverse and get paid To do that rather than shelling out all this money to go to university.  What is the sort of target of that obsession? Towards what are you designing or building whatever you are building? I don't know if this is too abstract of a question, but like I guess so you talked a lot about the customer and who you're also interested in Maybe I'm kind of setting a table for your answer here But like what is the what it was should the target of the obsession be? It's funny because as I originally heard your question. I was thinking it is the customer Like that is that key thing that in my mind you should be obsessed about Like far too much time I think as a founder gets spent obsessing about the competition or internal meetings And they things like that that do not matter as much You know, Jeff Bezos has a great quote about the fact that yes He looks at the competitors, but he's obsessed with the customer. And so that's definitely a commentary that we see amongst all successful founders that they really do obsess about the customer and so They're really obsessed with building a product that customers want My husband's a founder and it's one in our bathroom He's got all over the mirror these post-it notes, which are like build something people want build something people need And I love that because he's exactly right like finding that early product fit Where customers love you so much that they're coming back time and time again. So your attention is good They're telling their friends about it. So the referrals good they Love it themselves and they're you know stating that so your NPS is high They're going on social media and telling others about it, you know, so you have like terrific organic Driven by that word of mouth and organic social. And so if you really obsess about the customer to that extent You're going to find like such terrific, you know, factors in the business start to come through You know such as like hey, listen, your cat is going to be significantly lower because you are going to have a much higher organic and referral side of the business and so we do find the That obsession kind of manifests itself in many different positive ways You've also said that you do this kind of interview trips you travel across across the country talk to customers At what point should you do that? Is that something you do? Obviously a company needs to have customers for you to be able to do it or it's something you can also do kind of in advance Do you kind of do some research of your own to try to figure out if that idea has some kind of kind of a need? Right now is such an exciting time in consumer land So I feel like I am just right now meeting so many interesting companies But there was a point where it was like winter in consumer You know a couple of years ago, I'd say about three years ago and during that time I was like, you know what I'm going to take some time out to spend a couple of weeks on the road meeting customers and That does not mean the bubble of Silicon Valley by the way that means like actually getting out and speaking to people and You know traveling is so important to me and so whether it's going and seeing you know One of our founders is in Sirencesta, England I'm excited to come to your conference later in the year in Helsinki And you know for this particular trip, I actually went to like Bentonville, Louisiana And then I went to like North Carolina and South Carolina And I kind of traveled around the south and speaking to people So I went to some of the universities and spoke to the students And I really wanted to understand like what are the apps that you're obsessed with What are the apps that you have on your home screen? Because if you think about your home screen, those are the ones you see every day And it's a little bit like out of sight out of mind Once an app is not on your home screen, you tend to forget about it Whereas like the ones think about the ones that are on your home screen, right? Those are probably I don't know depending on the person, right? But for me, it's like uber because I use it so often And facebook and instagram and cameo and calm because I use calm every single day And so those are the apps that are really going to have such high engagement, such high retention because you see it every day And so I wanted to understand from people not which apps have you downloaded because we can kind of get that from You know data online, but like what are the apps that are on your home screen? What are the apps you could not live without? How are you thinking about different e-commerce companies? I remember someone said to me I trust Amazon. Amazon is my friend I was like wow Amazon is going to be taking a lot more market share than they even have done If that's the way that people think about like the trust that an amazon package will come and they do not have that same belief in others So hopefully Shopify is changing that for other e-commerce brands now But you know, it's interesting that trust is just such an important factor And that's like some of the areas that I was really diving into with people around their customer behavior It sounds almost obvious I mean it does it does sound obvious like think about the customer in a sense And I think everyone is trying to achieve that if they're trying their best. What are some of the Main things you notice In founders or or founding teams Where that attention gets diverted to something else Why does the customer lose the center? role of of like The number one priority of of of design I think it's because sometimes founders believe that they have the customer love Which is also called product market fit Before they actually do And so often people will think okay, so we have the customer love now. It's time Pedal to the metal. Let's stop scaling and they start raising a lot of venture money and start scaling And then they realize wow our cac is really high. Wow Like we're not actually able to acquire people in the same way that we were before um, and it's because like He didn't kind of go back to basics and think okay. Well, let's really obsess about the customer. And so I think Unfortunately people start scaling too fast before they have like the proper groundwork and the foundation in place um And then it is