Offering Memorandum: Definition, Examples, Tips (+How to Write)

Free Resource: Due Diligence Checklist

Investors need to be confident that your team is worth backing. This checklist helps ensure you’re providing the right information about your company.

Few companies secure funding without first creating an offering memorandum.

This document outlines the key details investors want to see before considering an investment in a startup. 

It’s not quite as easy as it sounds. That’s why an entire industry now exists to develop high-quality investment memos.

This is the DealRoom guide to offering memorandums.

While a company’s management team can write an offering memorandum in-house, it’s more common to hire external investment bankers or intermediaries to draft the document.

These professionals bring experience in structuring and presenting the information effectively. If engaged by the company, they can also distribute the memorandum to their network of potential investors.

Offering Memorandum Vs Investor Prospectus

There’s often confusion about the different types of offering memorandums due to the various names used for the document.  

Despite the different labels (private placement memorandum, offering memorandum, investment memorandum, etc.), they all refer to the same document.

That said, there is another document that should be distinguished from offering memorandums: the investor prospectus.

The investor prospectus

While an offering memorandum is used in private markets, an investor prospectus - often simply called a ‘prospectus’ - is used in public markets.

Both documents serve a similar purpose: presenting an investment opportunity to potential investors. However, prospectuses are subject to stricter disclosure requirements due to regulatory oversight in public markets. 

For example, a balance sheet may be of less importance for small public companies, but it’s a critical component when evaluating the potential of midsize or large public companies. 

The table below breaks down the key differences between an offering memorandum and investor propsectus.

Purpose of an Offering Memorandum

The offering memorandum is used to inform investors that the company is seeking funding, outlining how the funds will be used and how investors will be repaid. 

Essentially, it functions as a business plan tailored specifically for investors. However, the offering memorandum is not a promotional document. Instead, it should present a clear, objective, and detailed view of the company to support informed investment decisions. 

This benefits investors in several ways:

1. Information

The core purpose of an offering memorandum is to provide the investment committee with information. A well-crafted memorandum introduces insights the investors may not have previously known - insights compelling enough to spark interest and justify investment.

Based on the details provided, investors will then develop an investment thesis, outlining their rationale for why the opportunity aligns with their goals and merits funding. 

2. Comparison

Most investors receive dozens, if not hundreds, of offering memorandums each week. This volume enables them to compare companies against peers and make more informed investment decisions. They often rely on financial ratios and benchmarks to evaluate performance, risk, and growth potential across different opportunities.

3. Protection

Founders can attract potential investors, such as angel investors, venture capitalists, and private equity firms, with a well-prepared offering memorandum. By receiving a document directly from the company, investors gain a degree of legal protection against disinformation. 

If a company knowingly provides false or misleading information in its offering memorandum that leads to an investment, the investor has strong grounds for litigation.

For these reasons, the offering memorandum plays a key role in the investment process. It’s often preceded by a one-page teaser, a brief, non-confidential overview that can be shared with multiple investors. These teasers typically describe the company in generic terms (e.g., “a New York-based manufacturing company”) without disclosing sensitive information.

If the offering memorandum spikes the investors’ interest, they’re typically asked to sign a confidentiality agreement and then given access to the full offering memorandum. If the memo generates further interest, it can lead to detailed discussions around a term sheet that outlines the proposed investment terms.

Who Needs an Offering Memorandum? 

Offering memorandums are most commonly used by private companies looking to raise capital or facilitate a sale without going public. This includes startups raising Seed or Series A rounds, growth-stage companies seeking expansion funding, and private equity firms preparing to sell or recapitalize portfolio companies.

Mid-market businesses also use offering memorandums when pursuing strategic partnerships, minority investments, or debt financing. While not legally required in most private placements, these documents are essential when approaching professional investors (e.g., VCs, institutional firms) who expect a clear, structured presentation of the opportunity before moving forward.

An offering memorandum becomes especially beneficial when the fundraising process involves multiple prospective investors and a high level of due diligence.

How Investors Use Offering Memorandums

Once investors receive an offering memorandum, it becomes a key resource for evaluating the opportunity and shaping internal discussions. It’s often shared with partners or an investment committee as part of their decision-making process. The memo helps investors understand the business at a deeper level than a pitch deck can provide.

Here’s how investors typically use it:

• Internal review and due diligence. The memo is reviewed by analysts, partners, and investment committee members to assess whether the opportunity aligns with the firm’s thesis and portfolio strategy.
• Focus on key sections first. Most investors start with the executive summary, management team, financials, and market. This information helps them quickly determine if the opportunity is worth pursuing further.
• Benchmarking against other deals. Investors often compare your memo to others they’ve seen in the same space. A clear, concise, and compelling document stands out in a crowded pipeline.
• Supplementing pitch decks and data rooms. While pitch decks provide a quick overview and data rooms offer raw documentation, the offering memorandum connects the two, offering a strategic narrative that ties the numbers, vision, and execution plan together.

Understanding how investors engage with your offering memorandum can help you craft a document that speaks directly to their priorities and increases your chances of getting to the next stage.

