A data room is an secure virtual space where businesses can keep confidential information about high-stakes business transactions. These include mergers and acquisitions, initial public offerings (IPO), and fundraising rounds. The data room allows individuals who are authorized, such as due-diligence and investors, to examine and assess sensitive documents without sharing the original files.
Create a clear folder structure in your data room and clearly label all documents to make it easier for others to comprehend and access your data. This will help prospective buyers and investors to find the information they require to make informed decisions. It helps you keep your information well-organized, and prevents mistakes.
Some startups divide their investor data rooms into different documents depending on where they are in the process. If you’re raising your first round of funding, you may want withhold certain information until the investor has expressed interest in moving forward.
While it’s tempting to share as much information as you can, remember that the information you share will be used to build your narrative. The story will vary based on the stage of your company, but it should always contain the primary forces that determine your current success. A seed-stage company may focus on market trends and regulatory changes, as well as your team. But a growth-stage business may emphasize customer references, revenue traction and product development.