boltKey takeaways
- An investment memo exists to support one decision; put the recommendation and the reasons on the first page.
- Organize the memo around the three to five things that must be true for the investment to work, and the evidence for each.
- Show returns under base, downside and upside cases with the assumptions that drive the difference.
- Name the key risks honestly and say how each is mitigated, priced or accepted.
- Archive the memo with the IC decision; it becomes the baseline for monitoring and the evidence behind your track record.
An investment memo is the document a deal team writes to recommend an investment to the firm's investment committee (IC). It sets out what the company does, why the opportunity fits the fund's strategy, what must go right for it to succeed, the evidence from diligence, the proposed terms, the expected returns and the main risks. A good memo lets a partner who has never met the company make an informed decision in one sitting.
Memos also have a second life. Once approved, the memo records why the firm invested and what it expected, which makes it a reference for portfolio reviews, follow-on decisions, valuation discussions and, eventually, conversations with LPs about the track record.
What a memo is for#
Before writing, be clear about the job:
- Support one decision. The memo should end with a specific request: approve a $X investment at these terms, approve a term sheet, or approve further diligence spend.
- Surface disagreement. The IC's value comes from testing the case. A memo that hides weaknesses wastes that value.
- Create a record. Future readers, including colleagues, auditors and LPs conducting diligence on the firm, may want to know what the team believed at the time.
Length should follow complexity. A seed investment memo might be three to five pages; a control buyout memo can run much longer with appendices. Either way, the core argument should fit on the first page.
A practical memo structure#
| Section | What it answers | Typical length |
|---|---|---|
| Executive summary and recommendation | What are we asking for, and why? | 1 page |
| Company overview | What does the business do, and for whom? | 1 page |
| Investment thesis | Why will this be a great investment? | 1–2 pages |
| Market and competition | Is the market attractive, and can this company win? | 1–2 pages |
| Financial overview | What do the numbers show? | 1–2 pages plus exhibits |
| Diligence findings | What did we test, and what did we learn? | 1–3 pages |
| Proposed terms and structure | Price, security, governance, rights | 1 page |
| Returns analysis | What do we expect to make, and in what range? | 1–2 pages |
| Key risks and mitigants | What could go wrong? | 1 page |
| Value creation / post-close plan | What will we do after investing? | 1 page |
| Portfolio fit | How does this fit fund construction and concentration limits? | Short |
| Appendices | Model, references, adviser reports | As needed |
Executive summary#
Lead with the recommendation, the amount and the headline terms. Follow with three to five bullets that state the investment case, two or three key risks, and the base-case return. Someone reading only this page should understand what is being decided.
Investment thesis#
This is the heart of the memo. Frame it as a small number of propositions that must be true for the investment to succeed. For example:
- The company's product is meaningfully cheaper to deploy than incumbents for mid-sized customers.
- Those customers are switching away from legacy solutions at an accelerating rate.
- Management can scale sales without losing unit economics.
Each proposition should link to the evidence that supports it, and to the diligence that tested it. Writing a strong thesis is a skill of its own; see how to write an investment thesis.
Diligence findings#
Summarize what was examined and what was found, including findings that went against the case. Link conclusions to the thesis points. The due diligence guide covers the workstreams; in the memo, focus on what changed the team's view, price or structure.
Proposed terms#
State the price, the security, the amount, governance rights (board seats, information rights, protective provisions), key economics (liquidation preference, anti-dilution, pro rata rights) and any conditions. For buyouts, include the sources and uses table and financing terms.
The returns analysis#
The IC needs to see how returns depend on assumptions, not just a single number.
Worked example (hypothetical)#
Assume a growth fund proposes investing $30M for a 20% minority stake in a business with $15M of EBITDA, at a $150M post-money valuation (10.0x EBITDA). The company has no debt. The memo might present:
| Case | Year-5 EBITDA | Exit multiple | Exit equity value | Fund proceeds (20%) | MOIC | IRR (approx.) |
|---|---|---|---|---|---|---|
| Downside | $15M | 9.0x | $135M | $27M | 0.9x | −2% |
| Base | $27M | 11.0x | $297M | $59.4M | 2.0x | 15% |
| Upside | $36M | 12.0x | $432M | $86.4M | 2.9x | 24% |
Assumptions: company remains debt-free; no additional dilution; exit at end of year 5.
Alongside the table, explain the drivers: which assumptions move the outcome most, and what evidence supports the base case. If the base case depends on margin expansion that management has never achieved, say so. A one-line sensitivity on the most important driver (for example, EBITDA growth versus exit multiple) is often more useful than a large grid.
For venture memos, where cash-flow projections are less meaningful, the analysis typically focuses on ownership at exit after expected dilution, the exit value needed to return a meaningful share of the fund, and the probability that the company reaches that scale.
Risks and mitigants#
List the risks that could materially impair the investment, not every risk that exists. For each, state:
- What the risk is, specifically ("top customer is 28% of revenue on a contract renewing in 14 months," not "customer concentration").
- How likely and how severe it is, in the team's judgment.
- How it is addressed: priced in, mitigated through structure or documentation, managed post-close, or simply accepted.
A memo that lists risks without saying what the team will do about them leaves the IC to do the work.
Writing tips#
- Lead with conclusions. Put the "so what" at the start of each section, then the support.
- Separate fact from judgment. Label assumptions, management claims and the team's own views distinctly.
- Use exhibits sparingly in the body. Put the full model and adviser reports in appendices; include only the charts that support the argument.
- Include the bear case. Some firms assign a team member to write the strongest argument against the deal.
- Write for the skeptic. Assume the reader knows the industry and will push on weak points.
- Keep versions controlled. IC members should be reviewing the same version, and the final approved version should be archived.
After the IC#
The memo's job is not done when the vote is taken.
- Record the decision and any conditions the IC attached.
- Turn the thesis into monitoring metrics. The propositions in the memo become the KPIs reviewed in portfolio monitoring.
- Revisit at milestones. At follow-on decisions and annual reviews, compare actual results with the memo's base case.
- Use it for the track record. When raising a new fund, being able to show what the team expected and why, alongside what happened, supports a credible track record narrative.
Common mistakes#
- Burying the recommendation after pages of background.
- Company description instead of argument. The memo explains what the business does but not why it is a good investment at this price.
- One-scenario returns that don't show how wrong the team can be and still make money.
- Unfalsifiable thesis points, such as "large and growing market," that no evidence could disprove.
- Omitting findings that cut against the case.
A disciplined memo forces clarity before capital is committed, and gives the firm a lasting record of its judgment.