Investment Memos: How to Write a Perfect One in 2023
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An investment memo is a concise document startups use to pitch their company to potential investors.
Investment memos lay out your company's strategic vision, business strategies, rationale, and expectations for an investment. They are a great tool to help you raise capital from venture capital investors.
Venture capital investors use investment memos as supporting documents in their investment decisions. This guiding document helps them discover if the investment opportunities are worth following or not.
In this article, we’ll cover the following:
- What’s an “investment memo.”
- Why it is important to create one.
- The core elements it has to include the differences between investment memos and pitch decks.
- An investment memo template that you can adapt to your startup.
- Various examples of investment memos from well-known companies.
What Is An Investment Memo?
Y Combinator describes an investment memo as “a clear and concise articulation of the key components of your company and what the rationale is for investing in it.”
As a startup founder, creating this memo helps clarify why investors should be placing their money in your company. Having a clear and well-written investment memo is important so you can get the best deal for your startup.
Why Do Startups Need Investment Memos?
As we discussed previously, investment memos are a powerful tool for communicating between a startup and a venture capital firm during the investment process. Investment memos are utilized for:
- Staring the startup's story and business plan in a clear format.
- Outline the main reasons why investors should invest.
- Align your company's team and potential venture partners to what matters more for your company and product.
The investment memo is often ignored as those involved think the existing pitch deck serves the same purpose. However, this is not always the case.
Investment Memo vs Pitch Deck
A pitch deck is a presentation through which you share an overview of your business goals, product roadmap, potential services, and growth direction.
An investment memo contains similar elements but is written in document form and presented more formally than pitch decks.
A pitch deck will create a picture of who you are in front of investors, but the investment memo is the more detailed version of why they should invest in your company.
So, although they use similar information, the difference lies in how you write down the key elements about your company and hand it over to an investor.
An investment memo has a few advantages over a traditional pitch deck:
- An investment memo is a document with a clear structure and information, whereas a pitch deck sometimes contains more visual slides and lacks context.
- A structured document makes the investment memo easy to read by investors. A slide-based presentation can sometimes lack a narrative.
- An investment memo is ready to be shared with other third-party sources, while a pitch deck doesn’t convey the whole story.
What To Include in an Investment Memo
Here are the main elements an investment memo should include for startups seeking investment:
This introductory section has to cover the reasons why your company exists and the primary purpose of your business. Write it down as a clear and concise overview; you can think about the following:
- What does your business do?
- What are the current solutions that are available in the market?
- How will your solution generate income and shape the market?
The Problem section talks about the pain points from your core audience you are trying to address and how the environment will look once you resolve it. Describe things like:
- What problems are you trying to solve?
- What are your plans to resolve some of these problems?
This section is relatively straightforward. You will need to cover your product, business model, and key elements of your target market.
- What’s your business model?
- Describe your product roadmap.
- How do you ensure product-market fit?
4) Market Size
After covering the core problems and how your solution addresses them, it’s time to put things in perspective for your potential investor. Describe the size of the market, your primary customers, and the opportunity to scale your business.
- What’s your positioning in the competitive landscape?
- Describe your customers.
- Define the size of the market opportunity you are creating for them. How large is it?
After drawing out the market map, it’s time to move toward the available competitor solutions. You can explain how your solution is better than theirs and what unique selling advantages you have that separate you from your competition.
- Who are your competitors?
- How is your solution different?
6) Growth & Distribution
This is the part where things get more oriented toward your plan. Include your go-to-market strategy, the main actions you plan to use with the investment funding, and what expected outcomes would be measured by the end of the campaigns.
- What are the elements of growth that would empower your company?
- What’s your go-to-market plan?
- How much have you raised before?
- How much are you looking to raise right now?
- How will their funding round resolve your current issues?
Investors are looking for actionable elements. It’s essential to describe your current revenue drivers and growth strategies. Try to include charts in this section and highlight the following:
- Your core revenue drivers.
- Business metrics to show market traction.
- Product metrics (churn, ACV, rake, etc.)
Each plan is brought to life by the team implementing it, so talk about your team in the investment memo. Describe your core go-to-market team members, who they are, why they are suitable candidates for those roles, and what makes them unique. Additionally, state your plans for growing the team over time and how the investment will contribute to this area.
