A data room is an encrypted virtual space that allows companies to store confidential information on high-stakes transactions. These include mergers and acquisitions, initial public offerings (IPO), and fundraising rounds. The data room allows authorized individuals, such as investors and due-diligence teams, to review and evaluate sensitive files without sharing the original documents.
To help parties to read and comprehend your information, create a clear folder structure and clearly label the documents in the data room. This helps prospective buyers to identify the necessary information they require to make an informed decision. It helps you keep your data well-organized, and prevents mistakes.
Some startups separate their investor information rooms into different documents depending on where they are in the process. If you are seeking to raise your initial round of capital you may want to keep certain information until the investor has confirmed their willingness to invest.
While it’s tempting to share as much information as you can, remember that the data you share must be used to support your overall narrative. The story will differ based on the stage your business is located, but it should always include the main factors driving your current performance. For instance, a young startup may concentrate on market trends or regulatory changes and your team, while companies in the growth stage might focus on customer references, revenue traction and product expansions.