A data room is a space that allows sensitive data to be shared during due diligence and other business transactions. Data rooms are used across a range of industries including IT, healthcare, and finance to share sensitive information with potential investors. Due diligence was once done in physical rooms, but nowadays, it is conducted digitally. It involves a large number of documents.
Investors will be asking lots of questions about the startup’s documentation. It is the job of the founders to answer these questions in a manner that impresses them and speeds up the process. Start by creating a folder structure that is clear and organized with clearly defined documents grouped into categories (e.g. legal, financial, contracts). A clear labelling of these documents and folders allows those involved to locate the information they require. Metadata can be added to the data room to give each file 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 include articles of incorporation as well as business certificates, tax information and an audited financial statement. This will demonstrate that the startup is a trustworthy and legitimate business.