This guide is for startup scouts, venture capital associates, general partners, or other startup or venture capital investment professionals looking to create their own deal (or investment) memo.
An investment deal memo is a document that summarises the startup and the opportunity behind it in a concise, single-page format.
It's typically used by investors, startup scouts, and even startup entrepreneurs themselves during the fundraising process.
When bringing a deal, a deal memo can provide context for you and the investors when looking at opportunities. Specifically, it provides context for the major assumptions behind your model for success, what is driving those assumptions and how you will know if they are correct or not.
It helps everyone understand what information they need to answer their key questions (also called "pain points") around an idea or product. Those answers are the key to getting a yes or no on an investment decision and moving on to the next opportunity.
The best way to use an investment deal memo is as a way of clearly articulating your assumptions, the key metrics that prove those assumptions correct and how your investment recommendation will succeed.
While both documents may contain similar elements, it's. theangle from which each is written that makes the difference.
Traditionally a pitch deck is created by the startup entrepreneurs. Its goal is for the founders to communicate their business idea, achievements, and where they're heading. The pitch deck usually takes the form of a presentation. A pitch deck may be biased as it is written by the same people who are seeking an investment.
In comparison, a deal memo is created by an investor to make the case for an investment and to make an investment decision on whether or not to proceed to the next phase of due diligence. The deal memo usually takes the form of a document. And although it's written by someone who would like to proceed with making an investment, a deal memo can be more objective since it's written by a third-party and not the startup's founders themselves. For example, a deal memo may also include reasons for not investing, foreseen challenges, and weaknesses of the startup.
Both a pitch deck and a deal memo contain similar elements like the business opportunity, market size, team, traction and valuation.
This is the investment memo that was used by Airbase to raise their $60M series Series B funding led by Menlo Ventures. They shared it publicly soon after their fundraise was complete.Read on →
An inside look into the deal memo that the On Deck team used to raise their $20 million Series A round led by Founders Fund. The On Deck team shared it with the startup community because they believed that it it was a better alternative to a pitch deck.Read on →
This is the confidential YouTube investment memo that Sequoia general partner Roelof Botha wrote to the rest of the investment committee at Sequoia. It was released as part of a lawsuit between Viacom and Google (after acquiring Youtube) related to Youtube's early copyright infringement issues.Read on →
This is the investment memo that Bessemer Venture Partners did when they invested in Twitch soonafter its pivot from Justin.tv. It was publicly shared by Ethan Kurzweil, a partner with Bessemer Venture Partners, after Twitch's successful acquisition by Amazon for roughly $1 billion.Read on →
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