Brian Nichols is the co-founder of Angel Squad, a community where you’ll learn how to angel invest and get a chance to invest as little as $1k into Hustle Fund's top performing early-stage startups.

Let's talk about something uncomfortable. Most investors don't actually have an investment thesis. They have a vague set of preferences.

"We invest in software." "We like marketplaces." "We back great founders."

Cool. So does everyone else.

A real investment thesis is different. It's a coherent view of the world that guides your investment decisions, helps you source differentiated deal flow, and gives you conviction when others are uncertain. It's not a straitjacket. It's a lens.

What an Investment Thesis Actually Is

An investment thesis is your answer to the question: "What do I believe about the future that's different from consensus?"

The key word there is "different." If your thesis is "mobile is important" or "AI is big," you don't have a thesis. You have an observation that everyone shares.

A good thesis is contrarian but not crazy. It's defendable but not obvious. It's specific enough to guide decisions but flexible enough to adapt as the world changes.

Here's an example of what I mean. One of our beliefs at Hustle Fund is that the best seed-stage companies are being started by people who don't fit the traditional founder mold. Not ex-FAANG engineers with Stanford degrees (though we back those too). We're talking about immigrants, women, people of color, folks from non-coastal cities. We think these founders are systematically overlooked by traditional VCs, which means they're mispriced, which means there's opportunity.

That's a thesis. It's contrarian (most VCs still focus heavily on pedigree). It's defendable (we have data showing that diverse founders outperform in our portfolio). And it's actionable (it tells us where to source deals).

Why Most Investors Skip This Step

Building a real investment thesis is hard. It requires you to have actual beliefs about the world. It requires you to say no to things that don't fit. It requires you to be wrong sometimes.

It's way easier to just evaluate every deal on its merits, chase whatever's hot, and hope you get lucky on a few winners. That's what most investors do.

The problem? Without a thesis, you're always reactive. You're taking meetings with whoever emails you. You're evaluating companies against some vague internal rubric that changes based on your mood. You're getting FOMO on deals that don't fit but seem hot.

A thesis gives you clarity. It gives you a reason to say yes when others are uncertain and a reason to say no when others are piling in.

The Components of a Good Thesis

Every good investment thesis has a few key components. Let me break them down.

First, you need a view on market structure. What markets are you interested in? Why? Are you focused on enterprise software because you think there's still massive untapped efficiency gains? Are you focused on consumer because you think new distribution channels are creating opportunities? What's your angle?

Second, you need a view on founder archetypes. Who are you backing? First-time founders or second-time founders? Technical founders or business founders? Founders from specific industries or geographies?

Third, you need a view on stage and check size. Are you doing pre-seed? Seed? Series A? What's your typical check size? This matters because it dictates what kind of traction you need to see.

Fourth, you need a view on risk. Are you taking technical risk or market risk?

Finally, you need a view on portfolio construction. How many companies will you invest in? How much ownership are you targeting? How much diversification do you want across sectors, stages, geographies?

All of these views, taken together, form your thesis.

How to Actually Build Your Thesis

Here's how I'd approach this if I were starting from scratch.

Start with your unfair advantages. What do you know that others don't? Where do you have access that others don't? 

Next, look at the data. What's actually working? If you've already made investments (even just a few), what patterns are you seeing? Which founders do you click with? Which markets are you most excited about? Don't overthink this. Your behavior reveals your actual thesis, even if you haven't articulated it yet.

Then, think about where the puck is going. What trends do you believe in that aren't fully priced into the market yet? Five years ago, it was "remote work will be normal." Today, it might be "AI will unbundle every software company" or "climate tech will finally work because the economics are there now."

Now write it down. Literally. One page. What do you believe? Who are you backing? Why? What's your edge?

Show it to smart people and let them poke holes in it. If they agree with everything you wrote, your thesis isn't differentiated enough. If they think you're completely wrong, maybe you're onto something. Or maybe you're actually wrong. Hard to tell at first.

When to Ignore Your Thesis

Here's the thing nobody tells you: a good thesis should be a guide, not a cage.

There will be deals that don't fit your thesis but feel exceptional. Great founder, huge market, compelling traction. In those cases, it's okay to break your own rules. But you should know you're doing it and have a good reason why.

The key word is "occasionally." If you're constantly making exceptions, you don't actually have a thesis.

How Thesis Evolves

Your thesis should evolve as you learn. The world changes. Markets shift. You gain pattern recognition from your portfolio.

The trick is evolving based on learnings, not based on chasing whatever's hot. There's a difference between "we're seeing great companies in Southeast Asia so we're expanding there" and "everyone's talking about crypto so we're adding that to our thesis." One is principled evolution. The other is FOMO.

Building Conviction Through Thesis

The final thing I'll say about thesis is that it's how you build conviction.

When a deal doesn't fit consensus but fits your thesis, you have a framework for getting convicted anyway. You're not just trusting your gut. You're applying a coherent worldview.

That's the power of a real investment thesis. It's not about being right all the time. It's about having a coherent reason to take a position when others won't.

If you're building your investment approach and you want to connect with investors who think deeply about thesis and strategy, check out Angel Squad. We're all about helping investors and founders think through these questions together.