Write an Information Memorandum to win investors

The information Memorandum (“IM”) should be written to detail . . .  and form the basis for your pitch deck and executive summary outline. Following is an outline of what is commonly used for the both the pitch deck and Information Memorandum, and which Michael Ho at The Priority Map has most recently popularized.

To attract and inform investors, an IM should include the following:

  1. Executive Summary

  • One paragraph from each of the other sections is usually sufficient to build out your Executive Summary.
  1. Why Now?

  • What the business is – the reason customers care whether the business exists, and why satisfying that care is a great business.
  1. Problem

  • Identify the market problem you are solving for.
  • What is the compelling reason why a potential customer would buy? Don’t think about the market as an opportunity – that’s not compelling.
  1. Opportunity / TAM

  • The offering, the “secret sauce” that will draw customers.
  • Answer the questions, “Is the market validated?” and “Is the “pain” big enough?”
  1. Solution

  • Answer the question, “What is your company’s value proposition?”
  • The answer should be a quantifiable difference that you make to your customers business.
  1. Product / Value

  • Describe your product or service; include photos or screen shots if it is a software product. Detail how your product is scalable and when you plan to launch if you have not already done so. Outline the next R&D steps to further build on or improve your offering. Include a discussion of intellectual property (for example, patents, copyrights, trademarks) and any technology partnerships. You may also highlight your competitive advantages.
  1. Traction

  • Customers and end users:Provide an outline for the target customers for your product or service. Refer to any customer testimonials in this section and include the document in the appendix or the due diligence.
  1. Model

  • Provide a revenue model and answer the question, “How are you going to make money?”
  1. Go-to-Market

  • Market and industry: Include relevant research on your market and industry, such as market size, market segments, your product’s niche, the market’s growth prospects, new trends and technologies, and any barriers to entry.
  • Sales and marketing strategy: Explain how you will get the product into the customers’ hands. Describe the sales cycle and process. Include a description of the channels to market and your marketing communications strategy.
  1. Competition

  • Competition: Demonstrate that you fully understand the challenges from outside competitors, both large and small. Include a description of competitors’ products, distribution channels, pricing and partnership.
  • Consider developing a competitive matrix that lists the key attributes of your product and your competitive advantage and positioning.
  1. Team

  • Investors are putting their money behind you, so be sure to highlight how you’ve recruited the best team available to build the company. Include the list of advisors or board members as well as service providers. Get the approval of any directors and advisors before including their information in the document.
  • If you are planning any key hires in the near future, and you will be using the funding to build out the team, include the roles in this part of the discussion.
  1. Ask

  • Sources of funding: Describe investment by principals, prior equity investments, debt (if any), cash from operations and total funds raised to date.
  • Use of proceeds: Describe how you will use the funding. Examples may include sales and marketing, research and development, recruiting costs and salaries of new hires, equipment, capital expenses, legal and accounting, which will total to the amount you are targeting to raise in outside financing.
  • Actions include key hires, new financing, sales milestones, new product launches and strategic partnerships.
  1. Financials

  • Include your key assumptions and provide two scenarios.
  1. Investment Highlights

  • Based on appropriate timelines for key milestones, detail how you will build the organization’s value.
  1. Appendices:

    Include anything relevant, such as biographies of founders and key management, patent information and customer testimonials.