An investment memo is a structured document used by venture capitalists (VCs), private equity firms, and angel investors to evaluate and justify an investment opportunity. It outlines key details about a startup or company, including its business model, market potential, financials, risks, and exit strategy. Investment memos help investors make informed decisions and serve as internal records for due diligence.
What is included in an investment memo?
-Company overview (founders, mission, vision). -Market analysis (TAM, SAM, competitive landscape). -Business model (revenue streams, growth strategy). -Financial performance (revenue, margins, projections). -Investment rationale (why the opportunity is attractive). -Risk factors (competition, market challenges, execution risks). -Exit strategy (IPO, acquisition, secondary sale).
Why do VCs and investors use investment memos?
Investment memos help investors analyze risks, align decisions with fund strategy, and document their rationale before committing capital.
How long is an investment memo?
An investment memo is usually 2 to 10 pages long, depending on the complexity of the deal and the depth of analysis required.
How does an investment memo differ from a pitch deck?
-Pitch Deck: A visual presentation used by startups to attract investors. -Investment Memo: A detailed written document used by investors to assess and justify investments.
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