Contents of an Offering or Investment Memorandum

The contents of an offering memorandum rarely change, regardless of the company’s geography, industry, or size.

For companies in more technical areas of operation - particularly in the sciences, for example - it’s common to see a glossary of terms and a more detailed description of the company and its industry.

Outside of these exceptions, the chapter headings are as follows:

• Executive Summary: Within 2.5 pages, this section offers a concise snapshot of the company, including its business model,  financial performance, key strengths, and future prospects. The goal is to provide a clear, high-level overview for time-constrained investors - enough for them to understand the opportunity without reading the entire document. iBusiness Overview and History: As the chapter heading suggests, this section is where the company tells its story: how it was founded, key milestones, and its current trajectory. It should clearly articulate core metrics, recent growth, and strategic direction, helping investors understand the foundation and momentum behind the business.
• Industry Analysis and Market Overview: Often misunderstood by first-time founders, this section should clearly differentiate between the broader market and the specific market the company is targeting. This section usually includes a market sizing of some form, trends, and competitive analysis to help investors evaluate the opportunity and assess where the company fits within the market. 
• Financial Results and Projections: This section includes (preferably audited) financial statements and financial projections. While investors expect some optimism, projections should remain grounded in reality. Overly aggressive assumptions can damage credibility.  
• Management Team and Key Personnel: Investors invest in people as much as businesses. This section introduces the core leadership team and key contributors, highlighting their backgrounds, track records, and ability to execute on the company’s vision. Trustworthiness, experience, and capability are essential traits.
• Use of Funds and Capital Structure: Here, the company outlines how the funds or venture capital will be used (e.g., product development, team expansion, market entry, scaling operations). It also includes the current and post-investment capital structure, helping investors understand ownership dynamics and how the offering is priced and valued.
• Risk Factors and Disclosures: No company is without its risks, and investors know it. This section identifies potential business, financial, market, and regulatory risks. Transparency here demonstrates maturity and awareness, reassuring investors that the company is realistic about potential challenges and proactive in managing them.

The importance of good design & formatting

There is an expression that applies, to some extent, to offering memorandums: The medium is not the message. That is to say that investors spend their days scanning business plans, pitch decks, and offering memorandums. What ultimately drives their decisions are the numbers, the strategy, and the team, not the color scheme or cover design. 

That said, presentation still matters. Just as a job candidate wouldn’t show up to an interview in wrinkled clothes, a company shouldn’t present a disorganized, poorly formatted document to potential investors. Good design and clear formatting demonstrate professionalism, attention to detail, and respect for the reader’s time.

The goal is to make the information easy to digest. A clean layout, consistent typography, logical structure, and visual clarity all help investors focus on what really matters: the opportunity itself.

An investment company won't hire somebody because they’re wearing a Giorgio Armani suit, but they do expect a polished appearance. Similarly, they won’t give a company funding just because its offering memorandum was designed by a professional graphic design firm, but making a strong, professional impression does matter.

As the examples below suggest, companies that win funding are often the ones that pay attention to every detail in their offering memorandum. This includes a clean, professional design coupled with a convincing story.

Creating an Offering Memorandum

If you want to create an effective offering or investment memo template, understand that it should reflect these characteristics:

• Concise: If you can’t explain your company in a few clear lines, you’re not ready to pitch it. Investors won’t sift through pages to figure it out.
• Compelling: Like a good movie script, your memo needs to grab their attention within a few lines. Most investors will skim 80% of the document, so make the first impression count. 
• Honest: For obvious reasons, transparency is critical. Omitting a material risk is just as damaging as misrepresenting facts. Trust is the foundation of any investment relationship.
• Convincing: The investor should walk away believing that this is a high-potential opportunity and one they don’t want to miss out on. 
• Well-presented: Sloppy formatting or poor writing can undercut a great business. A polished, professional presentation reinforces the quality of the opportunity. Don’t cut corners here; hire somebody to do it if required.

Example of an Effective Offering Memorandum

Here’s an investment memo example from Naava:

Naava, a Finnish-Swedish company that makes green walls, has been successful with fundraising.

Having already raised EUR 14 million in 2023, it plans to raise EUR 7 million more to continue its expansion and prepare for an IPO on the Finnish stock market. Reaching this stage required not only product innovation but also a strong ability to craft effective offering memorandums. 

Below, we look at some of the features of its 2017 investment memo, which can be seen in its entirety here.

Cover

Most companies go with a plain cover, but Naava’s memorandum already hints at an environmentally-themed business model. It also looks attractive in its own right.

Executive Summary (“The Offer”)

The executive summary here is a little unorthodox, but still looks good. It outlines exactly what the company is looking for in this raise and what investors can expect.

Management Section

This is simple, concise, and elegant. Investors don’t want to know what a management team likes to do on the weekends - just why they’re the right people to fund.

History and Background on the Company

Two slides, with nicely-spaced paragraphs, tell the reader what they need to know about Naava. The content is cleanly organized and well signposted, making it easy for readers to navigate or skip sections, such as the company’s history, if they prefer to focus on other areas. 

