What Startups Need to Know About Investor Data Rooms
A data room is a safe online platform that startups can use to compile all of the important details that investors want to view during due diligence. Virtual data rooms that are the most cost-effective include features that let startups control who gets access to what data. So, the appropriate documents are to the right people. Startup teams can secure their investors with comprehensive access control, expiring links and password protection.
For instance, if you are in the early stages of fundraising, and an investor wishes to get more information about your product beyond what is presented in your pitch deck, the investor could request that specific additional details be included in the data room. However, it is vital to ensure that the information provided in the data room isn’t going to overload an investor, as it could hinder the due diligence process and possibly cause the investor to pull out from the deal.
A detailed financial model is a crucial document that’s typically found in investor data rooms. It should contain both future and historical projections. In the end this is what investors will look at to determine if the value you are selling is actually present in your company.
Startups can also utilize the data room for any other documents that are relevant, such as HR agreements and legal documents. They can also contain market research, intellectual properties or any other pertinent information. It is important not to overload the investor data room because this could cause confusion to investors or increase the likelihood that they will misuse or compromise the content.