How to Create a Data Room for Investors and Due Diligence Teams
A data room is a secure virtual space where companies can store confidential information relating to high-risk business transactions. These include mergers, acquisitions, initial publicly-traded offerings (IPOs) and fundraising rounds. The data room permits authorized individuals, such as due-diligence teams and investors, to examine and assess sensitive files without sharing the original documents.
To make it easier for potential buyers to view and understand your data, create an organized structure for your folders and clearly label all documents in the data room. This makes it easy for buyers to find the information they require to make an informed decision. It helps to keep your data organized and helps prevent any mistakes.
Some startups separate their investor data rooms into different documents based on where they are in the process. If you are raising an first round of capital it is possible to withhold certain information until an investor has confirmed their willingness to invest.
While it’s tempting to share as much data as you can, keep in mind that the data you provide should support your broader narrative. The narrative will vary based on the stage your business is at however, it should contain the key factors driving your current success. A seed-stage company may focus on trends in the market and regulatory changes, as well as your team. But a growth-stage business may be more focused on customer references, revenue traction and coding product expansions.