A data room is an online destination where startups can gather all the vital information investors will need to view during due diligence. The most cost-effective data rooms will typically include features that let startups manage the information that is shared with whom. So, the appropriate documents will be to the right people. Startup teams can secure their investors with comprehensive access control, expiring links, and password security.
If you are in the early stages of fundraising and a potential investor would like more information about your product, than what’s in your pitch deck, you can request that additional information be included in the data room. It is important to ensure that the data room doesn’t overload an investor as this can slow down the due diligence process and lead them to walk away.
Another key document that is often found in the investor data room is a thorough financial model. It should contain both future and historical projections. This is what investors ultimately be looking for to determine if the value you are selling is actually present within your business.
Startups can also utilize the data room to store other documents that are relevant like HR agreements and legal documents. They can also add research on market trends, intellectual property or any other relevant information. It is crucial not to over-stuff the investor data room, as this could cause confusion to investors or increase the likelihood that they misuse or compromise the content.