Write an information memorandum to win investors

A detailed information memorandum (IM) should form the basis for your pitch deck and executive summary outline. Following is an outline of what is commonly used for both the pitch deck and information memorandum, recently popularized by Michael Ho at The Priority Map.

To attract and inform investors, an IM should include:

1. Executive Summary

• One paragraph from each of the following sections is usually sufficient to build out your executive summary.

2. Why now?

• Provide a detailed description of what the business is, why customers care whether it exists, and why earning customers’ loyalty is great for business.

3. Problem

• Identify the market problem you are solving.
• What is a compelling reason why a potential customer would buy? Don’t think about the market as an opportunity. That’s not compelling.

4. Opportunity/Total addressable market (TAM)

• The offering, the “secret sauce” that will draw customers.
• Answer these questions: Is the market validated? And is the pain big enough?

5. Solution

• Answer this question: What is your company’s value proposition?
• The answer should be a quantifiable improvement that your company makes to your customer’s business.

6. 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.

7. 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 due diligence.

8. Model

• Provide a revenue model and answer this question: How are you going to make money?

9. 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 customers’ hands. Describe the sales cycle and process. Include a description of marketing channels and your marketing communications strategy.

10. Competition

• Demonstrate that you fully understand the challenges posed by outside competitors, both large and small. Include a description of competitors’ products, distribution channels, pricing and partnership.
• Develop a competitive matrix that lists the key attributes of your product and your competitive advantage and positioning.

11. Team

• Investors are putting their money behind you, so be sure to highlight how you’ve recruited the best team possible 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.

12. 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, and legal and accounting. The total of these expenses is the amount you are targeting to raise in outside financing.
• Actions include key hires, new financing, sales milestones, new product launches and strategic partnerships.

13. Financials

• Include your key assumptions and provide two scenarios.

14. Investment Highlights

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

15. Appendices

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