A data room is a secure virtual space in which companies can store confidential information related to high-stakes business transactions. This includes mergers, acquisitions or initial publicly-traded offerings (IPOs), and fundraising rounds. The data rooms permit authorized individuals — such as due diligence teams and investors to review and evaluate sensitive data without sharing the original files.
To help parties to understand and view your information, create clear folder structures and clearly label your documents in the data room. This will make it easier for prospective investors and buyers to find the information they need to make informed decisions. It helps to keep your data in order and avoids any potential mistakes.
Some startups divide their investor data room into different types of documentation based on the stage they are at in the process. For example in the case of raising your first round of capital you might want to withhold certain information until you’ve established that an investor is interested in pursuing further.
While it’s tempting to share as much information as you can, keep in mind that the information you share should be in line with your larger narrative. The narrative you tell will differ based on the stage of your business, but it should always contain the major forces driving your current success. For instance, a start-up company might he said focus on trends in the market or regulatory changes and your team, whereas growing companies might focus on customer references, revenue growth and product expansions.