Company’s Special Sauce

While intellectual property isn’t a standard section in every T offering memorandum (since not all companies have IP), Naava’s example is a strong model for those that do. It clearly shows how the company differentiates itself within a competitive landscape. The section is well-presented, easy to follow, and adds meaningful value for investors evaluating the company’s unique advantages.

Financials

The financial statements are well presented, enabling investors to see exactly what’s going on. Note that it doesn’t include a breakdown of every single data point in the company’s operating costs.

Ownership

This section clearly outlines how the company’s shares are currently distributed, which is essential information for any prospective investor.

It’s well signposted, straightforward, and reinforces that the company understands what investors need to see. 

The table below provides a snapshot of the key elements of an offering memorandum.

To get a better understanding of how to write an effective offering memorandum, you can take inspiration from published investment memos from influential VC firms, such as Bessemer Venture Partners (BVP). They feature memos from companies like Twitch and LinkedIn.

If you’re looking to write an offering memo for late-stage investments, Y Combinator also offers a comprehensive Series A investment memorandum guide that can serve as a practical roadmap. 

An effective offering memorandum is key to securing larger funding rounds. Consider how Rippling raised $45 million in Series A funding, and how Airbase’s investment memo helped them secure $60 million in Series B, all because of a well-written memo.

Common Mistakes to Avoid

Even strong businesses can lose investor interest if their offering memorandum contains avoidable missteps. Here are some of the most frequent pitfalls to watch out for:

• Overhyping financial projections. Unrealistic growth assumptions can erode trust and signal inexperience.
• Ignoring or downplaying risk disclosures. Investors expect transparency. Omitting known risks can be a red flag and expose the company to legal issues.
• Weak or unclear executive summaries. If the first few pages don’t clearly explain the opportunity, investors may not read further.
• Poor formatting and document structure. Disorganized layouts, inconsistent fonts, or sloppy visuals make the company look unprofessional, even if the opportunity is strong.
• Too much product detail, not enough focus on ROI. Founders often go deep on features but fail to show how the business makes money or scales. Investors want to see the financial upside.

Avoiding these mistakes ensures your offering memorandum makes the right first impression and keeps investors engaged.

Legal Considerations and Compliance

While an offering memorandum is primarily a business document, it also carries legal significance, especially when used to raise capital in private markets. To reduce liability, companies should include standard legal disclaimers stating that the document is not an offer to sell securities and that all investment decisions should be made independently.

For U.S.-based offerings, especially those involving private placement memorandums, the memo must comply with SEC Regulation D exemptions. These rules govern how securities can be offered without full SEC registration and may include restrictions on advertising and investor qualifications.

Founders should always involve legal counsel when preparing an offering memorandum. A securities attorney can review the document to ensure all necessary disclosures are made, confirm regulatory compliance, and help mitigate risk for both the company and its investors. This step is essential for protecting your business and building investor trust.

Frequently Asked Questions

What is an investment memorandum?

An investment memorandum is a document that outlines a company’s business model, financials, and growth plans for potential investors. It helps investors assess the company’s value and the risks of investing.

What should be included in an investment memorandum?

It typically includes company background, market analysis, financial statements, management profiles, funding needs, and use of proceeds. Clear, data-backed content helps build investor confidence.

What is the purpose of an investment memorandum?

The purpose is to communicate a company’s investment opportunity in a transparent and persuasive way. It gives investors enough detail to evaluate whether to proceed with due diligence or funding discussions.

How long should an investment memorandum be?

Most investment memorandums range from 15 to 30 pages. The ideal length depends on the complexity of the business and the level of detail investors expect.

Who writes the investment memorandum?

Founders, finance teams, or advisors typically write it, sometimes with help from investment bankers or consultants who ensure the content meets investor standards.

What is the difference between an investment memorandum and a pitch deck?

A pitch deck is a short visual presentation used to introduce a company to investors. An investment memorandum is a detailed written document that supports the full due diligence process.

When is an investment memorandum used?

It’s usually prepared before formal fundraising rounds such as Series A or later-stage investments. It can also be used in private equity deals and mergers and acquisitions.

Key Takeaways

• A strong offering memorandum clearly communicates your company’s value, helping investors make informed funding decisions.
• Professional design, transparency, and structure can significantly improve your chances of standing out and securing investment.

Creating a strong offering memorandum is a proven way to raise millions in funding.

If your team lacks experience in building these documents, bringing in external experts can be a smart investment. 

A professionally crafted memo not only increases your chances of attracting investors, but it can also serve as a strategic asset. Well-structured memos can be updated regularly rather than completely rewritten, and may even serve as an internal strategy roadmap to guide execution and growth. 

And when it comes to streamlining the fundraising process, DealRoom can be a game-changer.

Take PAX 8, for example. Their successful fundraising campaign was made possible thanks to DealRoom's efficient and collaborative platform. With DealRoom, PAX 8 was able to easily share documents, communicate with investors, and track progress throughout the entire fundraising process. Check out the full case study here.