Investment Memorandum

A typical investment memorandum is used to emphases the investment rationale. The data points are gathered from various sources (business plan, market studies, due diligence calls). Such a memo is typically about five to seven pages in length and covers key data points as follows.

  1. Overview
    • Brief business overview
    • Stage and status of the company
    • Investment amount sought
    • Syndicate partners, if any
  2. Investment Rationale
    • Market need/pain points
    • Competitive forces and their inability to address key opportunity areas
    • How the proposed opportunity addresses the market pain
    • Market segments and growth areas
    • A strong management team with venture experience
    • Financial: capital needs to reach break-even; future rounds anticipated
  3. Investment Terms
    • Amount of investment
    • Pre-money valuation
    • Preferences
    • Liquidation
    • Anti-dilution
    • Right of first refusal
  4. Board and Governance
    • Size of board
    • Participation on committee: audit committee, compensation committee
  5. Investment Risks
    • Technology—proof of concept
    • Market adoption
    • Scale-up
    • Management
    • Financing/future capital needs
    • Competition/regulatory
  6. Exit Analysis
    • Rationale and universe of acquirers
    • Comparable analysis: public markets and private companies
    • Projected IRR calculations