How FOAK Investors Look at Risk — and the Five-Step Framework I Use to Walk Them Through It

When you raise your first rounds, you are selling a dream. Customers are thin, your burn is low, the road ahead is long, and most of the risks aren't even visible yet — so investors settle for a story, or, as it's more politely called, a vision. By the time you're raising for your pilot, demo, or FOAK, that conversation has changed entirely. Investors want to know when the offtake will sign, who your EPC is and why, whether your suppliers are committed enough to weather another geopolitical shock, and how you plan to keep the senior engineers you've spent two years training. You are no longer selling a vision. You are selling your ability to draw a plan and execute it across dozens of moving parts.

This is structural. The VC who came in at seed never really expected you to make it — the bet-spreading model assumes most companies in the portfolio will fail, and one or two outliers will return the fund. The investors you talk to now — strategics, infrastructure funds, governments, impact funds — write checks an order of magnitude bigger, and they cannot afford that posture. They want to be as sure as possible that you'll return the money. Risk, which sat in the background of your earlier conversations, is now in the foreground of every meeting.

I learned in finance school that risk is the silver lining of investment, and the simplest way to look at it is as a tradeoff between greed and fear. Early on, your investors are greedier than fearful. By FOAK, fear is calling most of the shots. Each of them looks at your project through their own lens, and each one cares disproportionately about one or two specific risks rather than the full risk register. The framework below is built around this asymmetry. When talking to investors, you don't need to map every conceivable pitfall. Instead, walk them through the four risks that matter to almost every late-stage investor, and then learn how to identify the investor-specific one that will tip their decision.

Step 1. Address technology obsolescence risk

In 2021, Renault and Plug Power formed Hyvia, a 50/50 joint venture to build hydrogen fuel cell vans for European fleets. The credibility behind it was substantial. Renault is one of Europe's largest automakers, with a hundred-year-old distribution network and the engineering depth that comes with it. Plug Power was the listed US hydrogen specialist that institutional cleantech investors had spent a decade chasing. Hyvia set up a fuel cell assembly and testing plant at Renault's Flins facility in Yvelines, hired around 110 people, approved two production versions of the Master H2-Tech van in 2023 and 2024, and had a third generation in development that they previewed at the IAA and the Paris Motor Show.

By December 2024, they had filed for bankruptcy. In February 2025, the Versailles Commercial Court placed them in liquidation after no credible takeover offer surfaced.

The technology worked, the vans were real, and the factory ran. What didn't show up was the market. Renault CEO Luca de Meo, testifying to the French National Assembly's Economic Committee shortly before the liquidation, was blunt: despite considerable investment and numerous public subsidies, hydrogen passenger and light commercial vehicles "are not selling due to a lack of demand." His own framing was that hydrogen would eventually find a role in long-haul heavy trucking and perhaps green steel, "but I see things taking off more slowly than we expected."

Hyvia's own statement echoed the same conclusion — that the failure traced back to "the too slow emergence of hydrogen mobility ecosystems in Europe and the very significant development costs required for hydrogen innovation." Over the same four-year window, battery-electric vans in the same class crossed the 400-kilometre range threshold, depot charging proved trivial to install at a fleet's own yard, and the fleet buyers Hyvia needed concluded that for almost all of their duty cycles a battery van was simpler, cheaper to fuel, and serviceable at any fast charger they happened to pass. The hydrogen van wasn't beaten by a better hydrogen van. It was beaten by an adjacent technology that improved faster than the hydrogen ecosystem could be built around it.

This is the version of obsolescence risk that investors at your FOAK stage press hardest on. It sits outside your factory walls, and it is hard to mitigate. You name the substitute technologies most likely to move while you're building, you draw out both their cost curves and their infrastructure curves to the year your FOAK commissions, and you are honest about where you land at that intersection. A project pitched against a 2021 lithium-ion cost curve and a 2021 European fast-charging buildout is not the same project when its FOAK switches on in 2026. Investors don't expect you to eliminate the risk. They expect you to have looked it in the face.

Step 2. Address competition risk

When I pitched the case for building a lithium-ion battery plant in Russia, one of the Rosatom board members told me a story about the time the corporation tried to enter solar panel manufacturing in the early 2000s. They invested in the technology, built a small line in Kazakhstan, and by the time the line was producing panels, the global cost curve had moved so far down, and the technology had advanced so far that the factory could not stay competitive. They closed it and walked away.

I've watched the same story play out across solar, wind, lithium-ion cells, and electric vehicles — technologies developed in Europe and the US, then manufactured cheaper and at scale by China. It's so common now that "can the Chinese replicate this?" is a default question in every late-stage cleantech meeting I sit in. The honest answer is usually yes, they can.

