Startup Boards — Investment Thesis

In startup investing, you should have an investment thesis, which is what you invest in and why it will be successful.

Here’s how you build your investment thesis if you haven’t done so already:

Step one

Look at 50 deals and write down what you like and don’t about each one. This is not as hard as it sounds, given how many deals there are.

Step two 

Follow up one to three months later to see how it is working out. This will inform your investment thesis as you will see some deals progressing forward, some stall out, and others pivoting to something else.

Step three

Write out your investment thesis, which includes:

– Your observation about a macro trend in an area you care about
– Position of the company in the trend
– Characterization of the company that gives it a competitive advantage
– Conditions for investing based on price, revenue, and other factors

Example investment theses include:

– Healthcare is moving to the home
– Companies providing technology-enabled services will succeed
– Companies with recurring revenue and a CAC:LTV ratio of 1:8 are preferred
– Companies with revenue above $500K and a pre-money valuation below $5M are preferred. 

It’s important to write out your investment thesis as you’ll return to it often.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.