We receive hundreds of pitches from incredible founders every month but unfortunately, we can’t possibly invest in every company. Instead, we carefully select startups based on their existing merits and future potential. How exactly do we decide? We leverage our investment thesis. Read on to learn more about our process.
Not sure what the Cashmere Fund is? This short video will give you a quick overview of Sweater's flagship VC fund.
What’s an investment thesis?
An investment thesis dictates a fund’s investment strategy and is often backed up by research and analysis. It could be a concrete list of rules, a worldview that the fund seeks to uphold, or some combination thereof. Here are a few real examples:
- "The USV Climate Fund invests in companies and projects that provide mitigation for or adaptation to the climate crisis.”
- Maveron, a consumer-focused VC firm, says, “Our companies marry disruptive tech with soulful, beloved brands into an unstoppable and unforgettable consumer experience. Because middlemen are so 20th century."
- Village Global, a VC fund and network of successful founders, “back[s] entrepreneurs, at the earliest possible stage, who are using software & IT to transform global industries.”
The role of an investment thesis is to create focus within an investment team. When a company pitches us, we first refer to our thesis to decide whether it’s worth digging in further. Recognizing the value of a founder’s time, we let them know ASAP if their startup is off-thesis.
A strong investment thesis also helps a fund’s backers (known as limited partners, or LPs) rally around it. As venture capitalists, our priority is to maximize returns. But we’re also looking to shape society by supporting companies that we believe should exist. An investment thesis isn’t just a money-making strategy, it also reflects how an investment team sees the world.
Sweater's Investment Thesis
In most cases, a venture capital fund can only accept up to 99 LPs. We believe this drastically limits the impact that a fund can have on its companies, and that’s why we’ve constructed our fund to accept capital from thousands of members. This centers our investment thesis on the power of our community:
The Cashmere Fund invests in companies that are network affectable, scalably impactful, and broadly understandable.
The Cashmere Fund comes with a built-in support network for startups: the Sweater community. Our portfolio companies can tap our members for help with anything that would benefit from a broad network of professionals: talent acquisition, product research, or industry expertise, to name a few examples. Given our unique access to this community, we look for network affectable companies that would benefit most from our members.
This doesn’t necessarily mean we only invest in consumer-facing companies. Members of Sweater are also members of the workforce, with enterprise-level influence and purchasing power. We’re interested in companies selling products or services that our members could promote, purchase, or champion within their respective workplaces or personal lives. This could look like directly purchasing a product or service, sharing the product with your social network, or suggesting the product to colleagues with purchasing power.
Venture funds rely on outliers—one company’s success could mean success for the entire fund. As venture capitalists, we have to bet on companies with big potential. There are small businesses doing great things for the world that we’d love to support, but the return profile doesn’t match the ROI (return on investment) expectations of a venture capital fund. We look for companies that will affect a significant portion of the population with the potential to scale into massive businesses. Most VCs look for scalability, but it’s especially important for us because the more scalable the business, the more likely it is to resonate with a significant portion of Sweater members.
Part of what makes Sweater special is our belief in storytelling. We have designed our mobile app with narrative in mind, sharing videos and blog posts to tell each company’s story. While many quantum computing startups provide exciting potential for disruption, their stories can be difficult to understand or relate to. While we fully support these categories, they aren’t a fit for immediate investment at Sweater.
The Sweater community is made up of tens of thousands of investors of all different backgrounds and experiences. What unites us all is an interest in shaping the world. Whether you’re a thirty-year-old tech CEO living in Silicon Valley or a seventy-five-year-old retiree looking to expand your understanding of investing, we believe you can contribute meaningfully to the Sweater community. We believe that if Sweater members find our companies relatable, they’ll be more invested in the success of the portfolio. That’s why we invest in companies that are broadly understandable.
Invest with us
Our investment thesis hinges on the power of our community. Interested in joining? Download the Sweater app today to get started.
Want to dive further into our investment strategy?
Check out this recorded Deep Dive discussion with the Sweater Investment Team talking about the Sweater Cashmere Fund Investment Thesis. You'll get to hear more about our thought process behind it and questions we answered for attendees.
Read more about the metrics we use to evaluate prospective portfolio companies in this helpful guide, or watch the video below for a quick overview of what we look for in companies before we make an investment.