Does your VC have an investment thesis or a hypothesis?

Does your VC have an investment thesis or a hypothesis?

Venture capitalists like to say investment theses: on Twitter, Medium, Clubhouse, at conferences. Yet, when you look closely, they are often meaningless and / or confusing. To more efficiently find the right investors for the organization – and vice versa, OpenVC is a new open source initiative that collects and analyzes publicly available VC theses. For the first time, we are sharing our initial conclusions here.

We hope you upload your thesis in your own criteria. We have identified six common patterns of how VCs publish their theses and have some best practices in this regard. Our analysis based on two complementary datasets:

  • 36 theses pulled directly from U.S. VC websites by David Teten and Sam Sabin, co-founder of Hireblue.
  • 125 theses so far submitted by investors into the OpenVC database.

Our four primary conclusions:

  • We found seven categories of VC theses, plus an eighth: the non-thesis.
  • Investment these are just hypotheses; the portfolio shows how accurate the hypothesis was.
  • VC theses are often so vague that they’re meaningless.
  • Public theses are often inconsistent with how firms actually deploy capital.

In the interest of simplicity, we will consider “investment thesis” and “investment criteria” as equal conditions, although we argue that the thesis leads to investment criteria. They summarize how they relate to the table below.

A general VC thesis: “We invest in tech startups in Europe at an early stage.” However, our experience shows that in many cases, “Europe” means a handful of countries, for example, France, the United States, and Germany; and “Tech” means B2B SAS / fintech or Customer Application. Thirty-four VC organizations at OpenCV call them “early stages.” Yet 30% of this pre-revenue does not invest at the beginning. The phrase is quite vague; we recommend quantifying the size of the check to make your investment choices clearer. Almost every vice-chancellor says to invest in the “best” founder. However, according to PitchBook data, women founders have received only 4.4% of venture capital deals since the beginning of 2016. These firms have earned about 2% of all capital investment. This is despite the fact that the data shows that you are good at investing in women. This lack of transparency results in confused founders chasing the wrong investors. Instead, investors overwhelmed the opportunity for low efficiency.