A data room is a secure online platform that startups can use to collect all of the crucial information that investors would like to look at during due diligence. Virtual data rooms that are the most cost-effective ones will have features that let startups decide who has access to what information. This ensures that the correct documents get in the hands of the right people. Startup teams can protect their investors with granular access control, expiring links and password protection.
If you are in an early stage of fundraising and a potential investor is looking for more information about your offering than what’s on your pitch deck, you can request to include additional information in the dataroom. However, it is important that the information included in the data room isn’t going to inundate an investor, as it could slow down the due diligence process and could cause the investor to pull out from the deal.
Another important document typically found in the investor data room is a detailed financial model. This should include both historical and future projections. This is what investors ultimately look for to determine if the value you are promoting is present within your business.
Startups can also use the data room to store other documents that are relevant, such as HR agreements and legal documents. They can also include research on market trends, intellectual property or any other relevant information. It is essential that a startup does not overflow the investor data room with too much information as it could confuse investors and increase the chance of them misuse or compromising the data.