A VC or investor has expressed interest in your business and has asked for more information. They want to verify what you’ve presented in your pitch deck and are seeking more detailed information regarding your business model, the traction of your company and financials. An investor data room could aid.
The difference between winning or losing an investment deal can be made by executing the right strategy. Investors are busy and have little time for long processes. You must be ready as soon as the prospect of acquiring an investor approaches. The proper information in a room will save both parties time and show that they are committed to fundraising.
To run a successful investor data room, you should start by creating a folder structure that is clear and logically labeled. Include only those documents that investors require to complete their due diligence. This will vary at every stage of the deal process, but generally includes the following:
IP Information (patent filings, trademarks and intellectual property)
Documentation related to people (resumes and employee stock agreements as well as documents regarding hiring).
Financial Information (historical and projected) including sources and assumptions, as well the rationale behind these projections
You might also consider adding documentation that proves your startup is in compliance with local, national or international regulations. This is an excellent way to put investors’ minds at ease early on and help them feel secure that the business is operating legally. Also, think about including documents on sustainability for the long-term (e.g. carbon emissions reporting system or other measures to sustain the environment). A virtual data room that incorporates analysis of file access can allow startups to actively prepare ahead of meetings with investor stakeholders. This can lead to more productive conversations and an understanding of the questions investors are most concerned about.
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