How to Create an Investment Memo as a Founder

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As a new business founder raising capital from investors can be one of the most challenging tasks. When making fundraising preparations, building relationships to generate interest and making a compelling case for investment can feel overwhelming. 

While having a well-done pitch deck is essential, it is not enough to ensure your success in fundraising. Creating an investment memo is also a crucial step that should not be overlooked. This concise document that outlines crucial information for investors can help them build trust in a business and want to support its development. 

In this article, we will cover everything that you need to know about creating an investment memo from scratch, covering templates, step-by-step instructions, and some tips to craft the best investment memo for your business. 

What Is an Investment Memo?

An investment memo also called an investment memorandum or offering memorandum is a short document of usually 5 to 15 pages that presents a business, project, or investment opportunities to possible investors. Its purpose is to provide a thorough overview of the business, its strategic vision, the rationale behind the investment, and the expected outcomes. 

Unlike a pitch deck that focuses on visuals and bullet points, an investment memo offers a more in-depth narrative that allows investors to fully understand the investment opportunity.

As an entrepreneur starting a new business, you can often find yourself needing some extra funding to bring your ideas to life. To attract investors such as venture capital firms, angel investors, and accelerators, you can use an investment memo to outline the opportunity your business offers, explain the potential returns, and showcase key aspects of the business. 

Why Every Founder Needs an Investment Memo

For any founder, an investment memo is a vital tool in the fundraising process. It serves multiple purposes and provides significant advantages for founders and investors, such as: 

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• Building relationships - An investment memo is key to building strong relationships with investors. Clearly explaining the reasons why someone should invest in your business helps with swift decision-making, shows appreciation for the investor’s time, and builds a strong foundation for future interactions.

• Develops strong convictions - By giving detailed information and well-structured arguments as to why it is worth investing in your business, an investment memo helps investors develop strong convictions about your business and understand the merits and potential of the investment. 

• Ensuring Alignment - An investment memo can help keep everyone on the same page. When you're raising capital, it helps current and potential investors stay informed and aligned with your funding status. Within your team, it can be a clear reference that ensures everyone understands key decisions and project progress while providing a solid foundation for future discussions.

What to Include in an Investment Memo

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To improve your chances of getting funding for your business, a well-structured investment memo is crucial. It should be clear, concise, and persuasive, and provide investors with all the essential information they need to evaluate the investment opportunity. 

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Here is an ideal structure and the key elements you should make sure to include in your investment memo:

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Executive Summary 

The executive summary of an investment memo is a brief summary of the investment opportunity that should be about 1-2 paragraphs long. Here you should focus on summarizing your business idea, the opportunities it brings for investors, and key financial highlights. You should also give a compelling argument as to why the investment makes sense now to leverage the “now factor” and motivate people to invest.

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Business Overview

The business overview should start with your company’s basic information such as name, industry, and stage (early-stage startup, growth, etc.). Next, you should include a description of what the company does and its core mission. To finish off strong present key services/products and what makes them stand out from other similar ones or what makes them special. 

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Market Opportunity

In this section, you should provide an analysis of the market size and potential opportunities. Include data on the total addressable market (TAM), serviceable available market (SAM), and serviceable obtainable market (SOM). 

TAM represents the entire market demand for your product or service without considering competition and other limitations. SAM is the part of TAM that your business can realistically reach and SOM is the part of the SAM that your company can easily capture. To make it easier, think of TAM as the broadest opportunity, SAM as what is within reach, and SOM as your actual target market.

Here you should also include information about industry trends, demand, why the market is attractive, and a short competitor analysis to show how your company differentiates itself from the rest.

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Business Model & Revenue Strategy

This section is all about how your business makes money. Whether it is through subscriptions, one-time purchases, licensing, or selling products you should be as detailed and precise as possible to convince possible investors that your idea will create revenue. Include pricing strategies, and revenue streams, and also describe your long-term growth strategy. 

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Traction & Key Metrics

Strong traction and key metrics are essential for building the confidence of possible investors in your business. This includes revenue growth, customer acquisition, user engagement, and strategic partnerships. Key milestones, such as successful product launches, notable hires, or previous funding rounds, provide tangible proof of your progress. 

Additionally, testimonials, case studies, and early signs of product-market fit showcase real-world validation, reinforcing the demand for the company’s offering. By presenting these achievements, the investment memo shows a clear trajectory for growth and long-term success.

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Financial Overview

In the financial overview section, you should provide investors with a clear picture of the company's current financial state and future potential. This includes key metrics such as revenue, profit/loss, and financial projections for the next 3-5 years, offering insights into expected growth. Presenting factors like burn rate and cash runway indicate how efficiently the company manages its capital and how long it can sustain its business without additional funding. 

Understanding key financial ratios, past funding history, and valuation helps investors assess the company’s stability, scalability, and overall investment potential. A well-documented financial overview reinforces the investors’ trust in your business.

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Investment Ask & Use of Funds

The investment ask and use of funds section should offer precise information about the amount of capital being raised and the type of funding sought, whether equity, convertible notes, or another structure. 

It is crucial to be as clear and transparent as possible in this section as investors need a clear understanding of how these funds will be allocated, such as for product development, hiring key talent, marketing efforts, or expansion into new markets.

