A data room is a digital platform that lets startups upload important documents for due diligence prior to a financing round or an M&A deal. Typically, this includes the company’s financial projections as well as extensive IP ownership documents. This information is provided to investors who are able to use it to make informed decisions when investing in a start-up.
When preparing an investor data room, founders can choose to include the following details:
Pitch Decks or Whitepaper Founders may upload their pitch decks as well as whitepapers that describe how their product/service addresses a complex problem/market in a clear manner and is profitable. This document can be used to create trust with potential investors and demonstrate accountability.
Projections: Founders might include financial statements from the past and projected. They can also provide the assumptions of the source, reasoning, and assumptions behind these projections. This will streamline the due diligence process and aid investors in understanding the company’s forecasted financial performance and growth prospects.
People-Related documents: Founders can include resumes of key team players and any employee stock agreement or documentation related to hiring. Founders could include their growth plan and go-to-market strategy.
Investor Updates: Through the fundraising additional reading and due diligence process, founders are able to add a series of investor updates to the VDR. This helps to keep investors updated on the company’s progress and enables them to see that the company is committed to making the most of the investment.