Predicting the Future Through Thesis-Driven Investing

Note: The full article on this topic first appeared on VentureBeat. You can read it here.  

At Avalon Ventures, we’re committed to our three-pronged investment strategy, which has led to repeated success year after year. While some may define this success as prescience, our approach is actually much more sophisticated and interesting than looking into a crystal ball. What it all boils down to is pattern recognition.

We are able to observe emerging trends in the technology and life sciences markets in which we invest by seeing hundreds of businesses every quarter. We are able to narrow down these trends into patterns that turn into investing theses. These theses guide our investment decision processes, allowing us to determine which companies will be successful and which will not. 

Based on experience, these are the three reasons thesis-driven investing helps predict the future of a successful investment:

  1. We know which companies will be successful even before they do

Once we develop a thesis about a particular market, we look for companies whose unique problem-solving strategies align with our underlying assumptions about the direction of a given market. Many times we end up finding those companies before they even come to us.

Take Skycatch as a good example here. My friends and fellow investors knew that the UAV (Unmanned Aerial Vehicles) space was on my radar. After they told me about Skycatch, I called founder Christian Sanz and we quickly realized that we were a mutual fit. His positioning and beliefs on drones as a data business, combined with the drone’s autonomy, aligns with our thesis about the space and growth of real-time imagine beyond human capabilities. 

  1. We know what makes for a successful partnership

People matter. That is one of the most steadfast investment rules across all types of investments, public or private. When you invest long-term in a company, you’ll be sharing part of your life with them, which is why it’s very important to us to find a founder who shares the same underlying assumptions about a market. Many times it can be like finding an old friend. Sharing these assumptions aligns confidence in our partnership and becomes a powerful ally when times get tough (because they will). This also provides a place for common ground and understanding. Because of our different roles, investors and founders can find themselves at odds if they don’t share the same beliefs about the company’s purpose and future.

Thesis-driven investing allows for a successful partnership that endures throughout the company’s entire evolution.

  1. We can successfully move very fast

The fact of the matter is that your idea is not nearly as important as your ability to execute. When you have the right talent, tools and resources in place, you can move with incredible speed using your roadmap to navigate through difficulties ahead.

Having a common ground among investors and founders creates room for a fast pace of execution.

Why thesis-driven investing enables fast execution:

  • You can confidently let the founder own decision making
  • You can advise at strategic points and not at every opportunity
  • When problems arise, we can tackle it from a common place

What’s Ahead

By following this successful strategy year over year, we have enjoyed backing many incredible founders and ideas with successful results. We’re committed to our approach of thesis-driven investing and are always to looking for key patterns and identifying exciting waves of innovation that are large and timely.