A data room is a space that allows sensitive data to be shared during due diligence and other business transactions. Data rooms are used in many industries, such as healthcare, finance and IT for sharing sensitive information with potential investors. Previously due diligence was typically performed in a physical room, but now, it is generally conducted digitally and typically involves large volumes of documents.
Investors will have a lot of questions regarding the startup’s documentation. It is the job of the founders to answer these questions in a manner that impresses them and speeds the process. Begin by creating an organization structure that is clear and organized with clearly defined documents that are grouped into categories (e.g. legal, financial, contracts). The clearly labeled documents and folders allows those involved to locate the information they need. Metadata can be added to the data room in order to provide each file with additional context.
Other useful sections that founders can include in their data room include a competitive analysis, a list of current customers and referrals, as well as a customer references/testimonials section. Lastly, a company organisation/formation section includes any documents that show how the startup is legally registered and operated. This could include articles of incorporation, business certificates, tax information, and an audited financial statement. This proves that the startup is a legitimate and trustworthy entity for consideration by investors.