other areas like too focused on the competition. Like it's good to kind of like, you know, know what the competition's doing Um, but not to spend too much time on it. Um, because you should be you know out there leading in front Um, and not worrying about what the others are thinking Um, you know calm is a great example of that actually, you know, there was always headspace But we never really worried about what headspace we're doing. Well, like they can do their own thing You know, we're doing a great job in meditation and hey actually our customers are meditating at night Well, maybe that's because they're trying to get to sleep. So why don't we introduce sleep stories? Why don't we work with more celebrities and have Matthew McConaughey read you a sleep story? And so, you know, we introduced new areas just like leading out in front Um, and so, you know, that's why now calm is such a great brand because they have always be very been very Authentic and innovative in the way that they've been driving these products um and then the other things are you know, like Just spending a lot of time on internal meetings In areas like that And so I love it when the CEO is just really obsessed with the customer and getting on the phone to the customer I really better understanding like what the customer wants and needs and the saying about you Um, and just has a really sort of product led mindset In speaking to the customer and then building that Yeah, it feels sometimes even it can the reason you don't do that is just you don't want to get the negative feedback It's like very humane. You don't want to hear someone hate your company Uh, but even though that's a gift and that's you know, the the information you you really need to Need to get uh, but it can be very humane like I don't want anyone to to speak badly of the stuff I'm doing so Well, by the way, that is such a great point And that's why we invest in CEOs who have a growth mindset like that to me is such an important thing We almost look at founders who they want to hear the criticism I want to hear the constructive feedback because they're like, that's the way I grow That's the way I learn and grow and get better and my company gets better So we love folks that have that growth mindset. Yeah, bad news is good news. So But they're taking it back still maybe to the grit question and you mentioned calm A few times now and and you're obviously invested with them as well But do you think there's a risk Of confusing this grit Mindset and this run through wall mentality with kind of this Hero mindset that you need to be as a founder invincible. You don't sleep. You never have problems You are the one who should have you know, tackle all the problems You should always be strong all this kind of this kind of toxic way maybe at the end of the day to To also neglect your own health as a founder and it seems this Maybe topic and this discussion has You know become more and more relevant now in in Only in recent years Back in the days it used to be It feels like no one really questioned, you know, this stereotypical Entrepreneur who works for 100 hours a week and and that's all that I mean, it's something we think about a lot. Um, we've invested in an incredible company in the uk called zap Um ZAPP and it's in the quick commerce space. Um, it's really leading the way in england Um, and the founders are incredible. Um, you know, we met them in their prior company go butler and they're such hard workers And sometimes I will say to navita ceo. Hey, where does that guy go messaging you my afternoon? This is like, you know, very late for you in europe and he's like, well zap is 24 seven.  Um, but I think that he's also balancing that with like, okay well, you know, I also need to sleep and Speaking to his co-founder who's very sensible. Um around, you know, just sort of really driving the business forward But also realizing this is a marathon not a sprint.  Um, I mean, I actually Did a coaching course a year ago. Um, it was a year long coaching qualifications I'm a certified coach because I believe that is a board member's role to also be a coach to your CEOs Because like for us, we need to help you as a CEO be the best version of yourself and I really reach your potential And going back to that it's a marathon not a sprint. Um, so hopefully, you know, it's like a marriage Hopefully we're working together for the next 10 plus years. Um, and I'm able to, you know, help you on the upside mitigating the downside But also You know knowing yourself inside out Like what are your weak areas because we want to help you to be able to like hire a team around you So you have complementary others. I'm a big believer like build on your strengths. Don't worry about your weaknesses We can hire for your weaknesses But like you should just continue to make yourself better like make your strengths even stronger Um, and so, you know, that's definitely why lightspeed helps. We have two different hiring teams to come in and help folks with With hiring all different levels in the organization Um, and so I think that uh, it's something that I personally invest in actions over words, right? That's why we've invested in mental health companies like calm and real Um, and we'll continue to be doing so That's great. Um, what other sort of, um, talked a lot about the sort of support that you can give to founders What kind of relationship do you build with them? Uh, what is the uh, what is your philosophy there? and like what what should be the I guess more personal vc founder relationship like Yeah, so, um The team is very special to us at lightspeed. Um, one of our values at lightspeed is actually One lightspeed which means we all work together and it means, um, when you work with lightspeed you work with everybody Um, and so whatever problem you come up against If I don't know the answer, I'm going to make sure that I don't stop until I find that answer or find the very best person for you to speak to Um, and maybe you are You know building and facebook's copied you and you need to speak to evan speagle about when snap chat was copied by facebook And so we will introduce you. Um Because I think he's the best person to you know speak to about that because my gosh They have definitely succeeded after facebook