A data room is a vital instrument for conducting due diligence, whether raising Series A funds or closing an acquisition, merger, or investment deal. It allows you to organize all of your documents in one place and allows third-party parties to access the information in real time without having to send an email or request updated copies.
While it’s tempting, if you can, to fill your investor data room with everything you’ve got, be careful not to overwhelm potential investors. Having too many documents can make the due diligence process lengthy and frustrating for both parties. A well-organized and organized data room is crucial to ensuring that investors are able to quickly and easily review the performance of your business, its financial health, operations strategy and legal status.
Investors will want to be able to view your startup’s past and future financial statements, along with the basis and rationale of any assumptions and modeling. You can also include an overview of your recent and previous financing agreements and capitalization tables. Founders with a strong enough pitch to draw VC interest often put a copy or a draft of their pitch deck in their data room as well.
Your investor data room should include clearly defined headlines for each slide. It can be very difficult for an investor to navigate a long technical slide show if the titles are unclear or misleading. Avoid utilizing non-standard analyses in place of the standard ones (e.g. showing only a portion of a Profit & loss statement instead of a complete one).
