✅A guide to writing a crisp Investment #Memo, that will impress your IC and get past the case round in a #VC #interview.
🎯In this post I share what an investment memo is, why it is important, how to write one and my process and how I perfected my memos.
👉🏻 What is a Memo?
An investment memo is a short piece of the document (sometimes a couple of pages and can span up to ten pages including figures, graphs, and illustrations) that is aimed at getting the point across as briefly as possible.
✔️ When are these used?
From my experience, memos are written only when a target company/startup is exciting, a good fit for the firm, and the team feels it is worth their time to take a second look at the company. The associate/deal lead writes a document that is circulated to the larger team before or during a team call/meeting where the deal lead shares their reason for pursuing the target. During this meeting, there is a debate on the pros and cons and the team arrives at a quorum, whatever the decision may be.
The memo might make an appearance a couple of times after that. This depends on your firm's process and culture.
If you think the VCs are so busy to read your memo( the intern, new analyst, junior associate), drop that thought. This is your playground to flex. So do the memo right and well. Plus, also read others’ memos before any meeting with questions. Because you will be asked to express your thoughts, opinions, and recommendations.
💯 How can you write a good Memo:
Well, repeated practice, and presenting many is an excellent way to understand a good memo. If you are attentive, you start to realise the questions that the memo garners, the flow, and whether the audience is on the same page as you are after the pitch.
After writing more than a dozen of them, here are my takeaways on writing a good one.
📌 Main components: The basics — A one-page teaser with the following:
- What is the problem?
- How big is the market?
- What is the solution?
- How good is the Team ( based on the stage sometimes this is the most important thing)?
- What is good and what needs further digging? and
- Recommendation — this MUST be black or white, a binary decision.
✅ Expert advise: I have messed up many interviews at great firms because of my grey and unclear recommendations.
This is a huge red flag. Always give a concrete and binary recommendation.
Now, all of this is only the basics. Your grandma can write this well if she practised. So you need to go the extra mile to stand out. There are a few sections that I include in my memo that has helped me a lot.
🎁 The Extra Mile: that gets you to the next round in an interview or the next deal
- Recent transactions, fundraisers, and exits in similar startups across comparable geographies.
- ESG — What might be some ESG risks that the target company could encounter
- Further Due Diligence questions should address the “not-so-good” part that you mentioned in the teaser document.
- Double down on the good parts. This page serves as a recall factor and substantiates my thesis about the good parts. This page answers why the firm should invest in this target and why now. This section is very detailed with numbers and statistics. I also attached these calculations in the appendix section.
- Appendix: While this section is usually ignored, the quants will dig into this. Explain all assumptions you have made through the memo here.
🎉🎉 Bonus: If you read till here, Great! Below are screenshots of my process and some memos. Enjoy!!!
Snapshots of how my memos improved over time:
Memo 1: There is no structure or logic to this piece of writing. It almost reads as if I wrote it while drunk. There is absolutely no structure or visual appeal to this memo. I do not want to review this anymore.
Memo 2: Here, I have understood the importance of visual symmetry but completely missed the point about — important things first. The recommendation is not clear and not actionable. The 1st page talks about various things without leading to a conclusion.
Memo 3: This version comes after a couple of rejections, and a few months of learning and iterating on the format of the memo. Here I have a clean structure, have communicated all points and have a binary recommendation.
Memo 4: I would consider this a masterpiece. Here I have shifted the recommendation to the top. I want my readers to know the takeaway in 10 seconds. After their interest is piqued, I go on to talk about other things. The recommendation here is clear, assertive, and well-reasoned.
👉 Let me know in the comments if you’d like a link to these memos.
Few Examples of great Memos and further reading:
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