came in and copied them. Um, and so Equally at lightspeed I'm really excited about the fact that we have over, you know, the years built up a very strong founder success team Um, we are focused on quality over quantity And so as a result, we have a very senior experience team. Um, who can help with Growth marketing your narrative pr Hiring a top tier team across all levels, you know from c-suite right through the organization We actually recently hired a chap called sam wooley. He was Formerly Riviera partners who are the best out here In product and engineering and so he's really here to kind of drive our technical talent team And help companies hire the best engineers We also have Folks on the growth hacking side who can really kind of help our companies be like, okay Now you have found that customer love that product market fit now. Let let's kind of run through all these different growth hacking techniques one of our guys On that team actually took the hill from 2 million to 80 million users Then did something similar at uh whisper and so He's helped, you know, lots of our companies like calm and cameo and others over the years and so We probably actually have about 40 people on that team now Um, so we have like a really big team. Um, but it's like all these different individual units Um, and we make sure that you know eyes like your partner and still your number one So we won't say okay great, you know go off and find people in this organization I will be your number one contact and like really better understand What is like what's going to really move the needle for your business? And like for those areas that will move the needle, then I will make the right intros So that it's being very conscious of your time Um, I'm a big believer that you know, what gets management's time attention and focus has the greatest chance of success And so we need to make sure that you know, that CEO's time is being spent in the most worthwhile places I think that's a cool model. I haven't heard of that per se being that active and that big for VC firms I don't know if it's common or not But do all these people like work full time for lightspeed and then you just implement them to different places Or do they do something different that decide as well? Yes, everybody works full time And even though you know, we have a pretty sizable team Of 30 to 40 people We really have a strong view that is quality over quantity And so we don't hire a bunch of younger people to do hiring We go to like the very best recruiting firms like Riviera like SPMB And get like the head of consumer recruiting to come and do our consumer recruiting Or you know, the head of Riviera to come and do product engineering And I think that's very important because it's also saying to a Saying to the you know, the CEOs that we work with hey, instead of you spending $100,000 On you know, these recruiting firms will come to us and you know, we can kind of help you with your strategy And then often, you know, they do want to work with recruiting firms as well But it's so much better to like, you know, have all of these resources available to them Um, I think that you know, those things are super important And also a lot of them have great resources in Europe as well Which is increasingly important for our US teams coming to Europe and also our, you know, Europe teams really building out there Yeah, maybe you should get that team to to found a company of their own imagine that Love having the middle light speed We'll keep them focused Um, do founders worry generally about something too much? What do they sort of overlook? So that's a great question that comes back to, you know, some of the areas that we were talking about before And I think it is really thinking through, um You know, not doing as much in a way of focusing on the competition, focusing on entire meetings And just spending a lot more time focusing on the really high level hires And like making sure that you have the strongest people in the organization One of our companies real, I love it. She says that She doesn't want to even have a b player in the way of an ea She wants to make sure that every single person who has any touch point with the company is an exceptional person Really extraordinary And so just keeping that bar very very high from the c level execs right through to the ea is um, and so That I think is something that's super important.  It starts right from the word go um It starts, you know from the ceo and it filters through and so we've got to make sure that those early people that you hire are extraordinary um, and so I think that uh, that's something that founders need to spend more time focused on We always have a bit of controversy. So is there something That you think most people or maybe other vcs even Would disagree with you about in terms of, you know, building companies or wisdom in terms of of succeeding Yes, I've seen a few blog posts recently saying that people only invest in big markets and they really need a big time I completely disagree on that. Um, I'm a big believer that I'd much rather go after a founder Who's building um in a small market where there's many tangential markets It's a little bit like bowling right like you throw the ball and you hit a pin And you want that pin to then knock down the other pins So the eventually they all come down, but it's so important to just focus on that first pin Because it's a little bit like I don't know whether you guys have read the book crossing the chasm love that book um, and It's about the fact that hey if you target a niche audience And it's much easier to cross the chasm and become mass When you're targeting a smaller group because those smaller groups those groups They talk to one another a lot more and they share on social media with one another And so you're going to be able to like capture a much greater percentage of that smaller audience Um, and then go mass from there So I really don't like the idea of like, okay, we're going to be everything to everyone and we're going after this huge market and our market is everyone Um, it's like no, let's focus in on a smaller market and then knock over the other bowling pins Yeah, no, I think that's a great great point and it's it can feel Maybe a bit intimidating at first