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Investing Thesis

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How do you develop an investment thesis worth exploring?

An invest thesis provides a framework for building belief in stories of how the future will play out, and where value will accrue.

Categories​

Purpose​

The goal of writing a thesis is to score your conviction in predictions that an investment opportunity will generate compelling returns within a given future date range.

Keep your thesis succinct and focused on the most important factors driving your investment decision.

Intentions​

Successful evolution of your base thesis requires balancing deeply held beliefs while remaining open and being flexible enough to adapt to changing market conditions that challenge your assumptions.

Develop a Bayesian approach to decision-making. This involves weighing new information against your prior beliefs to come up with a new set of beliefs. Refer to Todd Simkin

Convictions​

High-level checklist for creating an investment thesis to build a picture of how, where and when value will accrue before committing to a decision strategy for controlling your position.

  1. Identify the underlying catalyst or trend driving the investment opportunity
  2. Assess how the specific investment is positioned to benefit from the catalyst
  3. Consider the biggest risks and potential downsides
  4. Determine your conviction level and expected return
  5. Write a concise statement (1-2 sentences) summarizing the investment thesis
  6. Include key supporting data points and analysis
  7. Outline your planned investment timeline and exit strategy
  8. Review and refine the thesis as new information becomes available
  9. Use the thesis to guide future decisions about the investment
  10. Be prepared to abandon the thesis if fundamental assumptions prove incorrect

Process​

A robust investment thesis requires a clear, logical, and comprehensive approach that justifies why an investment is attractive and how it aligns with your overall strategy.

  1. Market and Macroeconomic Analysis

    • Evaluate broader economic environment, cycles, inflation rates, interest rates, and geopolitical trends
    • Consider political and regulatory contexts that could impact investment prospects

  2. Industry and Competitive Dynamics

    • Analyze industry trends, growth prospects, technological changes, and competitive landscape
    • Identify industry size, growth rate, major competitors, barriers to entry, and drivers of change

  3. Identifying the Investment Opportunity

    • Clearly articulate unique aspects (underserved market niche, technological advantage, superior management)
    • Define criteria that make this opportunity attractive compared to alternatives

  4. Company and Strategic Fit Evaluation

    • Assess specific company's financial health, operational strengths, and competitive positioning
    • Ensure alignment with broader portfolio strategy and long-term goals

  5. Core Thesis Statement

    • Summarize fundamental argument for the investment, including key assumptions and expected drivers
    • Identify specific value creation mechanisms (market expansion, margin improvement, innovation)

  6. Risk Assessment and Mitigation

    • Systematically identify potential risks (market, regulatory, operational)
    • Present concrete strategies to mitigate or manage these risks

  7. Viability and Growth Potential

    • Evaluate feasibility to generate returns given the market, competitive setting, and capabilities
    • Assess growth potential and expected path to value realization

Outcomes​

A strong investment thesis weaves together macro and industry view, compelling opportunity, rigorous analysis, strategic fit, and balanced examination of risks and rewards—forming a clear rationale to guide consistent investment decisions.

  • Clarity and Rigor: Thoroughly researched, backed by data and clear logic, concise and actionable
  • Alignment: Reflects your investment objectives and risk tolerance
  • Adaptability: Prepare to revise as new information emerges or market conditions change

Checklist​

  • Intentions: Clarity and consistency of direction.
  • Culture: The commitment of the community and their meme game.
  • Business Model
  • Business Development
  • Engineering Principles
  • Tokenomics
  • Flows
  • Memetics
  • Leadership
  • Web3 Principles
  • Narrative and Goodwill
  • Community and Network Effects
  • Developer Experience
  • Token Economics
  • KPI Metrics