- Who are you?
- Who are your team members?
- What are their capabilities?
- What makes your team special?
- How do you plan to grow your team over time?
Investment Memo Template
It’s crucial to think about investment memos if you are looking to get some funding.
We’ve found Angel investor Steve Schlafman’s investment memo template in notion, which you can use to help you get started.
This template includes the core elements of an investment memo that will help you outline the information investors looks for most about a company.
You can download the investment memo template here.
6 Investment Memo Examples
Raising funds for an early-stage startup has a creative component due to founders having to share the story of their startup with investors. A story that is told through clear information, alongside great supporting materials, is more likely to be successful.
Here is a list of investment memo examples from venture capital firms around the world sharing their insights on different investment projects.
Shopify Venture Capital Investment Memo Examples
Shopify is considered one of the most successful investment deals from Bessemer Venture’s portfolio. Their investment memo was published close to 10 years after the deal was made.
This investment memo contains an overview of the company's purpose in attracting their $7M Series A funding round. It provides a short description of their market opportunity, including details about their customers and pricing strategies.
The information is also supported by financial reports, customer acquisition, retention metrics, and a quick view of the competitive landscape.
Bessemer's view of the deal states that the outcomes of their analysis ended up being 2x what they had expected.
Read the full Shopify investment memo here.
DoorDash Venture Capital Investment Memo Example
DoorDash is an investment of Sequoia from 2012, where they led a Series A round of $17.3M. The investment memo was published only in 2020 when DoorDash celebrated its IPO by Alfred Lin, Partner at Sequoia Capital and one of the key investors in this deal.
The investment memo contains information about who DoorDash is and what they were aiming to build. It captured the founder's story, customer obsession, and the company’s mission in supporting restaurants and local businesses.
Read the full DoorDash investment memo here.
Twitch Venture Capital Investment Memo Example
Bessemer Venture Partners invested $13M in Twitch.TV, in a Series B round back in 2012.
The document goes through the company’s key moments of growth and exit, such as pivoting from JustinTV to Twitch and the official acquisition by Amazon.
In this investment memo, Ethan Kurzweil, Partner at Bessemer Venture Partners and one of the lead investors, highlighted that a core reason behind the investment was the team. Bessemer liked the founders of Twitch, their passion for constantly delivering, and their solid focus on what they wanted.
Twitch’s investment memo also goes through the company's value proposition, key insights about the market they were participating in, and the impressive metrics highlighting good product adoption and usage.
Read the full Twitch investment memo here.
YouTube Venture Capital Investment Memo Example
Sequoia Capital invested early in YouTube, bringing an initial $1M seed round, followed by another $4M in a Series A. The investment memo was published in 2005 as a confidential document but released publicly only in 2010.
The document was made public by Roelof Botha, an investor from Sequoia, after a court case between Viacom and YouTube, during which he had to disclose the document as part of the testimony.
YouTube’s investment memo and the data inside it confirm why Sequoia believed in the power of YouTube.
The document highlights the company's main competitors, advantages and disadvantages, and market insights that made its position unique. YouTube’s investment memo also goes through product development elements, sales, and marketing efforts achieved by the company.
Read the full YouTube investment memo here.
Airbase Venture Capital Investment Memo Example
Airbase raised a Series B, counting a total of $60M to grow its spend management platform. The investment was led by the Silicon Valley venture capital fund Menlo Ventures.
The investment was also joined by Craft Ventures and existing investors, such as Bain Capital Ventures, First Round Capital, Quiet Capital, Webb Investment Network, and BoxGroup.
This is the first example featuring an investment memo from a founder instead of an investor. Thejo Kote, CEO of Airbase, explains that he used this investment memo to tell a better story of the company and gain more credibility in front of investors.
Read the full Airbase investment memo here.
Rippling Venture Capital Investment Memo Example
Kleiner Perkins led the Series A funding round of $45M in April 2019 in Rippling, an employee management platform. In the investment memo published on their blog, the company's founders share how they managed to raise this round without having a traditional pitch deck.
Rippling’s investment memo is relatively short, only 11 pages that go through a brief overview of the company. It includes the strategy behind building the platform, a good product overview, who the main competitors are in the market, and what they have managed to achieve so far.
Read the full Rippling investment memo here.