The Investment Memo - what it all comes down to

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Inside the VC brain: How investment memos really work

Some people might think venture capital is all pitch decks and shaking hands over expensive steak dinners.

It’s not…although I’m sure there’s a bit of that!

Every deal, even the flashy ones that are plastered all over the news, ends with a Word doc. Written by a VC. For other VCs. It’s called an investment memo.

Founders are naturally expected to pitch their business to VCs to get them onside and make them believe in what they’re building. But that same VC who’s leading the deal and wants to invest, also has to pitch the idea to his business partners. And they do that by first creating the investment memo!

So, what's in a memo? Interestingly, they are quite simple. Just a few pages of clear thinking, hard judgment, and blunt risk analysis. And yet, some of the biggest bets in history were born in these docs.

Take LinkedIn. In 2006, Bessemer Venture Partners, one of the most well known and well respected VC firms globally, wrote a memo to justify investing $12.5M into their Series C round. That memo is now public on the BVP website along with a few others like Shopify, Toast, Fiverr, Twilio and more. And reading it might change how you think about startup investing.

This week, we’re diving into it.

What even is an investment memo?

Before the wire transfers, before the press release, before anyone celebrates closing a round, there’s a memo.

Internally, every VC firm works a little like a group chat with money. Someone finds a deal, builds conviction, and then they have to convince the rest of the team that it's the right play. Remember, they’re the ones closest to the deal and closest to the company in question. So, while they might have conviction and belief in the startup, they must bring it to the team cold and get them on board.

That’s where the investment memo comes in.

It can be considered a write-up, a case or a pitch. Usually written by the partner leading the deal and shared internally to help the rest of the firm decide whether to vote ‘yes’.

No fluff or marketing spin. Just:

• What’s the product?

• Who’s the team?

• How big is the market?

• Who else is in the space?

• What could go wrong?

• Why should we bet the fund on this?

It’s not about trying to sell the hype, which is often the founders job when pitching. It’s about laying out the risk, the upside, and the rationale clearly enough that other partners buy into the vision and want to back it too.

But if you stripped the logos and names off the page, most memos would look like homework for a college assignment. They’re plain, dense and kind of boring!

But don’t be fooled. This is where the real work of venture happens, not on LinkedIn, not on stage, not on a podcast. In the memo.

LinkedIn x Bessemer: A real memo, a real investment

Let’s rewind to 2006.

LinkedIn was just three years old. It had 8 million users, breakeven revenues of $1.5M/month, but no real idea how to make people stick around. They were doing really well all things considered but it was far from the LinkedIn we know today and still very uncertain as to whether they would become a billion dollar company.

But Bessemer saw the potential. But not blindly. They did the work and they wrote the memo.

It’s still online today - one of the rare investment memos made public, and it’s a masterclass in how top-tier VCs think. Not just what they believe, but how they break it down.

Here’s what it covers:

Summary

Sets the stage. A $12.5M Series C for 5% of LinkedIn at a $237.5M pre-money valuation (the valuation of the business not including the new cash being invested). The investor mentions its a “fully-priced” deal, meaning he felt the valuation was on the high side and already reflected a lot of expected future growth, but he also felt there was attractive risk/reward because the downside was capped (already breakeven). And the upside? Owning a stake in the global business identity layer.

Product

Plain and honest: LinkedIn is a resume with network effects. Recruiters “live on it,” most people don’t. But that’s okay, usage will grow as features improve. This isn’t Facebook for business. It’s its own thing.

Revenue breakdown

They break out 2006 revenue line by line:

• Subscriptions: $5.4M

• Ads: $2.1M

• Jobs: $2.1M

• Corporate sales: $1.4M

• InMail + data: rounding errors

Importantly, most revenue is high-margin and self-serve. Not just big, meaning it’s scalable.

Market size

Online jobs is a $2B+ market, dominated by players like Monster. But LinkedIn isn’t a job board. It’s a network, and that’s a different, bigger game.

