Does an investment thesis matter?

Hey everyone,

I've lately been thinking about the value of an investment thesis from a rational perspective. Last year, I did the VC lab course where a significant emphasis was placed on a having a solid investment thesis.

Sticking to a first principle lens, if we know the most important attribute of startup success is a world class founding team building in a directionally growing and large market, then why does the thesis need to be more defined than this?

The primary function of an investment thesis is to attract better deal flow and to portray certainty to limited partners in an asset class where it doesn't inherently exist.

In my own personal experience speaking with limited partners (LPs), a well defined investment thesis is indispensable for branding and attracting LPs, guiding a my firm's external perception across sectors, stages and geographies, its operational relevance in investment decisions is secondary. The true indispensability of a robust investment thesis lies in its ability to attract limited partners.

A current example is the vast flow of capital going to AI and AI agent startups regardless of a fund's prior investment thesis. 

A rigid investment thesis can be a hindrance as the rapid evolution of technology landscape and market dynamics necessitates that your thesis remains flexible. 

Lets take a look at slogans for Tier 1 VCs

Sequoia - We help the daring build legendary companies
a16z - Software is eating the world
Kleiner Perkins - Investing in founders to build iconic companies that made history
Greylock - Ambitious, inventive entrepreneurs to build and grow enduring businesses
Bessemer - We’re early believers who invest in visionaries from concept through Series A, and all stages of growth

Most of these firms will have roadmaps or thesis on their websites, when you look through their investments it doesn't take long to find companies which sit outside their investment thesis. 

While a clear thesis is fundamental to attract LPs, from a returns perspective its more important to hone your ability to identity, assess and attract truly exceptional founders. Founders with unique insights and a demonstrable capacity to navigate ambiguity, one's with exceptional aptitude, grit, humility and charm.

The most successful investors are ones which can articulate a compelling thesis as a brand narrative while maintaining the agility and discernment to back extraordinary talent, even when it means venturing slightly beyond the conventional boundaries of their stated strategy.

Thank you for reading,

Rishad