A data room is a virtual space used to share sensitive information during due diligence or other business transactions. Data rooms are utilized in a variety of fields including IT, healthcare, and finance for sharing sensitive information with potential investors. In the past due diligence was typically performed in physical rooms, but nowadays, it is done digitally and typically involves large volumes of documents.
Investors will have a lot of questions to ask when they go through the documentation of a startup and it’s the job of the founders to answer these questions in a manner that will impress investors and speed up the process. Start by creating a folder structure that is organized and clear, with clearly defined documents organized into categories (e.g. legal, financial, contracts). Clearly labeling these documents and folders will make it easier for the users to find the information they need. Metadata can be added to the data room in order to provide each file with additional context.
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 be a list of articles that include the business certificate, company certificates, details on tax and an audited Financial Statement. This helps to show that the startup is a legitimate and credible entity to be considered by an investor.