Additionally, this section provides insight into the expected return on investment (ROI) and the projected timeline, helping investors evaluate the potential rewards and the impact of their contribution. A well-written investment ask demonstrates transparency and ensures alignment between the company’s vision and investor expectations.

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Team & Leadership

In this section you should highlight the key members that drive the company forward, their roles, and what makes them qualified for their roles. Investors look for strong leadership, industry expertise, and a track record of success that sets the team apart from competitors. Here you can also include advisors and notable investors, whose experience and connections add credibility and strategic value to your business.

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Risks & Mitigation Strategies

The risks and mitigation strategies section provides a transparent view of the potential challenges the company may face, such as market competition, regulatory challenges, or funding risks. Investors appreciate a realistic assessment of any possible obstacles, along with a clear plan to overcome them through strategic positioning, adaptability, and risk management. By proactively addressing risks, you can demonstrate a serious commitment to long-term stability that will make investors more likely to take the risk and invest in your business.

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Conclusion & Call to Action

In this final section, you should include a short summary of why your business offers a strong investment opportunity, the next practical steps that investors can make (such as requests for a meeting, etc.), and offer your contact information for future follow-ups.  

Best Practices for Writing an Effective Investment Memo 

To create the best investment memo you should focus on clarity, structure, and honesty. Here are some tips to help you:

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• Be Clear & Concise - Use straightforward language, avoid jargon, and focus only on critical details.

• Start with a Strong Summary - Begin with key highlights—problem, solution, market size, and financial overview—to quickly engage investors.

• Support Claims with Data - Back up statements with relevant metrics and use charts and graphs to make information visually engaging.

• Tailor to Your Audience - Highlight aspects of your business that align with investor interests, whether VCs, angel investors, or corporate partners.

• Make an Impact - Emphasize your unique value proposition, traction, and market potential to showcase strong growth opportunities.

• Use Visual Aids - Present complex data in a simple, digestible format with visuals.

• Be Transparent About Risks - Identify potential challenges and outline clear mitigation strategies to build trust.

• Ensure Readability - Use a logical structure, well-organized sections, and professional formatting. Edit and proofread to maintain an error-free presentation.

Investment Memo Template

Company Overview

• Company Name:
• Founder(s):
• Founded Year:
• Stage: (Pre-seed, Seed, Series A, etc.)
• Industry:
• Business Model: (B2B, B2C, SaaS, Marketplace, etc.)
• Current Traction: (Revenue, users, growth rate, partnerships, etc.)

Investment Thesis

• Why Now?: (Market timing and trends)
• Why This Company?: (Unique value proposition)
• Why These Founders?: (Background, expertise, past successes)

Market Opportunity

• TAM (Total Addressable Market):
• SAM (Serviceable Addressable Market):
• SOM (Serviceable Obtainable Market):
• Growth Trends:

Product & Technology

• Core Product: (What the company offers)
• Key Differentiators: (What makes it stand out)
• Tech Stack: (If relevant)

Business Model & Revenue Streams

• Primary Revenue Model:
• Monetization Strategy:
• Unit Economics: (CAC, LTV, margins, etc.)

Traction & Key Metrics

• Revenue: (Annual/Monthly Recurring Revenue)
• Customer Growth:
• Retention & Churn:
• Key Partnerships:

Competitive Landscape

• Key Competitors:
• Competitive Advantage: (Why this company will win)

Go-To-Market Strategy

• Acquisition Channels:
• Growth Strategy:

Financials & Fundraising

• Revenue & Burn Rate:
• Previous Funding Rounds:
• Amount Raising:
• Use of Funds: (Breakdown of how capital will be deployed)

Risks & Mitigation

• Potential Risks: (Market, execution, regulation, etc.)
• Mitigation Strategies:

Exit Potential

• Potential Acquirers:
• IPO Potential:

Final Recommendation

(Summary of the opportunity and recommendation to invest or pass)

Common Mistakes to Avoid in an Investment Memo

When writing an investment memo, one of the biggest mistakes you can make is to include too much information. You might feel like giving more details will strengthen your case but it can actually do the opposite. Offering too much information  can overwhelm the reader and make it difficult to focus on the key points. So you should focus on being as clear as possible, highlighting only the most critical information that supports your investment needs. 

Another common mistake founders make when writing their investment memo is neglecting the power of visual aids. Charts, graphs, and diagrams help simplify complex data, and break up dense text thus making key insights easier to understand and keeping your memo engaging.

Additionally, a common mistake to avoid is not addressing potential risks. It’s crucial to address potential risks rather than avoid them. Investors want to see that you have considered the challenges ahead and have a clear plan to mitigate them. Being transparent about risks builds confidence and demonstrates that you are well-prepared to overcome future challenges.

BaseTemplates Pro is an excellent resource for helping you avoid these mistakes and secure funding. Our comprehensive database of startup investors, tools, and templates will help you fundraise from start to finish.

Conclusion

By now you surely understand why an investment memo is a powerful tool in the fundraising process, providing investors with clear, data-driven information to make them to support your business. Unlike a pitch deck, it offers a deeper perspective, covering key aspects like market opportunity, business model, financial projections, and risk mitigation in more detail.

To make your investment memo most effective, keep it clear, concise, and well-structured. Use visual aids to simplify data, tailor your message to investors, and be transparent about potential risks. A well-written investment memo not only attracts investors but also builds trust and sets your business up for long-term success.

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