What is an investment memo?
An investment memo is a document that provides a comprehensive evaluation of an investment opportunity to potential investors. Widely used by angel investors, venture capitalists, and private equity firms, investment memos present detailed information about a target company, including:
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Type of business model
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Financial performance
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Management team
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Market conditions
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Growth projections
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Strategic fit
The memo also provides an assessment of the deal structure, company valuation, risks, and potential return on investment.
Investors rely on the summarized insights from investment memos to guide decision-making, aid in communicating the investment opportunity with stakeholders, and to document due diligence for future reference. By presenting data-driven investment analysis and strategic reasoning, investment memos effectively communicate key information and investment rationale to team members, limited partners, and investment committees during the investment approval process.
An effective investment memo will not only allow you to look at opportunities more objectively, but will also build a level of trust with other investors and demonstrate your level of conviction.
What to include in an investment memo
An effective investment memo provides a comprehensive look at the target company, the market landscape, and the potential opportunity. A clear and succinct investment memo should include:
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Executive summary: Provides a concise overview of the investment opportunity. Includes a brief description of the company, valuation, target returns, potential risks, and a summary of the investment thesis.
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Market opportunity: Covers the market size (TAM, SAM, SOM), market trends, customer demographics, growth potential, regulatory environment, and new opportunities or challenges.
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Business overview: Includes a description of the target company's business model, business plan, customer acquisition strategy, product-market fit, product roadmap, pricing, and value proposition.
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Financial analysis: Assesses the target company’s historical performance, important milestones, financial projections, and other key metrics like revenue, profitability, cash flow, EBITDA, gross margin, and burn rate.
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Competitive analysis: Evaluates the company’s competitive landscape, including direct and indirect competitors, competitive advantages, SWOT analysis, and market share.
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Management team: Profiles the company’s founding team and top executives, their experience, track records, and ability to execute the business plan.
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Investment thesis: Explains the rationale behind the opportunity, including growth potential, market positioning, or strategic alignment other goals.
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Risks and mitigation: Identifies potential financial, market, legal, and other risks and offers mitigation strategies to address them.
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Valuation and deal structure: Explains the valuation method, investment size, equity ownership structure, and other highlights from the term sheet including liquidation preferences and control rights.
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Exit strategies: Outlines exit scenarios and includes an estimated timeline and waterfall analysis.
How to write an investment memo
One way to strengthen trust with investors is providing them with an investment memo that clearly demonstrates you have done your due diligence. The key to writing an investment memo is to keep it short and concise so that it’s easy to read and able to inform investors.
This is also a way for you to know the deal inside and out and expect there to be questions. Be ready to address them.
You need to have the basics. A lot of the information will likely be provided by the startup but it’s your job to do the additional due diligence to fill in the gap for other investors to make sound investment decisions.
Use storytelling
Your investment memo should always be objective and factual. To make an investment memo an effective tool, connecting the dots with factual information through storytelling and conviction can be the difference between an investor saying “I’ll think about it” to “How much can I invest?”
Your goal in every communication is to inform your target investors. Information alone rarely changes any of these. Research confirms that well-designed stories are the most effective vehicle for exerting information.
It’s no wonder that more founders and investors are embracing storytelling as an effective tool to inform, inspire, and teach. Build that connection and engagement with your investors.
Bring it all together
In any group of investors, you’re roughly going to have a split of visual, auditory, and kinesthetic learners. Therefore, the most effective method is to provide an investment memo and schedule a Zoom call to discuss the opportunity in greater detail. Bonus points, if you can bring the founder to participate on the call, but that’s not necessary, you already have all the tools you need.
DISCLOSURE: This communication is on behalf of eShares, Inc. dba Carta, Inc. ("Carta"). This communication is for informational purposes only, and contains general information only. Carta is not, by means of this communication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your business or interests. Before making any decision or taking any action that may affect your business or interests, you should consult a qualified professional advisor. This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Carta does not assume any liability for reliance on the information provided herein. ©2025 Carta. All rights reserved. Reproduction prohibited.