This is why founders need to be sober about what their actual moat is. The IP moat — the patents you're proud of — sits at the front of every deck and matters much less than founders or early-stage investors think. If your IP leaks and a Chinese rival builds a FOAK faster than you, litigation will enrich your lawyers and bankrupt your company while they scale. Show the patents, but don't pretend they're the armour.

The harder moat is know-how — the kind encoded in your team's hands and habits rather than in a filing. There's a reason the best car engines are still made in Germany and the best battery cells are still made in China. Demonstrating know-how is harder because most investors don't have the manufacturing background to feel its value. You show it by spelling out, concretely, why the scale-up cannot be executed without it.

The third moat is regulation, and it cuts both ways. At NovaWind, the Russian wind manufacturer where I served as director for business development, strategy and manufacturing, the policy moat was decisive — the government's local content regime guaranteed favourable prices only to domestic producers. CBAM, IRA (now largely defunct), tariffs, procurement rules and local content requirements can all do this for you. They can also be reversed in a single election cycle, as the IRA's recent fate has shown. Politically supported moats can win you the round today. Cost discipline, customer obsession and know-how are what keep you alive after the policy turns.

Step 3. Address commercial risk

I've worked the two extremes. In 2016, when I pitched the wind turbine factory in Russia, there was effectively zero commercial risk — the first step of the project was a government tender that guaranteed ten years of wind energy sales at attractive prices, locked in before a single piece of equipment was bought.

Five years later, I was pitching an 8 GWh lithium-ion battery factory, and the difference was that I had zero customers. KAMAZ, the largest Russian truck and bus manufacturer, had signed a non-binding offtake term sheet with Renera, the company I was running, but they were buying cells from CATL for their electric buses and were only cautiously exploring passenger EVs. Two projects, same founder, opposite ends of the commercial risk spectrum.

Commercial risk usually carries the most weight in the investor meeting, because customers are the only real proof that someone wants what you're building. The cleanest signal is a binding offtake, underwritten by a credible counterparty. My wind project essentially had that, with the Russian government as the buyer. That is rarely what FOAK founders have. More often, you arrive at the pilot raise with a handful of LOIs, maybe an MOU, and ideally a customer trial that has returned positive results.

Battery startups tend to start joint trials before pilot, which is why most of them have something more than a piece of paper to show. The weakness of LOIs is that they say nothing about price. So you need to be ready to explain, outside any specific customer dialogue, why anyone will pay more for your product than for the existing alternative. And, no, it is not the green premium.

The green premium is dead — no one underwrites a project on the assumption that customers will pay more because the product is cleaner. That leaves two real reasons for a customer to absorb a premium. The first is a regulation that forces them to: CBAM, local-content rules, import tariffs, carbon pricing, or some combination.

The second is the disruptive-innovation case Clayton Christensen laid out, where a niche customer group is paying a premium for an existing product they're already unhappy with, and your product solves something that group cares about. Early solar panels lived in this niche before utilities cared, powering telecom relay stations and US military forward operations in Iraq.

A strategic investor on the cap table, or even seriously in discussions, exerts gravitational pull on VCs and financial investors who read their participation as a commercial signal. I have my reservations about strategics — they can crowd out future customers and complicate exits — but in markets dominated by a handful of incumbents, like nuclear, partnering with one of them can be the only realistic path.

And if none of this applies, if you're in fusion or direct air capture and there is no immediate demand at all, the argument becomes strategic. The case I made for the battery factory was that lithium-ion is a foundational technology of the new energy infrastructure, with intermittent generation on one side and the rise of the prosumer on the other. Some investors will place a long bet on strategic positioning when they cannot underwrite near-term demand.

Step 4. Demonstrate FOAK execution risk control

"Emin, you don't have any experience in battery technology or battery manufacturing. Why should we hire you to lead our gigafactory project?" That was my pre-final interview at TVEL, a Rosatom subsidiary, for the CEO role at the company that would become Renera. They were worried about execution risk, because a decade earlier they had been part of an attempt to build Russia's first gigafactory near Novosibirsk, and that project had failed spectacularly. They knew first-hand what execution risk looks like when it hits.

Execution risk isn't one risk; it's four — construction, ramp-up, supply chain, and team. Construction risk is the most immediate, and your story here is mostly determined by how you handle EPC. A Tier 1 EPC with experience in similar projects has a calming effect on investors; ATOME secured one for its Villetta green ammonia project and raised accordingly.

