drafting-investment-committee-memos

# Drafting Investment Committee Memos

## When To Use

- Preparing a formal IC memo to present a new deal for partner vote
- Documenting the investment thesis for a seed, Series A, or later-stage opportunity
- Creating a standardized write-up for deal pipeline review or weekly IC meetings
- Recording the rationale behind a pass decision for institutional memory

## Inputs To Gather

- **Company materials**: Pitch deck, data room access, financial model or projections, cap table
- **Deal terms**: Proposed round size, valuation (pre/post), instrument type (SAFE, priced equity, convertible note), pro rata rights, board seat, and any side letter terms
- **Market data**: TAM/SAM/SOM estimates with sourcing, comparable company benchmarks, relevant industry reports
- **Team information**: Founder bios, LinkedIn profiles, prior exits or notable experience, key hires and org gaps
- **Competitive landscape**: Direct and adjacent competitors, differentiation claims, switching costs
- **Diligence findings**: Customer references, technical diligence notes, legal/IP review status, any red flags surfaced
- **Fund context**: Current fund deployment pace, portfolio overlap or conflict check, reserve strategy implications

## Workflow

1. **Confirm memo scope and format**
   - Determine whether this is a full IC memo (for vote), a preliminary screening memo, or a deal update on an existing portfolio company
   - Confirm the fund's standard IC memo template or section expectations

2. **Draft the deal overview**
   - One-paragraph company description: what they do, for whom, and why now
   - Round terms summary table: round size, valuation, lead investor, proposed allocation, instrument type, key terms
   - Indicate the fund's proposed check size and resulting ownership percentage

3. **Articulate the investment thesis**
   - State 3-5 core thesis points, each as a clear assertion (e.g., "Founder-market fit is exceptionally strong because...")
   - Support each point with specific evidence from diligence, not generic claims
   - Distinguish between validated signals and assumptions that require monitoring post-investment

4. **Assess the market opportunity**
   - Present TAM/SAM/SOM with methodology and sources — flag any top-down-only estimates with [VERIFY]
   - Identify key market tailwinds and timing catalysts
   - Note regulatory or macro risks that could compress or expand the opportunity [VERIFY: jurisdiction-specific regulatory landscape]

5. **Evaluate the team**
   - Founder background and relevant domain expertise
   - Key hires in place vs. critical gaps to fill in next 12-18 months
   - Assess founder coachability and reference check themes

6. **Map the competitive landscape**
   - Position the company against 3-6 direct competitors on key dimensions (pricing, product maturity, distribution, funding)
   - Identify the company's durable competitive advantage or moat thesis
   - Flag any well-funded incumbents or adjacent threats

7. **Model return scenarios**
   - Build base, upside, and downside cases with explicit assumptions for each
   - Show entry ownership, expected dilution through exit, and implied MOIC/IRR for each scenario
   - State assumed exit multiples and comparable exit transactions — mark forward-looking estimates with [VERIFY]

8. **Identify key risks and mitigants**
   - List the top 3-5 risks in order of severity (e.g., concentration risk, regulatory, technical, go-to-market)
   - For each risk, state a specific mitigant or monitoring trigger
   - Flag any deal-breaker risks that require resolution before closing

9. **State the recommendation**
   - Clear invest/pass/conditional-invest recommendation
   - If conditional, specify exact conditions (e.g., "invest contingent on completing technical diligence by [date]")
   - Proposed next steps and timeline to close

## Output

The IC memo should follow this structure:

- **Header**: Company name, round, date, deal lead, memo author
- **Executive Summary**: 3-5 sentence overview covering what, why, and at what terms
- **Deal Terms Table**: Round size, valuation, instrument, allocation, ownership, key provisions
- **Investment Thesis**: Numbered thesis points with supporting evidence
- **Market Analysis**: TAM/SAM/SOM, dynamics, timing
- **Team Assessment**: Founders, key hires, gaps, references
- **Competitive Landscape**: Positioning matrix or comparison table
- **Financial Projections & Return Analysis**: Revenue trajectory, burn, scenario table with MOIC/IRR
- **Key Risks & Mitigants**: Risk table with severity and mitigant columns
- **Recommendation & Next Steps**: Decision and action items

Format financial figures consistently (e.g., "$2.5M ARR" not "2.5 million in annual recurring revenue"). Use tables for terms and comparisons. Keep the full memo to 4-8 pages equivalent.

## Quality Checks

- [ ] Every thesis point is backed by a specific data point or diligence finding, not a generic assertion
- [ ] Valuation analysis references comparable rounds or public comps with named sources
- [ ] Return scenarios use internally consistent assumptions (growth rate, dilution, exit multiple align)
- [ ] All forward-looking projections and unverified market sizing are marked with [VERIFY]
- [ ] Cap table math is correct: check size, price per share, ownership percentage, and dilution all reconcile
- [ ] Conflicts check completed: no portfolio company overlap or LP conflict noted (or flagged if present)
- [ ] Risks section includes at least one non-obvious risk beyond standard market/execution risk
- [ ] Memo tone is analytically balanced — presents the bear case as rigorously as the bull case
- [ ] Fund-specific formatting and section requirements are followed