I may be a nerd, but one of my favorite things to do is learn from experienced investors about their investment thesis.

Seriously. I dug into this topic with Jess Lee a few years ago, and with Elizabeth Yin more recently.

Understanding another investor’s framework for evaluating startups is perhaps the most effective way to develop your own investment thesis… that, and actually investing in startups.

So when I met Sandy Naidu, solo GP at Marathon Fund, Angel Squad super-member, and venture fellow for Hustle Fund, I had to know… what criteria is he using to decide where to invest?

I’m not sure what I expected Sandy to say, but I was not expecting alliteration. That’s what I got.

See, Sandy uses something he calls “the 5 Ts” to decide whether to bet on a startup or pass.

Below we break down each one. But first, let’s meet Sandy.

The Marathon Man

Sandy is a legendary marathon runner.

He’s run a marathon in all 50 states and all 7 continents. Yes, including Antarctica.

So it’s no surprise that his fund is called Marathon Fund.

The fund’s core thesis centers on investing in athlete founders, digital health, and Web3, with a broader emphasis on movement — whether in goods, people, or opportunities.

Initially, the plan was to raise a small $2-3m fund, but after deeper research into fund economics, Sandy decided to aim for a $10m fund, with a first close target of $3m.

And thanks to a conversation with investor Sarah Smith at Camp Hustle last year, he’s considering raising his fund as a 506(c) — IE raising in public.

Now let’s look at the framework Sandy uses to determine whether or not to invest in a company.

Team

Sandy doesn’t put much stock in pedigree. Instead, he looks for experience.

He’s wary of first-time founders, in large part because he WAS a first-time founder. So he knows the traps that first-time founders fall into… like shiny object syndrome, a lack of experience developing GTM strategies, and being pretty darn awful at sales.

Sandy’s investments typically include founders with experience building or scaling a large business – even if it failed – because they know how to avoid those pitfalls.

Target Market

The next thing Sandy looks at is target market. He asks: does this market have at least a $10B+ SAM?

Not TAM. SAM. Sam is “serviceable addressable market,” and it’s often a better indication of a company’s true market potential than TAM (“total addressable market”).

Sandy needs to believe that the companies he’s investing in have the potential to 100x or 1000x his return.

Technology

Then he looks at the product. Companies have to be able to demonstrate a unique value prop. How are they different from what’s currently in the market? How will this solution solve the customers’ problem in a way that existing solutions do not?

Traction

Sandy tends to avoid pre-revenue startups. The reason? He wants to understand their GTM strategy, sales process and skills, and their roadmap to $100m ARR.

Terms

The last T is terms. Sandy typically invests in companies under $10m valuations to allow for those large potential upsides.

Sandy’s Story

How did Sandy even get to this point? His path to becoming an investor is pretty wild.

While Sandy earned his Masters in Computer Science and started out as an engineer, the biggest lessons of his early career came from his experience as a founder.

He discovered that being a founder is grueling work. He bootstrapped and exited his business, but the learnings from that experience were way more valuable than the funds he received when he exited.

After selling the company, Sandy joined Charles Schwab, where he worked directly with corporate VC. His role involved building tools for wealth transfer, investment advisors, and helping with M+A and integrations.

This on-the-job education sparked something in Sandy. It got him excited about investing in private companies.

Then – a pivotal moment. He rejected job offers from tech giants Amazon and Google and decided instead to join a high-growth startup.

And according to Sandy, he learned more in 3 months from this startup than the last 3 years in corporate America.

As an operator at a high-growth startup, Sandy got a crash course in scaling a company. He helped with R+D, operations, and hiring. He grew the engineering and product teams from 50 to 200 in less than 6 months.

Eight months after he joined, the startup Sandy worked for was acquired by Shopify for $2.6B. And shortly after that, Sandy was faced with a choice: take a pay cut or face the unknown.

Sandy opted for the latter. And this choice launched him into the world of startup investing.

He joined Angel Squad to learn how to invest in startups, and became part of angel investing syndicates to increase his dealflow. Following Elizabeth Yin’s advice around portfolio construction, Sandy invested in roughly 50+ startups.

And now he’s running his own fund.

There’s so much more to Sandy

My interview with Sandy was 30 minutes, but I could have chatted with him for hours.

His philosophy around making life choices, building wealth, and finding your life’s purpose is something we should all be taking notes on.

If you’re keen to meet Sandy in person, join us at Camp Hustle in May (where he’s leading an optional group run), or find him at an Angel Squad event (which he’s probably organizing).

And the next time you’re thinking about investing in a company, remember to cross your Ts.