A data room is a vital tool for conducting due diligence, regardless of whether you are raising Series A funding, or closing a merger, acquisition, or investment deal. It lets you organize all documents in one place and allows third-party parties to access the information in real time without the need to email or request updated copies.
While it’s tempting to fill up your investor data room with all the information you’ve got, be careful not to overwhelm your potential investors. Having too many documents can make due diligence lengthy and frustrating for both sides. A well-organized data room is essential to ensuring that investors are able to quickly and efficiently review the company’s performance, operations strategy, financial health and legal standing.
Investors should be able to see your startup’s historical and projected financial statements, which include the reasoning for any assumptions or modeling. You may also choose to include an overview of your current and past financing agreements and capitalization tables. Founders who have a strong enough pitch to draw VC interest will often upload a copy of their pitch deck in their data rooms as well.
The most important thing is that your investor data room must have clearly defined headlines on each slide. It can be very difficult for investors to navigate through a lengthy, technical slideshow if the titles are unclear or misleading. Avoid using non-standard analyses instead of standard ones (e.g. showing only a portion of the Profit and Loss statement vs. the full report).
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