September 18, 2023

October 27, 2023

Supercharge your Fundraise with an Investment Memo

A pitch (intro) deck is a great tool to get into the initial fundraising meeting. From there, a long form written text document is a much more powerful tool to move the process along.

pascal's notes

I'm a strong believer in the immense power of the long form written word.

Thus, when going out for a fundraise, I encourage the founders I work with to not just create a brief intro deck but also to write a separate long form text document detailing all relevant parts of the business.

Jason Shuman from Primary Venture Partners just wrote a great LinkedIn post re why every Primary portfolio company creates an FAQ doc when they go out for a raise plus shared an outline of what such a doc should contain (see at the bottom of this email).

As Jason argues in his post, a long form written text document not only makes it much easier for investors to get to conviction (+ write their memos) but importantly, it also allows you to control the narrative throughout the raise.

On top, going through the exercise of writing the document puts you in a much better place to answer investors' questions when they come up during your fundraising meetings.

When it comes to how and when to best share the written word with investors, there are two camps out there:

  1. Jason seems to be in the camp of sharing everything at once after the first meeting to control the narrative across the board from the get go and impress investors with your level of depth / work you put in / thoughtfulness / preparedness. This also makes it much easier for investors to loop in their teammates.
  2. Others argue that you should only share what the investors want to dive into to not open up an unnecessary can of worms. If you choose this approach, pay extra close attention to the topics investors seem to care about during calls. Send them a thoughtful and tailored follow up note after each call with more details on each topic that seems to be top of mind using sections of your overall doc. Creating unique Notion pages for each investor where you copy / paste relevant information to is an approach I've seen work well in terms of method of delivery.

When I posted about this on LinkedIn, Cat Noone, Co-Founder & CEO of Stark shared her approach to #2:โ€

Create a parent FAQ doc and data room.

Make a unique one per investor but make that the most tailored aspect to this. Anything else isn't scalable and quite frankly, I've not seen any upside to tailoring everything that comes with diligence, per investor.

That's down to the data room as well. Some investors don't care about certain things and quite frankly would come to the wrong conclusions if you handed it to them (due to their own biases and the types of deals they see on a regular basis). Which feels like one of the "quiet things that nobody ever really likes discussing".

Edit the FAQ to account for those questions and putting them in there before sending to investors is key.

Don't hear from an investor in reply when they said you'd hear back or ahead of that? Mark it as a 'No'.

Either way, next convo...

That said, no matter which approach you take, writing such a document before you go to market for your raise significantly increases your odds of getting a round done.

Thus, please do the extra work of writing your own "investment memo" / FAQ doc. It pays off many times over.

As Jason said, do it and you'll see how simple yet powerful it can be.

Hereโ€™s what the FAQ doc looks like he advocates for:

๐—œ๐—ป๐˜๐—ฟ๐—ผ
-What we do
-What problem are we solving?
-How is X Working to Solve this Problem in a Unique Way?
-General Knowledge and Background Info

๐—œ๐—ป๐—ฑ๐˜‚๐˜€๐˜๐—ฟ๐˜† ๐—™๐—”๐—ค
-What do X Companies do?
-What products do competitors make?
-What is the market size for each product?
-What are the dynamics of the market?
-Who are the largest players?
-How do customers work with those companies today?
-What does churn look like in the industry?
-What multiples do competitors trade at?

๐—–๐—ผ๐—บ๐—ฝ๐—ฎ๐—ป๐˜†-๐—ฆ๐—ฝ๐—ฒ๐—ฐ๐—ถ๐—ณ๐—ถ๐—ฐ ๐—ค๐˜‚๐—ฒ๐˜€๐˜๐—ถ๐—ผ๐—ป๐˜€ - ๐—š๐—ฒ๐—ป๐—ฒ๐—ฟ๐—ฎ๐—น ๐—™๐—”๐—ค
-What products do you sell today?
-What's your projected revenue?
-How long are your contracts?
-What are the payment terms?
-What are your gross margins?

๐—ฃ๐—ฟ๐—ผ๐—ฑ๐˜‚๐—ฐ๐˜
-How does your product differ from the competition?
-What features are most frequently used?
-What do your product roadmap look like?
-Why are you prioritizing those features?

๐—š๐—ผ-๐—ง๐—ผ-๐— ๐—ฎ๐—ฟ๐—ธ๐—ฒ๐˜ ๐—ฎ๐—ป๐—ฑ ๐—ฅ๐—ฒ๐˜๐—ฒ๐—ป๐˜๐—ถ๐—ผ๐—ป
-How do you acquire customers?
-What is the CAC by channel?
-How do you calculate CAC?
-What is your productivity per rep?
-How long does it take to ramp sales reps?
-How do you onboard customers?
-What does it cost to onboard customers?
-How long does it take to onboard customers?
-What is customer retention?
-Do you have leading indicators for retention?
-What is your payback period?
-What is your LTV/CAC?
-What is your NRR?

๐—ฆ๐˜‚๐—ฝ๐—ฝ๐—น๐˜† ๐—ฆ๐—ถ๐—ฑ๐—ฒ
-What is the value prop to the supply side?
-How do you acquire supply?
-How do you onboard the supply?
-Do you integrate into the supply sides current systems?
-How do you determine supply side quality?

๐—จ๐—ป๐—ถ๐˜ ๐—˜๐—ฐ๐—ผ๐—ป๐—ผ๐—บ๐—ถ๐—ฐ๐˜€ ๐—ฎ๐—ป๐—ฑ ๐— ๐—ฎ๐—ฟ๐—ด๐—ถ๐—ป๐˜€
-What is your ACV?
-What are your margins today? In the future?
-What gives you confidence in margin expansion?
-What margins do competitors have?
-What is the industry benchmark for EBITDA %?

๐— ๐—ผ๐—ฎ๐˜๐˜€
-What are your barriers to entry and moats today?
-What are they in the future?

๐—ฉ๐—ถ๐˜€๐—ถ๐—ผ๐—ป
-What other products do you plan to sell? Why?
-What does future ACV look like?
-When do you plan to roll out other products?

๐—ช๐—ต๐˜† ๐—ป๐—ผ๐˜„?
-What has changed to make this business exist today?
-Why couldn't X exist before?

๐—ช๐—ต๐—ฎ๐˜ ๐—ถ๐˜€ ๐˜†๐—ผ๐˜‚๐—ฟ ๐—ป๐—ฒ๐—ฎ๐—ฟ-๐˜๐—ฒ๐—ฟ๐—บ ๐˜€๐˜๐—ฟ๐—ฎ๐˜๐—ฒ๐—ด๐˜†?
-What hires do you need to make?
-What are your goals for next 3/6/12 month?

โ€

Until next week,

Pascal

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