Investment Teaser

What is an Investment Teaser?

An investment teaser is a critical first step for a business in the capital-raising process. 

The teaser is a brief and confidential document designed both to gauge interest in, and to generate interest from, potential investors or buyers of a company or its securities. 

It’s used to present an investment opportunity, whether the purpose of that investment capital is to grow organically, make an acquisition, go public (via IPO), or to be acquired outright.

Purpose of an Investment Teaser

Potential investors can’t indicate interest in an investment opportunity without knowing something about the company; additionally, company management (and their advisory team) can’t gauge interest or make a market without divulging something about the business to prospective investors or acquirers. 

But many management teams don’t want the broader public to know they’re raising capital, going public, or looking to be sold; it can impact team morale, customer relationships, and negotiation dynamics in the capital-raising process.

The central purpose of an investment teaser is to solve this “chicken-and-egg” dilemma by confidentially presenting important information about the business. This element of confidentiality is often referred to in industry as being prepared on a “no-names” basis.

Who Prepares an Investment Teaser?

The confidential investment teaser may be prepared by several different stakeholders, including:

Investment bankers

If the company is looking to go public or offer a private placement of shares, management will enlist the services of an investment bank’s capital markets team to prepare the investment teaser. 

The investment banker’s job is to both gauge interest in the company’s securities (in order to set a target price range per share), but also to stimulate interest in the opportunity, in order to have buyers lined up for blocks of shares.

Potential public stock investors that receive an investment teaser are usually asset management firms or other institutional buy-side players like hedge funds, mutual funds, or pension funds.

M&A advisors

If management is looking to sell the company, it may enlist the services of an M&A advisory team, who will start that process with a teaser. 

Like the capital markets investment banker, the M&A advisor’s job is to both gauge and generate interest in the company, in order to create competitive tension and eventually secure the most money at closing. 

The most common potential buyers are financial investors like private equity firms (often called financial sponsors), as well as strategic investors, which may also receive investment teasers (regarding similar businesses in the same industry).

A company’s management team

Depending on the life-cycle stage of the business, the management may prepare the teaser themselves.

For example, early stage, founder-led companies often look to raise capital for growth. Potential investors at this earlier stage may include angel investors, seed or growth-stage venture partners, or other venture capitalists.

Components of an Investment Teaser

The specific contents of a teaser document vary by industry and firm, but there are at least five components included in most teasers. These are:

• Industry Overview – Potential buyers/investors expect a high-level overview of the industry or sub-group in which the business operates. Sometimes, depending on how specific the industry niche is, a teaser may instead reference a broader sector to help ensure the business is not inadvertently disclosed (e.g., this company is in the technology sector; or it’s a software development company, etc).
• Business Description – Sometimes called a “company overview,” this section describes what the company does so prospective investors understand the high-level particulars (e.g., SaaS company with monthly recurring revenue model; it has a diversified base of B2B buyers; average contract term is X months, etc). 
• Location – Without being too specific, a teaser should provide a location for the business to support a prospective capital provider in assessing if this company is a geographic fit. This is particularly true for smaller, private companies being shopped to smaller private equity firms (e.g., the business is located in Western New York).
• Financial Summary – Financial metrics in an investment teaser may include total revenue, revenue growth, average margins (e.g., gross, net, or EBITDA margin). Some businesses in certain life-cycle stages may also include specific metrics (e.g., cash on hand, burn rate, or unit economic KPIs like lifetime customer value and/or customer acquisition cost).

• Investment Rationale – This section will outline key reasons why a prospective investor or buyer may wish to deploy capital into this deal. Total addressable market (TAM) is often featured here (e.g., estimated $15 billion market opportunity that’s growing; company has X% penetration) as well as vanity metrics (e.g., growing ARPU, high customer retention, etc).
• Other Items – Other critical elements include deal-specific information (e.g., this is a prospective IPO, joint venture, partial sale, etc). Key customer (or customer concentration) information may be included for prospective investors (e.g., Walmart is a long-time customer but represents <20% of total sales).

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Qualities of an Effective Investment Teaser

Investment teasers should not exceed two or three pages in length, so it’s critical to be concise and only include the most important information and data points.

A picture is worth a thousand words, so using charts to convey information visually is typically encouraged. It’s also important to put a strong foot forward, so a good teaser won’t highlight metrics that might be considered weak relative to industry benchmarks.

The person preparing the teaser should know the teaser’s target market; for example, they shouldn’t shop small, seed-stage tech companies to a portfolio manager at a sovereign wealth fund whose mandate is trading blue chip, public securities.

What Comes After an Investment Teaser?

If a prospective investor or buyer likes what they see in the teaser they may want more information to continue the due diligence process. 

Typically, the investor (whether an angel investor, venture fund, private equity firm, or other buy-side asset manager) will sign a nondisclosure agreement (NDA). At which time the investment banker or the M&A advisor will distribute a Confidential Information Memorandum (sometimes called a CIM), which includes more information about the company, its financial results, and the proposed deal particulars.

If the investor is still interested after the CIM stage they may sign an exclusivity agreement in order to access the company’s data room, which is where all the company information necessary for more robust investor due diligence is located.

Additional Resources

Thank you for reading CFI’s guide on Investment Teaser. To keep advancing your career, the additional CFI resources below will be useful:

• Investment Banking PitchBook
• Non Disclosure Agreement
• Confidential Information Memorandum
• Greensheet
• See all valuation resources
• See all equities resources