A good company outside your thesis is a different decision from a good company inside it. Checking fit first stops attractive deals from quietly rewriting your strategy.
9 min read · Level 4
I think a thesis is only real if it has cost you a deal you wanted. Anyone can write down a focus; the discipline shows the first time an exciting company falls just outside it and you pass, or deliberately change the thesis rather than quietly bending it.
An investment decision has two separate questions, asked in order:
Thesis fit has several parts:
Part Question Stage Is it at the stage I invest in? Sector Is it in an area I understand? Geography Can I assess and support it where it operates? Cheque size Does the amount fit my plan? Edge Do I know something, or can I help with something, that others cannot?
A deal that fails fit is not automatically rejected, but it should face a higher bar and a written reason for the exception.
In thesis: decide on merit Partial fit: state which parts do not fit and why you would still proceed Outside thesis: decline, or record a deliberate change to the thesis
Because the most dangerous deals are attractive ones outside your competence. Each exception feels reasonable, and a series of exceptions becomes thesis drift - a portfolio nobody chose deliberately.
It also saves time: a fit check takes minutes, a full evaluation takes weeks.
Educational, not personalised financial advice. Nothing in the Investor Academy is a recommendation to buy, sell or hold anything — what is right for you depends on your own circumstances and the rules where you live.
An investor's thesis: B2B software, seed stage, the investor's home region, cheques of 10,000 to 25,000.
Deal Fit B2B payroll software, seed, home region full fit - evaluate on merit Consumer fitness app, seed, home region sector outside - higher bar, written reason required B2B software, Series B, overseas, 100,000 stage, geography and size outside - decline
The fitness app has impressive growth. The investor writes down that they have no consumer experience and no edge, and passes - noting the company in their decision record to review later.
Evaluating an exciting deal on merit first and then constructing a reason why it fits the thesis.
Test stage, sector, geography, size and edge first.
Record whether it is full, partial or outside your thesis.
Require a written reason for proceeding on a partial fit.
If you keep making the same exception, update the thesis on purpose.
At the start of every investment decision.
Do not use thesis fit to avoid ever learning new areas; expand deliberately and in small steps if you choose to.
Institutional investors and fund consultants monitor 'style drift' - when managers invest outside their stated strategy - as a significant risk, because it exposes investors to risks they did not choose when selecting the manager.
Staying within a stated strategy is treated as a core discipline by professional investors.
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