How to build your investment thesis

The best place to start as an angel investor is to define your investment thesis. This article will discuss what a thesis is, provide a few examples, explain the importance of keeping a thesis up to date, and offer a step-by-step prompt to guide the process.
Ava Najafi
January 3, 2024

How to build your investment thesis

Beginning as an angel investor can be overwhelming. Oftentimes knowing where to start is the hardest part. While it may be tempting to dive headfirst into the vast sea of potential deals, an intentional plan can increase ease, interest, and potential returns. The key to finding that intentionality is through a personal investment thesis. So, let’s define it.

What is an investment thesis?

An investment thesis serves as a personal guide to narrow down one’s lens for potential investments. While length or breadth of a thesis is less important and entirely personal, knowing your goals, passions, interests, and focus (around founder and industry) can help define what your thesis looks like.

Here are a few questions to ask when beginning that process:

  • What is driving your interest in investing?
  • What are some industries you follow and are passionate about?
  • Where would you say your expertise lies?
  • What qualities do you look for in a good founder?
  • Is there a certain minority group/founder you want to support?
  • What geography do you want to invest in?

Examples of thesis statements

A few examples of investment thesis statements include:

  • Broad: I invest in early- and growth-stage companies that may scale effectively, are apt to dominate a given market, and display an exit potential.
  • Middle Ground: I target early-stage startups led by ambitious entrepreneurs that solve problems felt by my generation. I target companies that exist in industries where I can leverage my advisor and industry expertise. I am geographically agnostic with a focus on leveraging Midwestern connections.
  • Narrow: I invest in startups that are working to reverse the negative environmental impact that governments, corporations, and individuals have on our planet. I look for scalable companies that reimagine how we live, work, and play to be more harmonious with the earth and that are based in the Midwest. I prefer to invest in minority founders who are pioneering the space.

A broader thesis allows you to cast a wider net, but will make finding a focus difficult and, as a result, likely waste time. However, a thesis that is too narrow will limit deal flow and inhibit your ability to create a well-balanced portfolio. While there is no perfect middle ground, reflecting on your own values and interests can guide a baseline parameter that will become more refined and clearer over time.

How often should I revisit my thesis?

Establishing your initial thesis is the first step; however, in order to ensure it still aligns with your goals, passions, and expertise, it is crucial to revisit it once a year. Often, your thesis will adapt with your investment experience. The more deals you are exposed to, the better you will understand your personal values, interests, and strengths.

Pro tip: Set a date on your calendar each year as a reminder to hold yourself accountable.

A few questions that might be helpful to answer when revisiting your thesis:

  • Where do you think your knowledge and interests have grown or narrowed over the last year?
  • Which geographies do most of your deals come from?
  • What are your favorite investments in your portfolio and why?
  • Which deals have felt the most exciting? Impactful?
  • What lessons have you learned along the way?
Worksheet: How to build your investment thesis.

This article originally appeared in Groove Capital's blog.

101
101
101
Article

Ava Najafi is an Associate at Groove Capital and a senior at the University of Minnesota’s Carlson School of Management, where she is pursuing her Bachelor’s degree in Finance and Entrepreneurial Management. She also serves as Managing Partner at Atland Ventures, where she helps manage the operations and strategic decision-making of the fund while overseeing investment activities and internal relations. Ava’s favorite part of investing is meeting with founders and sharing their passion for making a difference greater than themselves.

Related Content

Return to Content Library