Theta Decay | What Great ConTech Founders And Options Trading Have In Common

February 17, 2025

AI startups and construction tech share a key risk—stacking shaky assumptions. Learn why true category creators look odd at first, how deep insights drive defensibility, and what AI’s gold rush means for AEC.

Patric Hellermann

Shub Bhattacharya

Theta Decay | What Great ConTech Founders And Options Trading Have In Common

Remember when Japan dominated 44.2% of the world's stock market? Most of us don't. In the late 1980s, Japan's market cap exceeded the US by nearly double. Today, it's down to 6-7%. The story behind this dramatic fall carries a stark warning for today's AI gold rush - and reveals critical lessons for founders in construction tech.

This Week On Practical Nerds - tl;dr

Theta Decay of Efficiency – How (Not) to Stack Assumptions in Construction Tech
Hidden Champions – Why Staying Under the Radar Creates Stronger Categories
Layered Insights, Not Layered Assumptions – The Key to Defensible Category Creation

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Theta Decay of Efficiency – How (Not) to Stack Assumptions in Construction Tech

What options trading teaches us about defensible efficiency in startups

The story starts with DeepSeek, the AI company making waves by claiming 45x more efficiency than GPT-4. But this isn't really about DeepSeek. It's about how easily we get swept up in narratives and stack dangerous assumptions without realizing it.

We're seeing an explosion of AI copilots, foundational models, and AI sales tools. Most are built on the core assumption that spending hundreds of millions on infrastructure is justified because different models for different datasets create defensible opportunities. But what happens when that foundation crumbles? When someone achieves the same results at 1/100th the cost?

The most successful venture capitalists focus on what has to go right rather than what could go wrong. But more importantly, they have unique insights that others don't. When an experienced investor asked "What are the things that only your team knows and no other VC will know?" it transformed how Foundamental approached investments.

Without differentiated insight, you're extremely likely to make assumptions that others can easily challenge. This is exactly what's happening with 99% of AI copilot and foundational model startups today. They lack unique perspectives and will face hundreds of category clones until someone comes along with a fundamentally more efficient approach.

Hidden Champions – Why Staying Under the Radar Creates Stronger Categories

How can ConTech founders delay their Theta Decay and build real moats?

The construction tech space is filled with opportunities for non-generic insight. Take SnapTroot, which is building a Figma-like platform for 3D drawings and design in AEC. For years, it went through an "ugly duckling phase" while building up its minimum feature set. Many investors couldn't appreciate what was happening.

But that's exactly the point. The best category creators often look odd and quirky in their early years. If you're getting lots of organic fundraising traction in your first 2-3 years just by being in a hot space with the right narrative, it's usually a warning sign, not validation.

When multi-billion dollar funds quickly write you checks for 0.1-0.2% of their fund size, it's not real commitment. True skin in the game means investing 10% or more of your fund, like Foundamental did with InfraMarket. Easy money always comes with expectations that will need to be repaid.

The framework that guides successful investments looks at opportunities through two lenses: are they obvious or hidden to both experts and generalists? The sweet spot is solutions that are hidden to generalists but obvious to experts. These opportunities may struggle to get initial investor interest but often have the strongest customer love and inherent defensibility.

Layered Insights, Not Layered Assumptions – The Key to Defensible Category Creation

What makes category creation defensible in construction tech?

Creating lasting category leadership isn't about winning obvious markets with 99 competitors. It's about having layered insights where "every layer reveals a deeper insight and a more differentiated assumption." This is especially crucial in construction tech, where the opportunity for genuine innovation remains high.

Consider that your founder time is more expensive than any investor's money. Category creation can't be derived top-down - each success will have its own unique combination of ingredients. While the individual components may be known, their specific recombination creates something genuinely new.

The more even-keeled you are about short-term news (both positive and negative), the less likely you are to unconsciously bake in assumptions that need to hold true for the next decade. This is why seasoned founders often show more patience and focus on building deeply differentiated solutions rather than chasing quick wins.

Conclusion: The Hidden-in-Spite-of-Obvious Framework

Create categories by building in spaces that are hidden to generalists but obvious to experts Focus on layered insights and differentiated assumptions rather than following hot trends Recognize that true innovation often looks quirky and faces skepticism in early years Value founder time over quick money and maintain even-keeled long-term perspective