The "What You Have to Believe" Framework

Every venture capital firm develops its own unique framework for evaluating potential investments - systematic approaches that help partners make difficult decisions about where to deploy capital. They reflect the firm's investment thesis, risk tolerance, and collective experience.

One particularly insightful approach comes from Emergence Capital. According to Jake Saper, a partner at Emergence, they use a decision-making framework called "What You Have to Believe" to evaluate potential investments. This approach helps the team identify and focus on the 3-5 critical factors specific to each investment opportunity that would need to be true for the investment to return the fund.

The framework works by:

1. Identifying the 3-5 key beliefs specific to each deal that would make it a fund-returning investment

2. Conducting due diligence to gather supporting or contradicting evidence for each belief

3. Creating a chart that visually maps these beliefs against supporting and negating data

4. Making final decisions by evaluating whether, on balance, they believe in these critical factors

These key beliefs vary by company but typically address fundamental questions around:

• Potential dilution

• Additional capital requirements

• Founder's fundraising capabilities

• Market dynamics

• Competitive landscape

• Defensibility of the business

• Team strength

The process is iterative - beginning with initial hypotheses after founder meetings and refining these beliefs throughout the diligence process. This structured approach helps Emergence Capital make more objective investment decisions by clearly identifying what needs to be true for an investment to succeed.