An investment memo is the written case for or against a specific deal, covering the team, market, product, traction, risks, and proposed terms, that the deal team brings to the investment committee and the fund keeps as its record of why it said yes or no.
What goes in an investment memo
The memo starts with the answer. A partner on the investment committee should know from the first paragraph what is being proposed, how much, at what price, and why. Everything after that is support. A common structure:
- Recommendation and terms. Amount, valuation, ownership, round structure, board seat.
- Thesis. Why this company fits the fund's thesis and why now.
- Team. What each founder has built before, with evidence, and the gaps.
- Market. Who buys, how many of them there are, and how the market is changing.
- Product and traction. What it does today, usage, revenue, retention.
- Competition. Direct competitors and the alternative customers use now.
- What has to be true. The three to five assumptions the return depends on.
- Risks. Each with what was found in diligence and what would reduce it.
- Diligence summary. Who was called, what was checked, what is still open.
Sections 2 to 6 mirror what founders are asked to present. Sequoia's guide to writing a business plan lists company purpose, problem, solution, why now, market, competition, business model, team, financials, and vision. The memo adds what a pitch leaves out: risks, the fund's own view, and the terms.
Why the memo matters after the vote
The memo gets the deal through committee, and it also outlasts the vote. Years later it is the only reliable account of what the fund believed when it invested. When a company fails, the memo shows whether the risk that killed it was spotted and accepted, or missed. When a company succeeds, it shows whether the fund was right for the reasons it gave.
Researchers have used memos for this. The survey paper by Gompers, Gornall, Kaplan and Strebulaev cites an earlier study of investment memoranda by Kaplan and Strömberg, which found that VCs expected to add value when they made the investment decision. The same survey found VCs ranked the team as the most important factor in selecting deals, so the team section is where most memos should be strongest. It is also the first brief for portfolio talent work after the deal: any gap the memo names in the team is a hire to plan for. A fund can do the same kind of review on its own memos once a year, to see whether its bar has drifted. The authors also summarized the survey for practitioners in Harvard Business Review in 2021, covering how firms hunt for deals, winnow opportunities and add value after investing.
Worked example: the key section of a seed memo
Northwind Ventures, a fictional seed fund, is proposing to invest 1.2 million euros at a 12 million euro post-money valuation in Tessellate, a fictional warehouse robotics startup. That buys 10% of the company.
The "what has to be true" section reads:
- Mid-sized warehouses will buy robots on a subscription. Partly verified: 2 of 3 pilot customers chose the subscription over a purchase.
- Tessellate can install in under two weeks. Verified: the last two installs took 9 and 11 days, confirmed by the customers.
- The founders can hire a sales lead in six months. Unverified. Neither founder has hired a sales leader before. Mitigant: Northwind's talent partner will run the search.
Each line says what the claim is, what was checked, and what is still open. A committee member who disagrees can point to the exact assumption. That is more useful than a memo that says "strong team, large market" and leaves the vote to whoever speaks most confidently.
Investment memo vs scorecard vs pitch deck
| Investment memo | Scorecard | Pitch deck | |
|---|---|---|---|
| Written by | The fund's deal team | The fund, often per reviewer | The founders |
| Purpose | Argue for or against one deal | Rate a deal on fixed criteria | Persuade investors |
| Form | Narrative with evidence and risks | Scores per criterion with short notes | Slides |
| Comparable across deals? | Loosely | Yes, by design | No |
Many funds attach a scorecard to the memo. The scorecard makes deals comparable. The memo explains the one deal in front of the committee.
How long an investment memo is and who writes it
Length follows the size of the decision. Seed memos are often a few pages. Growth and buyout memos run much longer and come with financial models, due diligence reports, and legal summaries attached. Shorter is better if every claim still has its evidence.
The deal partner owns the memo, because they present it and their name is on the recommendation. An associate or principal often drafts it. Some funds also ask a second partner to write a short dissent, listing the strongest reasons to pass, so the committee hears both sides on paper.
Common investment memo mistakes
- Burying the recommendation. If the terms are on page six, readers form a view before they know what is being asked.
- Adjectives instead of evidence. "Exceptional founder" is an opinion. "Led payments infrastructure for a team of four, confirmed by two references" is evidence, the kind that founder scoring records.
- A risks section with no answers. Each risk needs what diligence found and what would change it.
- Rewriting history. Edit the memo after the vote and it stops being a record. Keep the version the committee saw.
How ScoringFactory approaches the investment memo
ScoringFactory scores founders and companies against a fund's own bar, learned from what it backed and passed on, and ties every point to the record it came from. Those receipts can go straight into the team and risks sections of a memo. The deal team writes the memo and the committee makes the call. See the venture and private equity use cases.
Frequently asked questions
What should a VC investment memo include?
Lead with the recommendation and terms. Then cover thesis fit, team, market, product and traction, competition, the key assumptions the return depends on, risks with diligence findings, and a summary of who was called and what was checked. Each claim should point to its evidence, so a reader who disagrees can see exactly where.
How long is an investment memo?
It varies with the size of the deal. Seed memos are often a few pages. Growth equity and buyout memos are much longer and usually come with models and diligence reports attached. The useful test is whether a committee member can find the recommendation, the key assumptions, and the main risks within a couple of minutes.
Who writes the investment memo?
The partner leading the deal owns it and presents it, and an associate or principal often writes the first draft. Some funds add a short dissent from a second partner. The memo goes to the investment committee before the meeting, so members arrive having read the case and the risks.
Should a fund keep memos for deals it passed on?
Yes. A pass memo, even a short one, records why the fund said no. When a passed company later raises at a much higher valuation, the fund can check whether the reason held up. Over time those records are the best evidence a fund has about where its bar is too strict or too loose, which is what thesis fit reviews need.
Sources
- How Venture Capitalists Make Decisions, Harvard Business Review, 2021
- Gompers, Gornall, Kaplan and Strebulaev (2020), How do venture capitalists make decisions?, Journal of Financial Economics (Elsevier)