What Startups Need to Know About Investor Data Rooms
A data room is a safe online destination where startups can gather all the vital details that investors want to review during due diligence. The most cost-effective data rooms typically have features that let startups control the information that is shared with who. Thus, the appropriate documents are in the hands the right people. With access controls that are granular including expiring links, watermarking and password protection, startup teams can ensure the right investors due diligence process have everything they require to make an informed investment decision.
If you’re in an early stage of fundraising and a potential investor is looking for more information on your product than what’s on the pitch deck may be requested that additional information is included in the data room. But, it is essential to ensure that the information provided in the data room doesn’t overburden an investor since it could hinder the due diligence process and could cause the investor to pull out from the deal.
A complete financial model is another important document that’s often found in investor data rooms. It should contain both future and historical projections. In the end, this is what many investors are looking at to determine if the value you are selling them is actually present in your company.
Startups should also use the investor data room to incorporate any other relevant documents, such as legal agreements, HR documents as well as intellectual property market research, and more. It is essential that a startup doesn’t overflow the investor data room with too many details as this could confuse investors and increase the chance of them committing fraud or compromising the content.