A data room is a secure online destination where startups can gather all the vital information that investors would like to look at during due diligence. Virtual data rooms that are the most cost-effective include features that let startups determine who can access what data. This way, only the appropriate documents will be in the hands of the right people. With access control that is granular and expiring links, as well as watermarking and password protection Startup teams can make sure the right investors have what they need to make a sound investment decision.
For instance, if are in early-stage fundraising and an investor would like to know more about your product than what is presented in your pitch deck, the investor could request that specific additional details be included in the data room. However, it is important to ensure that the information provided in the data room isn’t going to overburden an investor since it could hinder the due diligence process and could cause the investor to walk away from the deal.
A complete financial model is another important document that’s usually found in investor data rooms. This should be both historical and projected. In the end, this is what many investors are looking for to verify that the value that you are selling them is actually present in your business.
Startups should also make use of the investor data room to include any other relevant documents, such as legal agreements, HR documents intellectual property market research and much more. It is crucial that startups do not overflow the investor data room with too much information, as it could confuse investors and increase the likelihood of them using or compromising the information.