Investment Committee Memo: A Section-by-Section Structure

A useful investment committee memo answers six questions in a fixed order: what the company is and what the fund is being asked to do, why this is worth backing, what could go wrong, how the deal terms respond to those risks, what the numbers look like on the fund's own assumptions, and what the fund will do after it invests. Each section should state its answer in the first lines, show its evidence, and separate fact from judgment. The memo supports the committee's decision; it does not make it.

This post grounds that structure in research on real venture memos, gives a section-by-section outline with the question each part must answer, and ends with a checklist to run before the memo goes out.

What venture memos actually contain

The best evidence on IC memos comes from the memos themselves. Steven Kaplan and Per Strömberg studied the investment analyses behind 67 portfolio investments made by 11 venture capital firms between 1987 and 1999 (Characteristics, Contracts, and Actions: Evidence from Venture Capitalist Analyses, NBER Working Paper 8764, February 2002). Some were two-page write-ups; others ran past twenty pages. Across that range, the same building blocks recur:

• Investment theses, the reasons for investing. Market size and growth was cited explicitly in 46 of the 67 investments, and the quality of management in more than 60%.
• Risks and uncertainties. The investors identified risks in 65 of the 67 companies. Some aspect of management was seen as risky in 61% of the analyses, so the team often appears on both sides of the ledger.
• Financial forecasts, from management, from the investor, or both.
• Valuation and exit considerations.
• Planned actions by the investor. In 43% of the investments, the investor explicitly expected to play a role with management after investing.

The study is small and covers deals from a different era, so treat it as a description of what experienced investors chose to write down, not a benchmark for a modern fund. Its value is that it shows the memo's working parts, which most templates online only list as headings.

A larger survey points the same way on emphasis. Paul Gompers, Will Gornall, Steven Kaplan and Ilya Strebulaev surveyed 885 institutional venture capitalists at 681 firms (How Do Venture Capitalists Make Decisions?, NBER Working Paper 22587, later published in the Journal of Financial Economics). In selecting investments, respondents saw the management team as more important than business characteristics, and attributed more of an investment's eventual success or failure to the team. They also rated deal selection as the most important of the ways they create value. Both findings argue for a memo that treats the team as evidence to be examined, not a paragraph of biographies.

The investment committee memo outline

The outline below follows the order a committee needs to reach a decision. The question column is the test: if a section cannot answer its question in two or three sentences, it is not ready.

Put the recommendation first. Partners read the ask before the argument, and a memo that hides the amount or the conditions on page nine invites a meeting spent finding them.

Write theses as claims that can fail

A thesis is useful only if the fund could later tell whether it was right. "Large and growing market" is a category. A thesis, in an illustrative example, reads: "mid-market logistics firms will replace spreadsheets for carrier billing within three years, and the company already has eight paying pilots in that segment."

For each thesis, record three things:

1. The claim, in one sentence.
2. The evidence today, with its source and whether it came from the company or from independent work.
3. The milestone that would confirm or break it, and roughly when.

That third line connects the memo to the post-investment plan and gives the board a reason to revisit the theses at each review, rather than filing the memo after close.

Sort risks into three types, then match them to terms

Kaplan and Strömberg's most practical contribution is a way to classify risk. They group:

• External risks: market size, customer adoption, competition and exit conditions. The authors treat founder and investor as roughly equally informed about these.
• Internal risks: management quality, previous performance, capital at risk, the influence of other investors and the cost of monitoring. Here the authors treat the investor as less informed than the founders.
• Complexity risks: product or technology, and business model or strategy.

The study then relates these risks to the contracts actually signed. Greater internal and external risk was associated with more investor cash-flow and control rights. Ex ante staging with explicit milestones appeared primarily as a response to internal risk. Complexity risk was strongly positively related to time vesting and negatively related to compensation tied to performance benchmarks.

These are associations in a small historical sample, not rules. But they give section 6 a discipline that most memos lack: every material term should point back to a named risk in section 5. A simple way to show it, with illustrative risks rather than a real deal:

If a term cannot be linked to any risk, ask why it is there. If a serious risk has no response, the memo should say the committee is accepting it.

Show the company's numbers and the fund's numbers side by side

In the Kaplan and Strömberg sample, management forecasts tended to be more optimistic than the investors' own. By year four, the median management forecast was for earnings before interest and taxes of $11.9 million, against a median investor forecast of $6.5 million. Forecasts were available for only part of the sample, which limits how far that comparison can be pushed, but the lesson for memo structure is clear enough: present both cases.

Keep management's plan as submitted, add the fund's case beside it, and explain every material difference in a single line: slower ramp, longer sales cycle, higher churn, extra hires. The committee can then argue about assumptions instead of reverse-engineering a single blended number.

Separate fact, analysis and judgment

The memo will mix three kinds of statement. Label them so the committee can see which is which:

• Fact: sourced to a document, a data-room file, a reference call or public record.
• Analysis: a conclusion built from facts, with its inputs shown.
• Judgment: the deal team's view, stated as a view and owned by a named person.

The same discipline drives a good VC screening rubric: assess each dimension separately on its evidence, and give the overall view last. For checking that each factual claim is actually supported by the source it cites, use the claim register in our post on AI-assisted due diligence; section 11 of the memo can simply reference it.

Checklist before the memo goes to committee

• The ask in section 1 states amount, instrument, ownership, conditions and the decision required.
• Each thesis is a falsifiable claim with evidence and a test milestone.
• The team section addresses gaps against the plan, not only track record.
• Every risk is typed as external, internal or complexity, and has a response or is explicitly accepted.
• Every material term points back to a named risk.
• Management's case and the fund's case appear side by side, with differences explained.
• Exit analysis shows ownership after expected dilution.
• The post-investment plan names owners and first actions.
• Open questions and dissenting views are written down, not left for the meeting.
• Material claims are graded against their sources, and the reviewer and data-room version are recorded.

Where software fits

None of this needs software. A shared template and a reviewer who enforces the questions will do most of the work. What a system can change is the cost of the parts that are mechanical: pulling figures from the data room into the right sections, keeping source references attached to each claim, and listing the items still open.

When a fund wants that built around its own memo template, risk framework and sign-off chain, we design fund-specific diligence and IC preparation systems that draft structured memo sections with source references for the investment team to review. The analysis, the judgment and the investment decision stay with the fund.