An ETA investment memo is not a marketing document. It is an evidence package that allows an investor to evaluate three questions quickly: Is this a good business? Can this person run it? Does the price make sense? Every memo that fails to answer all three clearly is leaving money on the table — or more accurately, leaving it in the investor's pocket.
What Experienced Investors Actually Weight
Surveys and interviews with active ETA investors — traditional search fund investors, deal-by-deal co-investors, and family offices — consistently show that business quality and searcher capability account for approximately 58% of investment decision weight combined. Deal price and structure account for 22%. Downside protection and risk analysis account for 13%. Exit pathway analysis accounts for only 7%.
The implication: investors are primarily evaluating people and business quality, not financial engineering. A memo that leads with a sophisticated returns waterfall and buries the business description is signaling to experienced investors that the author does not understand the investment framework. Lead with business quality. Establish the searcher's fit and capability. Then show the numbers.
The Memo Structure That Works
The executive summary (1–2 pages) is the only thing some investors will read before deciding whether to take the next meeting. It must contain: a crisp description of what the business does, the purchase price and structure, one sentence on why this business is defensible, one sentence on why you are the right operator, and the headline return metrics (MOIC and IRR at base case). If the executive summary does not create interest, the 40-page detailed memo will not rescue it.
The business overview section covers: what the business does (specific products or services, not generic industry labels), who the customers are (customer types, concentration, contract structure), how revenue is generated and what makes it recurring or repeatable, what the competitive moat is (cost advantage, switching costs, network effects, regulatory barriers, or geographic density), and the management team beyond the owner. This section should be written so that an investor who knows nothing about the industry understands the business and its defensibility after reading it.
What Signals Credibility
Experienced ETA investors read investment memos from searchers who have done significant research and from searchers who are pitching a first-look memo with three weeks of diligence. The signals that distinguish them are specific, not general. Specific: "The business has 847 residential pest control customers averaging $58 in monthly contract value, with trailing twelve-month churn of 7.4% per the customer database we reviewed." Not specific: "The business has a large recurring customer base in the pest control sector." One signals you know the business; the other signals you have read the broker's marketing document.
Other credibility signals: QoE engagement status (investors want to know diligence is underway, not assumed complete), lender engagement (showing you have spoken to 2–3 SBA lenders and received preliminary interest), and your transition plan (what specifically are you doing in months one through six to maintain continuity and grow the business). Investors who see that a searcher has thought carefully about the first year of operations — not just the acquisition — have significantly higher conviction.
The Risks Section Most Searchers Get Wrong
The risks section is where most memos reveal whether the searcher is a genuine analyst or an optimist looking for validation. Investors do not want to see a generic risks section that says "business may face competitive pressures" or "key employees may leave." They want to see the specific risks of this specific business and the specific mitigants you have in place.
Write risks as: (1) the specific risk, (2) why it is a real risk (with data or evidence), (3) what you have done or plan to do to mitigate it, and (4) what the downside scenario looks like if the risk materializes. A searcher who writes "customer concentration: the top customer represents 31% of revenue (see Schedule A for customer detail). This customer has a 3-year MSA with auto-renewal expiring in 2027. We have obtained a customer letter confirming their intention to continue under new ownership. If this customer were lost, EBITDA would fall to $450K, reducing our DSCR to 1.18x — below covenant. Mitigation: structured 12-month earnout tied to this customer's retention." That is a risk section that builds investor confidence.
The Returns Table That Actually Gets Read
Show three scenarios: base (your underwriting case), downside (what happens if revenue is flat for two years and a key customer reduces spend), and upside (what happens if you execute the add-on acquisition you have identified). Each scenario should show: entry price, EBITDA trajectory, exit year and multiple, proceeds to equity, investor MOIC, and investor IRR. Keep the returns table to one page.
Do not show only the base case. Investors who see only one scenario assume the searcher cannot or will not think about downside. Investors who see a downside scenario where MOIC still exceeds 1.0x and DSCR remains above 1.10x are far more likely to commit capital.