Information Memorandum Template

Written by Toby Kelly · Published on Tue, 30 October 2018

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The Information Memorandum is the key document for companies that are raising private capital in New Zealand. There are certain standard sets of detail and financial information that an investor would expect to be in every information memorandum, investment memorandum, or product disclosure statement. The document ideally will tell the investor everything that they know to make an informed investment decision.

The FMA does not prescribe a specific format for information memorandums but the Ministry for Business, Innovation and Employment has issued guiding principles that offer documents for equity raises should contain enough information to “enable investors to assess the underlying business, including the current state, value of assets and future growth prospects and how the capital raised will be used.” The FMA has stated several times that Product Disclosure Statements for equity capital raises (and other offer materials such as a prospectus, private placement memorandum or investment memorandum) should be “clear, concise and effective”.

At Snowball Effect, we use the IM as a place to collect together all the material information that an investor would need to know about a new investment opportunity. The IM is used as the master document to create offer materials such as the online offer page, shorter slide decks, press releases and offer videos.

The key things covered in the Snowball Effect IM template include:

  • Overview: Highlights, summary and team
  • Product: Problem, solution, operations, market, customers, competitors
  • Strategy: Current stage, growth plan, intellectual property, metrics, exit strategy, use of funds, risks and mitigations
  • Financial: Revenue statement, cashflow statement, balance sheet, forecasts, valuation
  • Offer: Terms, types of shares, disclosures, share register, shareholder communication, advisors

Length

The IM should be long enough to cover the key points that an investor needs to know, but it should also be short enough to maintain interest. Most IM’s on Snowball Effect range between 30 and 40 pages so it’s a significant document to produce. But the length is only a function of the fullness of the content. You should strive to make it as concise as possible so investors can find and read the parts that are important to them.

Tone

We’ve found that investors prefer direct and honest language. There is no need to add drama and hyperbole. Just keep things simple so that an investor can understand the opportunity. Being clear, concise and honest is more persuasive for potential investors. Good investment documentation treats readers as partners who would like to understand the business at a deeper level, rather than prospects to be marketed to.

Metrics

Some investors are looking for an emotional connection with the company, but large sophisticated investors are often looking for hard facts so make sure that you include the key metrics and numbers that support your investment case. The template contains sections on financial information and metrics. You should highlight the key operating metrics that you track internally to assess progress in the business because these are probably the same metrics that investors will want to use for benchmarking your company and assessing their investment.

Audience

While an IM is obviously produced with an investor audience in mind, it is still worth considering segmenting further between different types like angel investors from corporate backgrounds, savvy industry professionals, or friends and family. Making sure your document is tailored to your ideal investor base is an important consideration in the process.

How to prepare your IM

There are several options for preparing an IM. You can go it alone or engage with experts to help you prepare the offer materials. The main options include:

  • DIY: Some companies prepare their own information memorandum for a small capital raise. These companies still need help later in the process with accounting, design, legal, payment processing and anti-money-laundering checks.
  • Existing advisors: Your existing lawyer, accountant or business advisor may be able to help you complete certain sections of the IM. However, they may not be able to cover all the bases.
  • Specialist capital raising advice: There are specialist boutique investment banks, professional service firms and advisors who can provide assistance preparing the offer materials for a capital raise. These can be expensive but provide a high level of experience and help to craft the content of your offer based on experience in what investors look for.

Snowball Effect provides a dedicated capital raising advisory service with an IM preparation process that includes discovery workshops, testing your story with experienced investors and a specialist to write your IM for you based on your existing business plans and documents. Our services include the production of supporting slide decks and drop sheets so you can market your offer appropriately. This process draws on your existing materials and advisors to efficiently provide the benefits of specialist capital raising support without the usually high associated costs.


Download the template

You can download and fill in the template to create your own draft information memorandum by entering your email address below.


If you have any questions about the template you can contact Toby Kelly on [email protected]