Fullstack Logo

Information Memorandum – A Guide

information memorandum

An Information Memorandum (or Investment Memorandum, (IM)) is the most commonly used disclosure document to support private company fundraising in Australia. A comprehensive and well structured IM can enhance fundraising efforts, while a poor IM can have the opposite effect.

The regulatory framework

Fundraising in Australia is subject to the provisions of the Corporations Act, which is governed by ASIC.

    A sale or offer of securities (usually shares) requires a disclosure document (Product Disclosure Statement or Prospectus) to be produced and approved by ASIC, unless subject to a specific exemption. The main exemptions are;

  • A “small scale offering” which is limited to 20 issues or sales (of securities) in 12 months up to a maximum $2m – known as a “Personal Offer”
  • Issues or sales to sophisticated and professional investors

The majority of private company and particularly startup fundraising is conducted under these exceptions, or in terms of the Crowd Sourced Funding (CSF) provisions of the Corporations Act (see our separate Article on Equity Crowdfunding).

As most fundraising is conducted under a Corporations Act exemption, there is no prescribed offer document required, although any offer must still meet common law requirements and the provisions of the Corporations Act which deal with misleading and deceptive conduct

What is a Information Memorandum?

An Information Memorandum is a comprehensive description of all aspects of the business and the fundraising proposal. It is intended to provide all the information needed by an investor to make a fully informed decision in a positive and appealing way. A typical IM may be 30 to 50 pages in length.

The contents of an IM are not prescribed (unlike a Prospectus for example) so the contents will vary for each proposal.

At a minimum however the following topics are usually covered;

Executive Overview / Summary

A concise summary of the business and the proposal.

The Business

A comprehensive description of the business including the Problem being solved, the Solution, the business model (ie how the business makes money), key achievements, traction gained and any relevant background (like previous companies founded).

The Company

The corporate legal structure, how / where IP is held, the cap table showing existing shareholders and outstanding instruments, funding history, investment to date.

The Product / Service

A detailed description of the product / service – how it is originated / manufactured, cost to produce / serve, product range, facilities or outlets, how the product is delivered and distributed, pricing.

Team

Founders and their experience, key executives, incentives, organisation structure.

Market

Addressable market size and description, the target market, customer profile, trends affecting the market, growth strategy, geographic markets, competitors, sales traction, sales targets.

SWOT analysis

A SWOT (Strengths, Weaknesses, Opportunities, Threats) or similar competitive analysis is sometimes included. It is helpful in providing a succinct summary of the strategic factors affecting the business.

Financial forecast

A 3 to 5 year forecast of the Balance Sheet, Profit & Loss Statement and Cashflow, with supplemental information to support Salary / Wage costs, Capital / Development costs and any other substantial items.

Offer details

The offer being made – no. of shares, type of shares (i.e. Ordinary, Preference), the % ownership available (in other words the proposed valuation), any other terms or conditions.

Risk Analysis / Statement of Risks

A description of the potential risks facing the business – for example reliance on key staff, competitive threats, legislative or regulatory changes etc.

A few pointers towards a good IM

  • All statements made in an IM should be open, transparent and honest. Negative factors and challenges affecting the business should be disclosed in addition to the positives;
  • Data used in an IM should be current and relevant;
  • An IM should have a clear and consistent “thread” – for example, if strong early growth is forecast it should be supported by a marketing and promotional effort;
  • While the IM is in part a marketing document, it is important to be objective and have well founded arguments to support the predicted development and growth of the business;
  • In terms of presentation, an IM should be clear, uncluttered and professional. While it should be visually appealing, it should not emphasise presentation over substance.

If you need help with developing an effective Information Memorandum, reach out to the seasoned team at Fullstack who can help with outsourced CFO services.

Was this article helpful?

illustration-Stuart-1


Stuart Reynolds
is the founder of Fullstack Advisory, an award-winning accounting firm for businesses leading the future. He is a 3rd generation accountant who specialises in tech companies, crypto and entrepreneurs.

Share this Article

Find out more.

Need accounting
help?

Request a consultation and speak to one of our business accountants & advisors. Get clear next steps for your project.

Connect with us

Ask Us a Question?

Reach out to us about any of the topics in this article.

error: Content is protected !!

Via online meetings, email or phone, we are keen to help you get to the next level.

When it suits, just pop a time on the calendar.

CONTACT US

Speak to our experts

Other ways to get in touch with us.


Your Privacy

Privacy

We will never share your details with any third-party.

This form collects your name contact number and email address so that we can contact with you and provide a quote for our services. Please check our Privacy policy to see how we protect and manage your submitted data.

HEAD OFFICE

Sydney

Suite 63, 388 George St, Sydney NSW 2000

BY APPOINTMENT

Melbourne

120 Spencer St Melbourne VIC 3000

BY APPOINTMENT

Brisbane

310 Edward St Brisbane QLD 4000

structures set Restructures

Structures - Setup & Restructures

  • Company Setups
  • Trust Setups
  • Flip Ups
  • Australian Subsidiary Setups
  • Detailed Tax Advice
  • Cap Tables
  • Equity Consulting
Get a quote Tax Advisory Icon
govt grants Incentives

Government Grants & Incentives

  • R&D Tax Incentive
  • R&D Finance consulting
  • Forward Financing consulting
  • ESIC
  • Export Market Develop. Grant (EMDG)
  • State Grant Editorial Reviews
Chat with an Advisor> Tax Advisory Icon
finance Forecasting

Financial Forecasting, Xero & Fintech Support

  • Dashboards
  • VCFO Reporting
  • Management Reports
  • Advisory Board Meetings
  • Bookkeeping & System Reviews
  • App Implementations
  • Cashflow Forecast Workshops
Get a quote structure and setup
complex tax questions

Complex Tax Questions

a) Book a consultation with a Tax Advisor
b) If more detail > Written Tax Advice

We regularly cover:
  • Corporate Structuring
  • International Tax
  • Restructures
  • Business Sales
  • Tax Consolidation
  • ESOPs
  • GST & Duties
  • FBT
  • ESIC
  • Tax Residency
Chat with an Advisor > Tax Advisory Icon
capital raising support

Capital Raising Support

  • Financial Modelling
  • Cap Table Modelling
  • Share Issues
  • Share Splits
  • Share Buy Backs Pre Diligence
  • Startup Valuations
  • ESIC / ESVCLP advice
Chat with an Advisor > Tax Advisory Icon
Tax Advisory Icon

Corporate Secretarial & Advisory Board

  • Share Issues
  • Share Transfers
  • Director Updates
  • Nominee Directors
  • Registered ASIC Agent
  • Monthly or Quarterly Advisory Board
  • AGMs
Get a Quote Corporate Secretarial