A data room is a secure online platform that startups can use to compile all of the important details that investors want to review during due diligence. Virtual data rooms that are most cost-effective will have features that let startups decide who has access to which information. This way, the right documents will be in the hands of the appropriate people. With access control that is granular such as expiring links, watermarking, and password protection startup teams can be sure that that investors get the information they need to make an informed investment decision.
For instance, if are in the early stages of fundraising, and an investor would like to learn more about your product than what is described in your pitch deck, the investor can ask for specific additional information to be included in the data room. It is important to make sure that the data room doesn’t overwhelm the investor, as this could hinder the due diligence process and lead the investor to withdraw.
A detailed financial model is another important document that’s often found in investor data rooms. This should include both historical and future projections. This is what investors will ultimately look for to ensure that the value you are selling is actually present within your business.
Startups can also make use of the data room for any other documents that are relevant like HR and legal agreements. They can also contain research, intellectual property or any other pertinent information. It is essential not to over-stuff the investor data room, as this could confuse an investor or increase the likelihood that they misuse or alter the information.
