[Free] IC Memo Template for VC Investing

If you're investing in startups or a startup founder looking to get VC funding, it's imperative you understand what commercial diligence points should be scrutinized.

Here is my template for you to reference:

1. Deal Overview
>Executive summary of the deal (terms, deal dynamics): It's important to quickly understand the process and dynamics of the company / deal. This is a good communication exercise.

2. Market Opportunity
>How does the industry work: Understanding the industry dynamics, structure, and value chain is crucial to grasping the startup's role and potential for growth.

>Use cases of product: Identifying the specific use cases and applications of the product helps determine its relevance, stickiness, and scalability.

>Tailwinds / Headwinds: Recognizing the macro trends and factors that could impact the startup's success is vital. Tailwinds (e.g., growing demand, favorable regulations) can accelerate growth, while headwinds can hinder it.

>TAM / SAM: Estimating the tam helps understand the startup's growth potential.

>Global Landscape: Assessing the global competitive landscape and market trends helps determine if the startup has a unique value proposition.

3. Company Diligence
>What products does company X offer: Understanding the startup's product offerings, features, and roadmap is essential to PMF.

>Who are the competitors: Identifying the key competitors, their strengths, and weaknesses helps VCs assess the startup's market position, competitive advantage, and potential for market share gain.

>Team: Evaluating the founding team's experience, skills, and track record is crucial to determining their ability to execute on the startup's vision.

>Sales funnel / GTM: Understanding the startup's sales strategy, customer acquisition costs, and revenue growth prospects helps VCs assess its scalability.

4. Financial Diligence
>Cash burn: Analyzing the startup's cash burn rate, runway, and funding requirements helps VCs determine its financial health, potential for growth, and need for additional funding.

>Public comps: Researching publicly traded companies in the same industry or with similar business models provides valuable insights into market valuations, growth prospects, and potential exit opportunities.

>Transaction comps: Examining recent funding rounds in the industry helps VCs gauge market interest, valuations

>Financial projections:Reviewing the startup's financial projections, including revenue growth, expenses, and cash flow, helps VCs assess its potential for returns.

>Returns analysis: IRR / MOIC standardizes return expectations across deals

>Sensitivity Analysis: Models can be sensitive to certain inputs / outputs

>Cap table: Who else is investing?

5. Takeaways
>Considerations: Key questions on the deal to make a decision

>Thesis and risks: Why are we excited? What risks can happen to this company?

>View on the deal: Go / No-go decision on this deal

>Outstanding points: What areas do we not have visibility on?