People who need money to begin a business or other venture may send an investment proposal letter that is intended to get the attention of investors and convince them to invest in the venture. A well thought-out and written investment proposal letter may bring the investors running and demanding to discuss the venture further.
Some points that should be considered when a person writes a proposal letter are:
• The proposal should make a confident pitch that sounds like the venture will make money. Even during a recession, investors are looking for ways to make money, and if the proposal sounds like it will, they will be interested.
• The letter should be clearly and simply stated. Even if the opportunity for investment is really good, if the letter is complicated with too much detail, it most probably will not be considered. Simple words are better than acronyms or jargon.
• The letter should clearly state what business sector the venture is in. For example, people may think Google is in the software sector, but it is actually in the advertising sector because most of its revenue comes from advertising.
• The proposal should clearly express the funding requirements and how the money will be spent. It should state how much money is needed and why. These are questions an investor will ask, and it’s a good idea to have the answers right in front of him.
• If the person writing the letter has special education, experience or skills that will help make the venture a success, they should mention it. If they don’t, but their management team does, they should mention it. If there is nothing to mention, it can be avoided for now.
• The letter can mention if the venture idea has global appeal.
• The letter can give information on the return on investment and when the investor can expect to see it.
Before writing the letter, the details of the business need to be completely thought out. This may mean creating a business plan. The letter should not be based on hopes and dreams, but on hard facts that show the investment will be profitable.
If the person is seeking a very large investment, they should organize the letter with an introduction, description of the investment, the terms of the investment, the expected returns, a contingency plan and the financial projections on a spreadsheet.
They also need to include in the letter:
• The full terms of the investment contract
• An exact description of the uses of the money with lists and budgets
• The expected results of the investment
• The distribution of income or profits
• Any other investors and how much they invested
It is recommended by investment experts to include something the investor should do at the end of the letter. For example, express the desire to meet the investor in person, give contact numbers and request a meeting at their convenience or offer further information on request.
Here is a sample investment proposal letter for a small business. It should be sent by certified post, so the sender has a record of the time it was sent and received. All enclosures should be copies. No original documents should be sent.
Sample Investment Proposal Letter
City, State, Zip Code
City, State, Zip Code
Dear Name of Investor,
It has been brought to my attention that you are a strong investor in local businesses. I have been told of several businesses that got their start with your backing. At present, I am running a baking business from my home, but the demand for my cakes has become much more than I expected, and I would like to expand my business.
I sell my homemade cakes to local restaurants. They are basically chocolate cakes that are vegan and gluten-free, but they are so tasty, everyone enjoys them. Restaurants are happy to be able to offer this option, and I have been asked to supply a national chain of restaurants.
I have been told by several restaurant owners that many of their patrons return just for a piece of my cake. I have made several other pastries that have been appreciated too.
I believe I can create a smoothly run business that would give substantial financial benefit to us both if I had the funds to pay two full-time employees and buy some equipment. My business would require a mixing machine and bigger ovens.
I have enclosed a simple brochure that shows what I am doing now as well as a business plan for expanding. I would like to meet you and give you more information about my venture as well as one of my cakes. I can be reached anytime at 555-123-4567 or at Name@email.com.
Thank you for your time.
List of enclosures such as a brochure or business plan