A data room is a space that allows sensitive information to be shared during due diligence and other business transactions. It is used across multiple industries including healthcare, finance IT, IT and capital markets to allow businesses to share information securely with potential investors and other stakeholders. Due diligence was traditionally done in physical rooms, but is now mostly conducted digitally. It involves a large number of documents.
Investors will have a lot of questions to ask when they review the startup’s documentation and it’s the job of founders to address those questions in a way that will impress investors and speed up the process. Begin by creating an organization structure that is clear and organized with clearly defined documents that are grouped into categories (e.g. legal, financial, contracts). The clearly labeled folders and documents makes it easier for stakeholders to locate the data they need. It is also helpful to add metadata to the data room to provide additional information to each file.
Other useful sections that founders can include in their data room include a competitive analysis, a list of current customers and referrals, as well as a customer references/testimonials section. Lastly, a company organisation/formation section includes any documents that show how the startup is legally registered and operated. This could include articles that incorporate the business certificate, company certificates, details regarding tax and an audited Financial Statement. This helps to show that the startup is a legitimate and what is the purpose of a data room trustworthy entity to be considered by an investor.
