The Craft of Underwriting
Underwriting is the most important craft in any serious investment firm — and the most consistently underestimated. Done properly, it is the discipline that determines every other outcome.
Underwriting is treated, in most firms, as a technical exercise — a model to be built, a memo to be circulated, a committee to be convinced. Treated that way, it produces predictable outcomes. The deals that should not be done are usually done anyway, justified by the marginal narrative the model can be made to support.
Underwriting, treated as a craft, is the opposite. It is the discipline of refusing to model what cannot honestly be modeled, of insisting on entry assumptions that survive being wrong, and of walking away from opportunities that require optimism to clear the hurdle.
The Discipline That Matters Most
Honest underwriting begins with refusing to underwrite to the exit. The exit is a residual. Anyone who builds the thesis around the exit is, in our experience, building the thesis around the wrong variable.
Why It Compounds
Firms that underwrite honestly close fewer deals. The deals they do close compound more reliably. Across enough vintages, the difference is structural — not stylistic. We have organized our practice around the conviction that the second outcome is the only one worth pursuing.
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