A Step-by-Step Guide on How to Write an Investment Proposal
Let’s be honest and tell the thing everyone knows but no acknowledges — 1/3 of the startups which failed did not succeed because of the issues related to the lack of funding. Brilliant ideas are not everything one needs, no matter, even if someone says otherwise.
The picture of startup financing has changed a lot from the moment the COVID-2019 outbreak. The diagram shows with no illusions — the private market funding is falling, but the accurate figures are not yet to be calculated. Though the tendency is clear.
In practice it means that the industry is becoming competitive, selective and not newcomers-friendly at all, as it was before.
Is it a reason to put all the ideas to the shelf?
Of course not. It is a reason to learn how to write a competing investment proposal to stand out of the rest of the startups and get all the needed funding and even more.
If you are here, most likely it is your first investment proposal and, let’s be honest, on this stage all people are standing with eyes wide open and a lot of questions in mind. For example, what is the point to start with? How should the writing be performed? How long/short should it be? What should be pointed out and mentioned? And it’s OK to have all these questions. We have created the guide just for these purposes.
Start from the beginning: What is an investment proposal?
Here everything is simple — it can be any document, showing off your ideas and whose purpose is to raise capital. PDF, presentation, text document — does not matter. The document is not just a description, it is written for people who have financial capabilities to contribute and invest in the project.
The arguments should be solid enough so the investors can see their own profit from pouring money into it. So before you start writing and highlighting the pros, pay attention to the significant level of preparation. One more point to consider — the investment proposal can bring you maximum profit or fail depending on what stage of the product development it was presented. The best and the most appropriate stage is the MVP.
Before starting
As we have mentioned, preparation is one of the keys. The best way to conduct it is to follow the stages as to:
#1. Research stage. Investigating the market and competitors
If you are working with startups, you probably know that the discovery phase is the phase critical for the startup success in the future. Here the data is collected, the market is analyzed and the market-fit of the product is calculated precisely. This phase, if conducted accordingly, helps to eliminate the risks, even not the obvious ones like the lack of market demand and so on. It works with the risks related to unexpected expenses as well, so keep it in mind.
Discovery phase has certain stages so let’s dig into them and have a detailed look at what we quill be working with:
💼 Competitors, market size and demand
The first half of the discovery phase is about scoping the market segment you will be working with, customer demand, market demand in general and your ability to cover it. On this stage you can discover the market gaps and check if your product has the efficient market fit to succeed. Do not forget about withstanding the competitors. If the brilliant idea came to you, it has probably come to someone else.
🧑 Buyer personas and customer journey
As one of the results of the discovery phase you should get the customer journey map. In simple words (if there can be any), it is based on the marketing avatars of the potential customers. Having this data in hand you can figure out the touchpoints of interaction, analyze them and pick the most appropriate ones to put the efforts there. It is clear that this phase is important but not everyone understands why exactly. The answer is — user experience. To be precise, the first user contact with the product and the experience he gets in the end. Being positive or negative, satisfying or not, this contact can break all the game or boost it to the moon and back.
#2. Product review
As we have pointed out beforehand, the best time to start thinking about the investment proposal is when the MVP is ready. Minimum viable product or at least the early version of the product you want to create, having the minimum functionality to be viable for the customers, is the thing you can work with for investment proposals. Yes, such a product still needs development efforts and time but the general idea is clear. Do not forget to figure out the buyer personas and the business goals on this stage.
#3. Know your investors
Finding the investors and starting working on the proposal also requires the investigation phase of a kind. There are different categories to group the investors. Have a look and try to think, which group you aim at.
- Angel investors and angel groups. This name stands for high-net-worth individuals and groups, investing in the startups to get something in return. They are a part of a startup’s success and they get the returns accordingly. As a rule they have entrepreneur experience and can be your mentors as well.
- Banks. This source of funds is not among the common ones but when the product gets customers and can be presented as a successful one you can also go with your investment proposals to banks. Why not?
- Venture capital firms. Compared to angels they close more deals. They are more or less the same everywhere so picking one, think about your location first and foremost and whether you have such a company nearby.
- Corporate investors. The companies take interest in startups in the terms these new technologies can help their own projects to get more revenue. And yet this source of funding is relatively stable.
- Peer-to-peer and personal investors. Crowdfunding platforms P2P lenders, even close relatives — this group includes them all. Historically it was the family who provided the startups with some money and the sums in some cases were significant. Another option is to lend to the potential customers at once, starting a crowdfunding.
As soon as the target investor group (or groups) are picked, the steps are related to the research, including:
- Investigate aim focus field of the investor group.
- Find out, if the new territories exploration is on the investor’s agenda.
