Investment Memo

A business considers buying a smaller competitor, and the team prepares a memo explaining the price, expected benefits, integration costs and reasons the acquisition could disappoint. The investment committee can then compare the case with alternatives.

Start with the ask: the decision needed, the amount, timing and any conditions, so a reader does not have to infer the proposed commitment. Explain the thesis, meaning why this particular investment should create value and why now, and separate the central reason from supporting details.

Describe the asset or project, since a factory upgrade, fund stake and startup investment need different evidence even when each uses the memo format. Show the current facts with their sources, keeping historical performance and signed contracts distinct from forecasts and management claims.

Set a baseline of what happens if the organisation does not invest, assess market demand without assuming the entire market is available to one company, and present the full cost, including acquisition price or project capital, transaction expenses and follow-on funding. Map cash timing, because when money leaves and potential returns arrive matters, especially when liquidity is limited.

Show assumptions such as growth, margin, exit value and discount rate, which can drive a model more than the initial price, and make them easy to challenge. Test a base case and a plausible downside so decision-makers can see how sensitive the outcome is.

Net present value, internal rate of return or payback can inform a decision, but each has limits and none is a guarantee. Identify risks such as execution, financing, customer concentration, technology, compliance and integration, and explain mitigations, because a named owner, diligence step or contract condition is more useful than simply labelling a risk 'manageable'.

List open questions, since a memo can recommend further investigation instead of pretending uncertain facts are settled. Describe alternatives such as a smaller investment, partnership, delay or no action, and check strategic fit, because a profitable-looking project can still consume capacity needed for more important work.

Clarify governance by naming who prepared the memo, who reviewed it and who has authority to approve, and have any sponsor who stands to benefit disclose the interest under applicable policy. For an owner, the memo earns its space by making both the case and its weak points clear before money is committed, so avoid sales language and keep the core readable, with supporting exhibits.

If price or assumptions change before the vote, update the model and mark the new case; after approval, record the decision, conditions and rationale, and compare actual results with expectations. Carta describes startup investment memos covering business, finances, valuation, risks and terms, and a Stanford-hosted research brief examines memos as a tool for investment decisions and later review, though neither prescribes one universal format.