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Write the Perfect Investment Proposal

Investment Proposal, Roughly one-third of startups fail because of a lack of funding. They may have brilliant ideas but not enough financial support to survive. We see seemingly weak business ideas receive a lot of investors. An investor invests only because the proposal had been well written and well thought out.

Besides, since COVID, the financing industry is becoming very selective and competitive. But don’t put your great idea on the shelf just yet. A compelling investment proposal will give you a good chance to source the funding you need.

But if you haven’t done it before, you probably have a bunch of questions. How do you write a good investment proposal? How long or short should it be? And what should you write about?

What is an Investment Proposal?

In the entrepreneurial world, a proposal is a document that details suggestions and a plan of action towards achieving a certain goal or task. And when a proposal is written to gain the attention of and the monetary support from investors, lenders, and financial institutions to fund and seed the beginnings or the continuing operations of a business identity, property, asset, or other legal money-making schemes, this proposal is called an investment proposal.

A successful investment proposal delivers solid arguments as to why your startup is worth investing in, which requires preparation before you start writing.

How to Write an Investment Proposal

The most compelling investment proposal is the document that succinctly and accurately informs a potential investor what is in it for them if they decide to invest in the said project. And to make sure that your investment proposal embodies these characteristics, we have created a list of the most important parts or pieces of information that should be included in your written investment proposal. Find out what these are below…

  1. Investment Title

The investment title of your proposal must explain what your business does. Create a compelling title that will position your business to be understood instantly in the investor’s mind before they have even read your investment proposal.

Ideally, it should be a few words that describe the value of the future product or service and the direction you are taking, such as the market segment.

  1. Description of Proposed Investment Project

All investment proposals should start with a brief description of the proposed investment project or idea. This is the public part of your proposal and must compel an investor to read the entire investment description.

Ideas to mention here are:

  • Why your investment opportunity is attractive!
  • How much capital is needed and how it will be used.
  • What will be the return on investment (ROI) for the investor, and when will they see this return?

If you want more funds for an already launched business, you need to write about what you want to do to re-energize your business.

Remember that this portion of your proposal is the first thing that potential investors will see and read, so make sure that its first few paragraphs are written well.

  1. Company Performance and Financial Report

Another must-include section in any investment proposal is a section about your company’s performance and financial background. If it’s an existing company, include a business description and provide historical and current financial data and achievements in this section.

If you haven’t yet established your business, share information about the products & you (the business owner), how you came up with the business idea or project, and what you intend to do with the business once you get all the funding you need.

Your Investment description will have to answer the question:

“What’s in it for the Investor” – I have seen it too many times! Entrepreneurs talk and talk about their product and business…. And then nothing more.

Strike a balance. Talk about your business, how you will make money, why you seek investment, and how an investor will make a return. And don’t forget to add some industry statistics! A simple search on Google will reveal some interesting facts that you can include in your investment proposal.

  1. Planned Marketing and Sales Method

This part of the document presents all the research you’ve done on your market and its competition. To illustrate, a thorough market research study will allow you to know who your competitors are in your chosen field or industry. After reviewing the results of this study, you need to develop different marketing strategies, advertising strategies, pricing models, employee acquisition processes, product sources, etc., that you can implement to maintain or gain a market leader. And it would help if you listed all these planned action plans in your investment proposal.

A key point here might be the pricing model you’ve chosen for your product and a rationale for why it’s the most profitable one. Your proposal needs to include as much information as possible to help any potential investor make a better assessment of your business’ potential.

  1. Operational Team Logistics

Investors want to know everything about your proposed business idea or project before committing to you fully. That is why you also need to include all the technical and operational aspects of your planned business.

Another piece of information that can help potential investors form a positive opinion of your startup and its potential is your team’s structure — the one that will achieve your goals. This means that your proposal needs to include information about the number of employees you have hired/ plan to hire, the business location, the operating costs, the equipment and/or technology you need to get the business up and running, the sources of raw materials, workforce resources, and any applicable operational expenses.

Investment Proposal1

  1. Business Financing

Seeing how this is the proposal’s entire goal, make sure you use accurate numbers and include lots of detail. This is very important for potential investors since this will state what an investor will get out of funding your business idea or project.

Information like the source of funds, the return of investment, projected gains and losses, the business’s profitability, possible loans, and other financing options should be clearly stated in the investment proposal. This will provide investors with a clear understanding of how much their money or resources can help your business and how much they will gain in return.

Ensure that you do not falsely represent your business by making unverifiable claims in this section of your proposal. Investors can do background checks or redo the math of their financial projections. And when they find out that you have embellished some portions of your proposal, you may not only have just lost a potential investor, but it may also affect your reputation as an entrepreneur.

  1. Project Timetable

The time frame for the investment should be included in your investment proposal because this will help potential investors know the length of their agreement with you (the business owner). This also helps you keep your business goals.

  1. Exit Plan

A sound investment exit plan is another important component of an investment proposal. It is a crucial point in an investment proposal that’s necessary for two situations:

  • When a business meet its predetermined investment criteria; or
  • When a business fails to achieve its defined profit objective.

This is usually a contingency plan with information on limiting financial losses if the business fails.

Things to Avoid When Writing an Investment Proposal

The investment proposal can be a lifeline for any startup, so it’s crucial to make a compelling argument for your case. Simultaneously, it has to be straight to the point and factual to highlight your competence in your field. We’ve already discussed how to write an investment proposal, so here are some things that you should avoid along the way:

  • Don’t make it complicated.
  • Don’t be shy—no beat around the bush when talking about the financial support you require.
  • Avoid irrelevant information
  • Don’t fixate on any information you provide in the proposal, as this might be viewed as unprofessional.
  • Could you not make it too long?

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