- Check the projects they have been investing in before.
- Check the rejected projects. Try to get the reasons for rejection.
- Any piece of public information might be useful and do its deed.
Write a couple of tailored proposals depending on the investor you are addressing. For example, banks are more oriented on the financial part of the deal while angels might be willing to know more about the marketing ideas.
The key parts of the investment proposal
The way you present your investment proposal is up to you. The only thing to mention is that the type of the proposal should be selected depending on the investor group it aims. Remember, you can choose as many formats as you consider to be reasonable.
However, there are certain must-have elements in every proposal. They are:
Investment Title
In the perfect world the investment proposal title is a couple of words, describing the product value in full, including the directions. The advice here is — keep in mind that catchy does not always mean enthralling.
Summary
The summary as the must. The cover page has to be followed by the table of contents and the body starts with the summary. The value proposition has to be covered in this part. The points to be covered are the following ones: who are your target customers, the problems of the customers and how your product will solve them, the benefits the solution brings to both customers and the investors.
Do not forget to point out the expected ROI, the ROI you expect to get right away as soon as the investment is poured into the project. In case you can link to some success stories of yours, do it here too. It will help to ensure your competences in the eyes of the investors. The question you should keep in mind is what the project can bring to the investor, what is the investor’s profit in it? Your project should show with bright letters that it can bring the money to the investors if they decide to contribute.
Project details
Facts, arguments, cases which can support you as a strong entrepreneur should be placed here. Also include the part of bringing the MVP into life.
Company performance
In case your startup or project is a company which existed already, the current financial data should be provided as well as the historical data in the perspective. In case the company is new and young, add here the data about the projects you have been working on. Use any piece of data which can underscore the startup’s potential even potentially.
Marketing and sales methods to be used
This part should cover the research you have conducted regarding the market and the competitors. Marketing channels and the strategies to be implemented should be here too.
Team logistics and related data
The team is important because the team makes the project. For you it means that in this part you should cover some topics including the business location, technologies to be used, equipment and the employees, operational expenses and so on. In other words, everything you should have to make the project running.
Project financing
It is the goal of the proposal on its own. The data should be accurate, the figures precise and a lot of details are included. It is the gold standard of the financing part. To be precise and show that you do know what you are doing, specify the funding sources, forecasts, timeframes, ROI, the investment exit plan.
Do not underestimate the exit strategy. It is necessary to think about and point out in the proposal. There are two situations when it is useful:
- The moment when the business meets predetermined investment criteria, having been set at the very early stages of the project development
- In case the business experiences the failure in achieving the predetermined profit objective.
As a rule, this part is simply a plan of what to do to prevent or at least limit the potential financial losses in case the business fails and goes under.
Things to avoid
- Don’t overcomplicate the plan
The text has to be clear, easy to understand regardless of the level of the person reading it. Though professional slang and terminology are the part of the case, too many complex terms and words will look like a copy paste but not your own ideas expressed in writing. - Don’t be shy
Go to the point when it is necessary, underlining the financial support you need. - Avoid irrelevant information
Include only the skills and experience related to the field. Long list of previous gains, not related to the field or area that is in discussion will be considered as a not necessary informational noise. - Don’t be obsessive
Cover all the information during the presentation. Being fixated on one part might look unprofessional for the potential investors. - Don’t make it too long
Too long proposal is less likely to be read than the short but accurate one, describing jus the point of discussion.
Investment proposal examples
We have collected some examples to look at if you want to know how a good investment proposal looks like.
1️⃣ The first investment proposal example is a simple landing page accompanied with illustrations and description of the startup along with its competitive advantages. 👉 https://templates.qwilr.com/Khr3ml2fStmI
2️⃣ The second startup investment proposal is a presentation in PDF format. It is nice to be shown as a presentation itself or sent as a PDF document for clearer understanding of the project goals in case the investor can’t be present during the show off. There are areas in the template where one can add the data, related to the project. 👉 https://pitchdeckexamples.com/startups/investment-proposal-template
3️⃣ The third template is an old good text document, a simple part of the business plan. Being conservative, this format still works fine in some areas. The template to be edited is available on this link.
Conclusion
Jumping into creating a proposal might seem a good idea but it is not, especially if your goal is to increase the project chances of getting funds. Take time, check the guidelines, collect all the information you might need for a strong proposal. The thing is, the investor might not even not read it if the title won’t be appealing and catchy enough. Use only relevant data and pay close attention to the proposal structure so everything is clear and concise. The more accurate data you provide, the better. Remember that your enemy here is abstract words, phrases and unrealistic data.
Explore more useful tips in the Celadon’s blog or Contact our team to discuss your questions!
