Data Room for Investors – What Startups Should Include in Their Investor Rooms
A data room is a digital space where startups can store all the data they require from potential acquirers or investors during an M&A deal. Usually, they’re used to answer questions and conduct due diligence on prospective investors during the process of funding. However they can also be used to simplify a round of funding because they allow investors access to all the documents and information they need.
Startups may have different items in their investor’s rooms, based on their stage and the scope. For instance the stage 1 data room would typically only include an elevator pitch and any publicly available information about the company. This is to give investors an overview of the business and the company. A stage 2 dataroom is normally shared by a company once it has received the Term Sheet and is planning to close an investment. The data room should be designed to permit simplified due diligence, with a more granular set of documents and details.
For instance a stage 2 investor data room could contain things such as historical financial information and projections that are based off of your current business model. This gives investors a clear picture of the company’s financial condition and gives them more detailed information to review and compare with your competitors. Investor updates should be part of this stage of fundraising so investors know how the company is doing and can verify that the company is still on track.