Screening memo
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Quick Answer
A screening memo is the short internal document that decides whether a target is worth real diligence spend.1
What it is
It tests fit against the thesis and the buy box, then attaches a quick model — usually an ability-to-pay or rough LBO run on the CIM's numbers — to see whether a price that clears the seller can also clear the buyer's financing. It is built to be cheap, because its main output is a decision to stop.1
Operational context
What good looks like
Why It Matters
The buyer's dominant cost is saying no efficiently. A screening step that takes two weeks per target is not a screening step; it is diligence performed on deals the buyer was never going to do.1
Frequently Asked Questions
What is Screening memo in venture capital?
It tests fit against the thesis and the buy box, then attaches a quick model — usually an ability-to-pay or rough LBO run on the CIM's numbers — to see whether a price that clears the seller can also clear the buyer's financing. It is built to be cheap, because its main output is a decision to stop.
Why is Screening memo important for startups?
Understanding Screening memo is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Sources & References
- 1.T2-11 — Stanford Graduate School of BusinessA Primer on Search Funds; 2024 Search Fund Study — Selected ObservationsStanford Graduate School of Business(A screening memo is the short internal document that decides whether a target is worth real diligence spend.)primary · T2 · buy-side-process · document
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