What is a deep dive?

What is a deep dive?

Table of Contents

Deep Dive

Similar to an investment memo, a deep dive is your overall thinking about a specific company or investment opportunity including your notes, models, and evolving hypothesis. The key difference between a memo and a deep dive is typically that a memo is meant to follow a specific structure that drives towards action; you read a memo and have an answer to the question "therefore, what?" A deep dive is a library of knowledge; there may not always be a resulting action but the reader will walk away significantly more informed on the topic.

The reason you create a deep dive is often after you have gone through the process of

and have identified a key trend within a broader theme that is interesting. For example, your canvas might have led you to the e-commerce market and you read the statistic the total online sales have increased their growth rate from 9% to 30%+ in the first half of 2020. That is a trend that feels worth investigating. The more you investigate it you may develop a thesis like "if people are selling online they're going to need tools to help them do that." So you decide to investigate Shopify. Now Shopify becomes the subject of your deep dive. Your deep dive may be more broad like "E-commerce Technology Vendors" where you want to lay out the entire landscape.

Creating a deep dive is an opportunity to gain a deeper understanding of a specific company, and can be a valuable resource to some of these companies as well. The ability to correctly profile a company is a valuable skill for your own analysis and for the companies you work with.

There is a never-ending list of ways you can go about developing a deep dive. There also isn't always a clear outline for what is important until you immerse yourself in the content available. Here are some approaches you might take.

Key Research

General Search

  • Google is your best friend. (see
    Research
    Research
    )
    • Try phrases like
      • "what does [COMPANY] do?"
      • "[COMPANY] alternatives"
      • "[COMPANY] product demo"
      • "[COMPANY] pricing"
  • Review Google Trends to see if any relevant key words about the company have been increasing / decreasing in popularity
  • Review Glassdoor looking for hints about company culture, both the good and the bad
  • Review G2, Capterra, or vertical-specific review sites; anywhere customers would leave reviews or opinions of the company's products or services
  • Review YouTube looking for both product demos and interviews with people discussing the company or market

Specific Filings

  • If the company is public you should be able to find different public reports the company has filed, often by searching "[COMPANY] investor relations."
  • You may also be able to get access to analyst research on these companies through things like CapIQ

Personal Interviews

  • Two key ways you can get first-hand perspective is to seek out (1) people with relevant knowledge and experience, and (2) other investors that focus on that particular category.
  • If I were diving deep into "behavioral health" as an industry I would search that exact phrase in LinkedIn and try and find anyone I know with relevant experience

Building a Framework

Key Questions

  • Throughout this entire research process you should be keeping a running list of questions that you have. Some of them may be very specific like "What does SAML mean?" Some may be more general like "Why are there so many players in this market?"
  • Over time you'll strike out some of those questions because you'll continue to do research and answer them. Over time you'll be left with what is likely a list of some of the most difficult questions to answer

Market Dynamics

  • Pay attention to the aspects of the market that affect every player. This could include changing consumer preferences (e.g. no one wants to own music anymore), or regulatory impact (e.g. every state has their own regulation around pre-fabricated housing)
  • Try to paint a picture of the most important "things to know" about this market that should come to define the way you think about this market and whether those components are good, bad, or neutral

Key Players

  • One of the most critical parts of actually being informed on a given space or company is a familiarity with relevant names and how they relate to each other.
  • The flip side is also true. The fastest way to identify whether or not someone is actual knowledgeable on a particular space is to ask them about names you know are relevant and they're not familiar with them at all.
  • As you come across relevant names you should try and keep a running list as well as an attempt at categorization in terms of what that player does in particular. It's okay to have one name show up in multiple categories. Often a company will not only do one thing in a market so it's important to understand the overlap.

Differentiation

  • You're not only trying to generally understand how these names relate to each other, but if you have a specific target in mind you're paying particular attention to what makes that name unique.
  • Alternatively, if you know you want to investigate "e-commerce technology providers" but you don't yet know what is interesting you're paying attention to "what seem like the most interesting parts of this market to play in?" Maybe email marketing is commoditized and uninteresting but customer demand prediction is more interesting.

Key Drivers

  • Always be thinking about what the most important drivers are in this market. If you're diving deep into software for customer service call centers you'll realize that some critical components are:
    • # of call center agents
    • Avg. revenue per agent
    • Hours per month of agent calls (because some vendors charge for usage hours)
  • Any market will have unique drivers that often make up the very high level thinking within a given market

The Output

Usually after you've immersed yourself in all this information you need to somehow summarize it. This can evolve into two outputs: (1) summary for yourself, and (2) summary for other people.

For Yourself

The best way to do this deep dive and then have it available to you is through a note-taking system (see

). All the individual pieces of information should be connected to other ideas you spend time thinking about.

For Other People

You could take a few different approaches to creating a summary output to share. You could create a long-form written summary (most of the examples below follow that model.) You could also create a market map presentation; basically a powerpoint outline of the market that explains the players and their relation to each other, the key considerations, and areas that you think are most interesting. What the one-slide market maps are typically focused on is bucketing different players into different categories. They're typically missing a lot of the information you could include in a broader write-up.

Some examples of limited market maps: E-Commerce Enablers, Remote Work

Better example of a market map + deep dive context: Creator Economy Market Map

The best outputs are those that become evergreen content, something that provides real value, is high quality, and can be shared over and over again. One great example of this is "The Makings of a Multibagger" by the Alta Fox Capital intern class of 2020:

<<< Even more interesting when you can find a business that is more under the radar than most. You want to add unique perspective in the work that you do and sometimes being the thousandth person to write about Facebook won't be as helpful as finding something less trafficked.

Examples

For more detailed deep dives into specific companies, see

💹
Public Equity

✈️
Private Equity

Hilton / Blackstone Deal

📈
Venture Capital

🐌
Micro Private Equity

🚧
Small Business Ownership

🏠
Real Estate

What are people talking about?

Resources

The Rise
The Rise
Deep Dives: Other Resources