J-Curve (Private Equity returns)

Biological Parallel

The J-Curve—initial value decline followed by growth—mirrors germination's resource dynamics. When a seed germinates, it initially loses value: the cotyledons (stored energy reserves) are consumed faster than photosynthesis can replace them. The seedling operates at a net energy deficit, relying entirely on stored capital. Only after developing sufficient leaf area does photosynthesis exceed respiration, and the plant becomes cash-flow positive. The deeper the initial dip (larger seed reserves), the longer the plant can sustain losses while building productive capacity. Premature flowering—trying to generate returns before achieving positive cash flow—kills the organism.