A data room is a secure virtual space that allows companies to store confidential information on high-risk transactions. This includes mergers and acquisitions as well as initial public offerings (IPO) and fundraising rounds. The data rooms allow authorized individuals — such as investors and due diligence teams to review and evaluate sensitive data without sharing the original data files.
To make it easier for people to read and comprehend your data, create an organized folder structure and clearly label documents in the data room. This will make it easier for prospective buyers to locate the relevant data they need to make an informed decision. It helps you keep your data organized, and it prevents mistakes.
Some startups divide their investor data room in various documents based on the place they are in the process. For example, if you’re just raising an initial round you might want to hold certain information until you’ve confirmed that the investor is interested in pursuing further.
While it’s tempting to share as much information as you can, keep in mind that the information you share should be in line with your larger narrative. The narrative will vary based on the stage your company is, but it should always contain the key factors driving your current performance. For example, a seed-stage company might focus on market trends or regulatory changes and your team, whereas growing companies might focus on customers’ references, revenue growth and product expansions.