Going without an EPC is also a defensible choice if the arguments are rock-solid. JR Energy Solution built a 500 MWh electrode factory in nine months without one, and they could defend that decision because they were building inside an industrial park with infrastructure already in place, several of their equipment suppliers were on the cap table, and the founding team had personally built and run battery lines before.

Ramp-up risk is what the pilot-demo-FOAK sequence is designed to attack. For investors, list the ramp-up risks you've identified at each stage, align them with your mitigations, and find anecdotal evidence from adjacent industries to anchor your timeline assumptions. Nothing beats a comparable project. If you can outsource the ramp-up altogether through a foundry-style partner, even better. JRES does exactly this for battery startups looking to produce their first commercial-grade batch — adapting designs for large-scale manufacturing, finding and resolving ramp-up problems before they hit the customer's lab, and training the startup's own team on the way.

Supply chain risk is the one I see most often overlooked. In March of this year, at InterBattery in Seoul, I had multiple conversations with Westerners asking whether a 100% China-free battery supply chain is achievable — a question that wasn't being asked a year ago. Geopolitics aside, FOAK founders should worry more about being deprioritised by a tier-one supplier the moment a larger, less risky customer places a rush order. The strongest demonstration of supply chain control is a critical supplier on your cap table, which is rarer than it sounds but more common in FOAK than in software. Failing that, you want either a diverse supplier pool that can be swapped without friction, a supplier with their own strategic reason to participate, or — at minimum — a procurement lead with deep, named relationships at your key vendors.

Team risk is the most overlooked of the four. Investors don't want to hear the org-design philosophy. They want to shake hands with the person on your team who has personally solved the risk they're most worried about. If the supply chain is the concern, they want to meet someone who has bought from those exact suppliers for fifteen years. For every major risk you can't cover with a full-time hire — and you won't be able to cover most of them, because the people you'd want are hard to pry loose from their current jobs — the next best thing is the same kind of person as an advisor. You save the salary, you get the practical advice, and you give your investors a name and a CV they can read.

Step 5. Identify the one risk that will actually decide it

In many of the conversations I've had with potential investors and partners, I've felt they weren't telling me the whole story. There was always something — a real deal-breaker — that they were hesitating to put on the table. Sometimes they wanted to know me better first; sometimes they were still forming their own view; sometimes the person across from me wasn't the actual decision-maker; sometimes they weren't really interested and were just being polite. But when I could get it out of them, it always turned out to be what actually mattered, and addressing it always led to the deal being either closed or dropped fast.

The four risks above will get you 80% of the way there. The fifth step is finding the one risk that will decide it for the specific investor in front of you. The only reliable way is to ask, but you have to ask carefully. The first answer is rarely the real one — investors follow templates, they have cultural defaults, they're shaped by whatever came up in the morning's investment committee. Let them name everything that bothers them first. Then, only at the end, ask which of these they consider most critical to their decision. Forcing them to revisit and rank their own list often surfaces a concern they hadn't named at all. Be especially attentive to the quiet person in the meeting who asks one piercing question at the end — that person frequently holds the real power and names true priorities.

Don't try to address every risk in every conversation. You identify the one risk that will decide it for this investor, and you build a tailored answer to that one. The Pareto principle applies: the top 20% of risks tend to dissolve the remaining 80%.

The framework, and the one risk it can't cover

In the summer of 2018, Adam Neumann chartered a private jet to fly from the US to Israel, allegedly smoking marijuana the entire way. He leased buildings he personally owned back to WeWork. The company collapsed, and he walked away a billionaire. SoftBank lost sixteen billion dollars.

The five-step framework covers four investor-side risks — obsolescence, competition, commercial, execution — and then the fifth, investor-specific one. What it can't cover is the principal-agent risk, the lack of trust that sits underneath every investment relationship. Agent risk is mitigated by trust, and trust is built slowly. The framework is designed to demonstrate to investors that you see what they see, understand the same risks they do, and have a credible answer to each. It is the structured part of trust-building.

Your fears and your investors' fears are the same fears, looked at from different ends of the same room. You control most of the risks; they fund the risk-taking and bear the downside. Your job is to demonstrate, concretely and specifically, that you will spend their money the way they would spend it themselves.

If you are preparing for a FOAK raise and feel that the deck and the data room you used for your last round have stopped landing the way they used to — that the conversations have moved from vision to risk, and you're not yet speaking that language fluently — that is usually the gap this framework is built to close. I work with founders specifically on this transition, between the VC pitch and the project finance pitch, and on the four-plus-one risks above as they show up in your specific company. If that's where you are, book a call.