Competition

Xing in Germany, Viaduc in France. Bessemer isn’t naïve - they name competitors, compare metrics, and even note IPO valuations. But the call is clear: LinkedIn is growing faster, even in Europe, with zero localisation.

Team

Blunt and honest. Reid Hoffman? “Brilliant strategist… not a strong, detail-oriented manager.” The plan? Hire a CEO. They even flag cultural risk in leadership transition.

Risks

• Usage is too shallow

• Team is stretched

• Industry spread is too tech-heavy
  

But again: already breakeven, low capital in, lots of optionality.

Scenario analysis

VCs love expected value math. This memo gives one:

“Chance of capital loss: <1%. Chance of at least 2x return: 35%.”

The upside may not be infinite, but the floor is almost guaranteed. Reading it now, what’s interesting isn’t how visionary it was, it’s how practical it is. Just a structured breakdown of how a small, weird, “online resume” site has the potential to become a global platform. And the memo was right.

The real job of a VC

A simplistic way to look at VC is to say it's just about spotting the next unicorn. But there’s much more to it than that.

It’s about convincing other people to believe in it with you. Usually, early on, when it still looks weird, undercooked, or overpriced.

And much of that starts with the memo.

The memo isn’t the end of the process. It’s the work where conviction gets tested internally by people who know how to ask hard questions. Who’ve seen hype come and go. Who’ve seen other startups building in a similar space, possibly even very similar things, and who’ve passed on billion-dollar companies before, and remember what it cost.

Now, LinkedIn was already well into their journe,y and it would be easy to say it was an obvious bet from where we stand today. They had millions of users, break even revenues and a CEO/Founder who was an early employee at PayPal and a very experienced operator. But even then, the LinkedIn memo wasn’t a no-brainer. It was a $12.5M bet on a site that looked like a fancy CV directory. The product was half-baked. Usage was still soft. And growth was good but had a ways to go.

So why write the memo?

Because that partner at Bessemer had conviction. They saw the potential, they broke it down, and they sold the room. This is the job of the VC - getting access, building conviction, doing the work, and convincing others to say yes when it matters. And that’s why these memos are so powerful. They show you the real judgment call that separated “not for us” from “let’s invest”

So why does this matter for retail investors?

Behind every serious VC investment is a memo, a process and a whole room of people asking: “Are we really going to bet the fund on this?”

It doesn’t guarantee a successful outcome, but it shows there is a standard and some serious thinking and analysis behind each and every investment.

We want to raise the bar on what retail access should look like. And this is the standard we want to give you access to.

When you invest through Shuttle, you’re not buying into hype. You’re co-investing alongside VCs who’ve done the work and put it in writing.

You might not get to read the memo yourself (NDAs, you know how it is). But you can trust it exists. That someone had to lay out the product, the risks, the upside, and say “This is worth it.”

That’s how real investing works. And it’s the kind of access retail should have always had.

Conclusion: The memo is the moment

Before the headlines, before the board seats, before anyone knew LinkedIn would matter, someone had to write the memo. Someone had to say, “Here’s why.” And that’s the part most people never see.

VC isn’t magic. It’s messy judgment calls written down, debated and scrutinised.

And as retail investors, that’s the level of rigour you deserve. Actual conviction. Real skin in the game. And access to opportunities where the thinking’s been done and documented.

Because the best investments aren’t always obvious. Someone always has to convince a room full of sceptics to take the bet.

What we’ve been working on at Shuttle

• Working on marketing strategy and planning our first marketing hire

• Interviewing candidates for our new Full time Head of Compliance

• Strategising on new products and new markets

The Unsophisticated Investor is brought to you by Scott & Rob, the founders of Shuttle. We’re both sick of private markets being a playground exclusive to the ultra-wealthy so we started a company to challenge the status-quo. Shuttle’s singular focus is to unlock private markets for Millennial and Gen Z tech professionals and help them build wealth through the highest performing private market opportunities.

Scott & Rob
Shuttle Co-Founders