Pattern Recognition and Conviction

My friend Cory Berg asked me, “why is an investment thesis so important.”  

This question reminded me of a podcast I listened to last week (Acquired- Part II on a16z).  The host stated that “if you have been a VC investor for over 5-years, then you effectively become a functional expert in nothing.”  He was inferring that operational knowledge becomes obsolete due to rapid changes in the tech industry.  

If you buy into this sentiment, then you could say that you need something more significant than your operational experience to evaluate good companies.

Following a thesis can keep you relevant enough to identify promising companies and add value post-close. Having a targeted investment philosophy allows you to have pattern recognition within a particular sector or stage in which you focus. In addition, you will be able to start leveraging your network to assist companies with the same types of challenges.

Another reason for having a thesis is that it speaks to the level of your attractiveness to company founders.  John Francis at Stout Street Capital mentioned something to me that stood out.  He said that all great investors must have conviction in something to be successful.  

Now that I am following my thesis, my overall sourcing strategy and messaging are much more fluid, and my time has freed up.