A data room is an online safe place for startups to gather all the important information that investors would like to look over during due diligence. The most cost-effective data rooms usually have features that allow startups to control the information that is shared with who. This way, the right documents are placed to the right people. Startup teams can safeguard their investors by providing them with granular access control, expiring links, and password security.
For instance, if you are in the early stages of fundraising and an investor wishes to get more information about your product than what is included in your pitch deck, they can request that specific additional information be included in the data room. However, it is vital that the information included in the data room does not inundate an investor, as this could slow down the due diligence process, and even cause the investor to walk away from the deal.
Another key document that is frequently found in the investor data room is a detailed financial model. It should include both future and historical projections. In the end, this is what many investors will look for to verify that the value you are selling is actually present in your company.
Startups should also make use of the investor data rooms to include any other relevant documents, such as legal agreements, HR documentation intellectual property market research, and so on. It is crucial that a startup doesn’t overflow the investor data room with too many documents as this could cause confusion for investors and increase the risk of them committing fraud or compromising the content.
https://dataroomtools.com/faq-about-the-due-diligence-process/
