How to Create a Data Room for Investors and Due Diligence Teams
A data room is an encrypted virtual space that allows businesses to store confidential information on high-risk transactions. These include mergers and acquisitions, first public offerings (IPO) and fundraising rounds. The data rooms permit authorized individuals, including investors and due diligence teams — to review and evaluate sensitive information without sharing the original data files.
To make it easier for parties to understand and view your information, make an organized folder structure and clearly label the documents in the data room. This makes it easier for prospective buyers and investors to find the information they need to make informed decisions. It helps to keep your data organized and helps prevent any mistakes.
Some startups divide their investor data room in various documents based on the place they are in the process. For instance in the case of raising your first round of capital it may be necessary to hold certain information until you’ve confirmed that an investor is interested in pursuing further.
It’s tempting to provide as much information as possible. However, the data that you provide must be part of your overall narrative. That narrative will vary depending on the stage of your company, but should always include the main forces that are driving your current success. A startup in the early stages may concentrate on trends in the market and regulatory changes along with your team. However, a growth-stage business might emphasize customer references, revenue growth and product growth.