A data room is a virtual space in which companies can store confidential data related to high-stakes business transactions. These include mergers and acquisitions as well as initial public offerings (IPO) and fundraising rounds. The data rooms allow authorized individuals — which includes investors and due diligence teams — to review and analyze sensitive information without sharing the original data files.
Create a clear folder structure in your data room and clearly label your documents to make it easier for others to comprehend and read your information. This allows prospective buyers to locate the necessary information they require to make an informed decision. It also helps keep your information organized and prevents potential mistakes.
Some startups separate their investor data room into different sets of documentation based on the stage they’re at during the process. For instance, if you’re just raising your first round of capital it may be necessary to withhold certain information until you’ve established that an investor is interested in moving forward.
While it’s tempting to share as much data as you can, keep in mind that the data you provide will be used to build your narrative. The narrative will vary based on the stage your business is located, but it should always include the main factors driving your current success. A seed-stage startup might focus on market trends and regulatory changes and your team. In contrast, a growth stage business might emphasize customer references, revenue growth and product growth.
