How to Create a Data Room for Investors and Due Diligence Teams
A data room is an encrypted virtual space that allows companies to store sensitive information regarding high-stakes transactions. These include mergers, acquisitions or initial publicly-traded offerings (IPOs) and fundraising rounds. The data room permits authorized individuals, including investors and due-diligence teams, to examine and assess sensitive documents without sharing the original files.
To help parties to comprehend and read your data, create clear folder structures and clearly label all documents in the data room. This will help prospective investors and buyers to locate the information they require to make informed decisions. It also helps keep your information well-organized and helps avoid potential errors.
Some startups separate their investor data room in different documents, based on where they are in the process. For example that if you’re only making your first investment it may be necessary to hold certain information until you’ve established that an investor is interested in moving forward.
While it’s tempting to share as much information as you can, remember that the information you share will be used to build your narrative. The narrative you tell will vary based on the stage your business is at however, it should include the main factors driving your current success. A seed-stage company may focus on market trends and regulatory changes as well as your team. In contrast, a growth stage business may emphasize customer references, revenue growth and product growth.