A data room is an encrypted virtual space that allows companies to store confidential information about high-stakes transactions. These include mergers, acquisitions, initial publicly-traded offerings (IPOs), and fundraising rounds. The data rooms allow authorized individuals — such as investors and due diligence teams to look over and evaluate sensitive information without sharing the original data files.
Create a clear folder structure in your data room. You should clearly label all documents to make it easier for others to comprehend and access your data. This allows prospective buyers to identify the necessary information they require to make an informed decision. It also helps keep your information well-organized and helps avoid potential errors.
Some companies divide their investor information rooms into different documents depending on where they are in the process. For instance that if you’re only starting to raise capital, you may want to hold certain information until you’ve established that an investor is interested in pursuing further.
While it’s tempting to share as much data as you can, remember that the data you provide should support your broader narrative. The narrative you tell will vary based on the stage in which your company is in, but it should always include the most important factors driving your current performance. For example, a seed-stage startup may focus on the latest market trends or regulatory changes and your team, whereas companies in the growth stage might focus on customer references, revenue traction and product growth.
