A data room is a digital platform that lets startups upload important documents to ensure due diligence prior to a funding round, or an M&A deal. This typically includes the company’s financial projections as well as extensive IP ownership documentation. This information is available to investors who can make informed decisions when investing in a start-up.
When preparing an investor data room, investors can decide to include the following details:
Pitch Decks or Whitepaper: Founders can upload their pitch decks and a whitepaper that describes how their product/service solves the complex problem or market in a concise manner and is profitable. This document can help establish trust with investors and demonstrate accountability.
Projections: Founders could include historical and projected financial statements. They can also include the assumptions that are based on sources, as well as the reasoning behind these projections. This will simplify the due diligence process and help investors comprehend the projected financial performance of a business and growth potential.
People-Related Documents: Founders may include the resumes of their team members and any employee stock agreements or documentation in connection with hiring. Founders can also choose to include their go-to-market and growth strategy.
Investor Updates: Through the fundraising and due diligence process, founders can add a series of investor updates to the VDR. This keeps investors informed about the developments of the business and demonstrates to them that the company is committed to making the most of their investment.