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.
- Overview
- Brief business overview
- Stage and status of the company
- Investment amount sought
- Syndicate partners, if any
- 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
- Investment Terms
- Amount of investment
- Pre-money valuation
- Preferences
- Liquidation
- Anti-dilution
- Right of first refusal
- Board and Governance
- Size of board
- Participation on committee: audit committee, compensation committee
- Investment Risks
- Technology—proof of concept
- Market adoption
- Scale-up
- Management
- Financing/future capital needs
- Competition/regulatory
- Exit Analysis
- Rationale and universe of acquirers
- Comparable analysis: public markets and private companies
- Projected IRR calculations