A data room is a secure location where startups can gather all the necessary information that investors need to examine during due diligence. Virtual data rooms that are the most cost-effective include features that let startups control who gets access to what data. This way, only the appropriate documents are to the right people. With access control that is granular and expiring links, as well as watermarking and password protection startups can ensure the right investors have the information they require to make a sound investment decision.
If you’re at the early stages of fundraising and a potential investor wants more information on your product than what’s included in the pitch deck may be requested that additional information be included in the data room. It is important to make sure that the data room doesn’t overburden an investor, since this can slow down the due-diligence process and cause them to walk away.
Another important document frequently found in the investor data room is a complete financial model. This should include both historical and future projections. In the end, this is what many investors are looking at to determine if the value you’re selling them is actually present in your company.
Startups should also utilize the investor data room to include any other relevant documents like legal agreements, HR documents intellectual property, market research and more. It is essential not to over-stuff the investor data room since this can cause confusion to investors or increase the risk that they will misuse or tamper with the data.