also not being everything to everyone and you know to maybe narrowly defining your target market, but At the end of the day you can't it seems you can't become truly big by by trying to You know just scatter all around You you really need to find something that someone or or some people There's this like first hundred first thousand fans concept as well, which I guess is is pretty much the same idea and Once you get that traction and you get that I guess that's product market fit in its purest form Then after that you can you can find other verticals other customers as well You know, I love that and just to give a couple of examples of what you're talking about I feel like it can be based on either geography Or sector and so on the geography side of things, you know zap we started very very narrow we started in like west london in a small borough and We really just wanted to be in front of everybody in that area and then we expanded to london and now we're in three different countries And so we just kept expanding and like kept knocking over bowling pin by bowling pin And so I think that is exactly the right way to grow And just sort of proven you can do it in multiple markets And the other one to kind of grew by sector is calm And so with them you could say originally the meditation market was small, right? Like 10 years ago when they started how many people meditated was a small market And now their market is everybody who wants to go to sleep So significant market And listen, I love being read to sleep by Stephen Fry telling me about the Provence fields in France The lavender fields in Provence rather every night. So it's it's a much bigger market now Yeah, no, it's true. Things are usually things kind of become a thing or a cool when they're small in group things What why would you want to be mainstream from the start? You don't want to get that bad funk bad mainstream funk on you too early You are preaching to the converted. I completely agree with you I mean it likes me we always look for companies that are like quickly becoming part of popular culture But I do think that very much starts in the more niche audiences first Yeah, I think it's important. Do you think that founders would benefit from maybe having some experience with building something smaller? Something more hands-on something maybe not as scalable um To kind of have that mindset that understanding of also doing things that do not scale uh, this is kind of the the idea I've I've had for for myself actually is that like Maybe start off or what I have been doing personally is is building things that necessarily don't scale To the level of facebook They can become real businesses who serve real a lot of real customers every year But they can't become you know at the biggest tech platform But kind of those skill sets and those the things you get from understanding that really seems like Are that that maybe like feels like the fundamentals that you would need in in building any company and getting any company off the ground Yeah, I think that's great that you're doing that. I think that um in the early days that's so important I mean we often invest in multiple time founders and so if you think about Michael Akson Smith before kami did moshi monsters And that did scale, but then you know hit a ceiling And alex too did the million dollar homepage You know and just sold off little pics. Oh, he did that one. Oh, that's a legendary thing. Oh, I love it The million-dollar homepage. No, I missed this. What is this? It's the greatest web page ever google this after this show right away It's definitely not scalable right because it literally only has a million pixels and so you can't even go beyond that point um, and so They both did that first but they built incredible skills and learnings Through those companies that didn't work out and then they took those learnings and then you know applied them to Calm now and so it's like, you know, whenever we come again come up against a challenge It's like that's another one of those is seen that before Um, you know in the prior companies and so, you know, we know how to deal with it um, so that's uh, I think that's great what you're doing That was great great to hear. Um, but um, yeah, and it also seems like um Or just is saying like that if Your first company becomes really big it would have become much much bigger if it was your third company or something like that It is not accurate. That's not an accurate quote, but something like that at least Maybe to to round off. Uh, it's always interesting to hear about VCs because it seems like a very Generalist job in a way. You need to understand a lot of things to be able to be a good investor um What is something you cultivate all the time or every day even something you practice? What is something you try to to do to? To become a better VC The number one thing that I do is uh, it's the most important resource that all of us have Uh, which is you know these the pair of ears that we have Um, I'm a big believer that you have two ears in one mouth and you should use them in that proportion Um, that's really well shut out. That's nice. You guys have heard me talking more than I ever talk in the last half an hour Usually I'm just asking questions. We're very happy. It is the point of the podcast It usually is, you know, hearing the incredible like insights from founders and hearing the nuggets of the future Um, that's what I love about this job. Um, but I do think it's so important to you know, really be listening Um, and to like double down and like, okay. Well, wait, am I hearing you right? This is what I'm hearing um, and so That's the number one thing I do. Um, you know other resources is, you know, great to read terrific newsletters my partner Alex Towsig writes one called fire hose And so I love that But also the interesting thing about what you guys said is like bc is a generalist job I agree with that, but I deeply believe in speciality. And so I think because I invest in consumer But like consumer in the broader sense of the word consumer fintech to consumer house care to social and marketplaces I think it helped you bring Just like more deeper insights when you're in a board meeting like specializing in that space Um, and so that's why, you know, love companies and working with them on the boards and being able to like bring those insights over the years to them Uh, so specialism is also key I agree. Yeah, it's been very enjoyable. Thank you so much for joining the podcast and sharing your your wisdom and your your nuggets as well It's been super interesting Thank you both such wonderful questions and looking forward to seeing you. Uh, I think first and second of december. That's right. Likewise in Helsinki Where the weather is always Very nice. So look forward to seeing you as well And yeah, thank you to everyone who tuned in listened or watched and see you in the next episode Take care until then. Bye. Stay safe. Bye. Bye


