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 includes, for example the company’s financial projections and detailed IP documentation. This information is available prospective investors, who are able to use it to make informed decisions when investing in a startup.
When creating an investor data room, founders are able to choose to include the following information:
Whitepapers or Pitch Decks: Founders can upload their pitch decks as well as a whitepaper that describes the way in which their product or service addresses the complex problem or market in a clear way and is profitable. Adding this document will help establish trust and prove the company’s accountability to investors.
Projections: Founders may include both historical and projected financial statements, as well as the assumptions, sources, and reasoning behind the projections. This will simplify the due diligence process and help investors understand the projected financial performance of a business and growth potential.
People-Related Documents: Founders may include resumes of the team’s key players, as well as any employee stock agreement or documentation related hiring. The founders can also include their go-to-market and growth strategy.
Investor Updates During the fundraising or due-diligence process, the founders could add a series updates for investors to the VDR. This helps to keep investors informed of the progress of the business and helps them to know that the company is committed to making the most of its investment.