Data room business is a tool used to aid in the due diligence procedure during any major financial transaction, like a sale of a company or venture capital round, or an initial public offering (IPO). By keeping all important documents in a virtual environment, companies can ensure that third parties have access only to the information they require and safeguard sensitive information from unauthorized disclosure.
When creating an investor data room, founders can decide to organize their the files using a top-down or bottom-up strategy. The first involves creating principal folders for specific types of information, like department, project stage or department. Subfolders further break down documents into easy-to-use structures. The second option is a better solution that allows users to access data by simply clicking on the name of a document or image.
The types of documents that commonly will be found in an investor’s data room are pitches, a one-pager on the company and a thorough market overview, including competitors’ analysis and customer references. It is also beneficial to provide the founders with an overview of the current role of the team as well as the compensation they will receive.
A section that focuses on the historical and/or projected financial performance of the company is another important aspect to include. The financials should be concise and clear, backed by reliable sources and reasonable assumptions. Founders can also include an analysis of competitors or a development roadmap, in addition to other legal documents pertinent to the fundraising process. A section about the marketing and branding strategy of the company can also be helpful.