In this section, I will be telling you about the concept of risk management. When we look at the finance, the theory of finance concentrates on three main pillars. The first one is dealing with the time value of money. Next we talk about the valuation of the financial assets and the third important aspect on which the entire theory of finance is based is the risk management. So the question arises, what is risk management? So before we try to understand the concept of risk, it is important to understand the concept of uncertainty. So both uncertainty and risk are used together. So uncertainty is a broader term. Uncertainty means that we are, we do not know, we are unaware of the things that are going to happen in the future. So that kind of a situation is called an uncertain situation. And whenever we are planning to make any sort of investments or we are trying to expand our business or we are setting up our business, we do not know that what is going to happen in the future, what will happen tomorrow, whether the demand for the product which we are going to produce through this particular business entity will increase in the future, it will become obsolete or what type of situation is going to be there, it is all subject to uncertainty. Now, there is another term which is called risk that is quite often used with the concept of uncertainty. When we use risk, it means that we are attaching the value of something with the uncertainty and then it becomes risk. So risk basically in financial terms can be defined as the difference between the actual return or the actual value and the expected value. So if suppose you have invested in a financial instrument and you think that by the end of the year, I will get 6% profit from this but actually your profit is 8% or 4% so the difference that will be considered as risk. So that is the difference between the actual value and the expected value. So when we are dealing with money, when we are dealing with investments, when we are dealing with finances, it is quite common that we are getting into situations that are subject to uncertainty and then when we attach value to it, when we try to understand something like profit or loss with the help of uncertainty, then we call it risk. So risk can be defined as the possibility of losing all or part of any original investment which you have incurred. If you have invested 1 lakh rupees, then that possibility or probability that you will not lose the entire investment or any part of it, whether it is the loss or loss, we call that particular element risk. So as I mentioned earlier, when we consider value in uncertainty, whether it is financial transactions or financial investments, when we add value in monetary terms, whether we are going to lose or gain profit due to uncertainty in the form of money, that particular thing is called risk. So that is the basic difference between uncertainty and risk. So it is important to understand that every risk situation is uncertain but every uncertain situation cannot be risky. And to explain this particular thing, I am going to take an example. Example is not from finance or financial economics but basically that will help you in understanding the difference between uncertainty and risk. So for example, we have arranged a dinner party in which we invited 100 people and you have arranged the food for 100 people. So if instead of 100 people, 110 people or 120 people or 150 people come, then there is uncertainty that more people can come. There is uncertainty that people can be less, that there is some protest going on on the way or the weather was not good or something like that. There was news that there was going to be a problem or there was going to be a traffic block. So in such a situation, the number of people you invited could not be as many as the number of people. So when you have arranged the dinner party, it is subject to uncertainty that people that actually turn up for the dinner, they may be less than the number of people who were invited and they may be more than the people who were invited. So this is the situation of uncertainty. I have told you that if you attach value to it, then it will become a risk. So we said that what will happen with this that whatever we had ordered or prepared, if people come, then the food will be wasted, our resources will be wasted in the form of food. If we have more than expected expectations, more uninvited guests, then you will have to spend some more money to manage the food immediately, to arrange it more. So there is a risk. So we can account for these two situations. But if you have kept a one dish party, then what will happen is that you have told everyone that whatever will come for dinner, they will bring their own food along with them and bring food for one or two people. In such a situation, we can see the uncertainty in the one dish party that it is possible that all the people who were invited to the one dish party did not come. But there will be no shortage of food or a surplus situation there. Because the people who did not come have brought their own food. So there is uncertainty in this situation. But there is no risk here that the expenses that you incurred and the plan that you planned to eat, those things are not wasted and there is no shortage. You have to arrange extra. So risk is always assessed in terms of the value of the expenses which you are going to make or the revenues or the return or whatever is in financial terms. Whereas uncertainty is any situation where you have a chance to assess the uncertainty or the uncertainty to assess that probability.