Developing an investment thesis that gets results

By John Boitnott

Most successful business professionals know the importance of having a roadmap before starting any venture. When a startup founder approaches investors for funding, a robust business plan can make a crucial difference, demonstrating that the entrepreneur has thought things through, preparing for both the long- and short-term future of the company.

For similar reasons, investors need a plan in place while building a portfolio. Known as an investment thesis, this type of plan outlines the benefits of each investment and serves as a guide as they entertain pitches and make new deals. Over time, an investor may find that they can use the document to win over entrepreneurs who are entertaining multiple offers, since they can clearly demonstrate their overall strategy.

If you’re actively building your portfolio, here are a few tips to help you develop an effective investment thesis.

You’ll also know to trust your gut that a venture isn’t the right fit when it doesn’t present value quickly.

In many pitch meetings, you’ll have a moment of decision. This is the point where you either decline or make an offer off some kind. In the heat of the moment, it can be easy to commit to more than you’re willing to give up in exchange for too little. Before going into each meeting, you should already know how much you’re willing to give up and the least you’ll take in return. This will keep you from making a deal you’ll later regret.

Although successful investors learn to do many of the above things automatically, having a plan in writing can make it more concrete. Don’t feel pressured to create a formal document. Begin by merely documenting what you hope to gain from your investments and expand your thesis from there.

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