Why Creek Equity writes a one-page memo before every investment

Every investment Creek Equity makes, whether a new company we are founding, a founder we are backing, or a business we are acquiring, begins the same way. Before any capital moves, I write one page.

One page is not a limit on how much work goes into the decision. The diligence behind an acquisition can run to hundreds of pages. The memo is a limit on how much the decision is allowed to hide. If I cannot state in a page what the company does, who runs it, what we are paying, what could go wrong, and why we would own it, then I do not understand it well enough to own it.

What goes on the page

The structure is always the same, and it has not changed in years.

• What the business does, in plain words a stranger would understand. If the description needs jargon, that is a warning.
• Who runs it, and why I believe they will do what they say.
• The capital requested and our total exposure after this round, including anything we have already put in.
• The base case and the downside case. Not the upside. Anyone can write the upside.
• The exit or the hold thesis. Some businesses we intend to own for decades. The memo has to say which.
• How it fits. Where it sits in our allocation, and what it does to our concentration and liquidity.

Why it works

The discipline does three things. It slows down enthusiasm, which is the most expensive emotion in investing. It creates a record, so that a year later we can judge the decision on what we knew at the time rather than on what happened after. And it gives our Investment Committee something concrete to push on. A committee cannot interrogate a feeling. It can interrogate a page.

The memo is also the first thing I share with the operator we are backing. If we disagree about what is on it, better to find out before the wire than after.

The page is a habit, not a form

The point is not the template. The point is the habit of writing the decision down before making it, in Michigan, where most of the companies we build and buy are located, and in the handful of other places we have gone when the business was worth the trip. Twenty years of doing this has convinced me that the investments that went badly were almost always the ones where the page was hardest to write, and I wrote it anyway.