A data room is a space that allows sensitive information to be shared during due diligence and other business transactions. It is utilized in a variety of industries that include finance, healthcare IT, IT and capital markets to assist businesses share information securely with potential investors and other stakeholders. Due diligence was previously conducted in physical rooms but nowadays, it is conducted digitally. It involves a large number of documents.
Investors are often faced with a myriad of questions when they look through the startup’s documentation, and it’s the responsibility of the founders to answer these questions in a way that attracts investors and speeds up the process. The best place to begin is by creating a clear and organized folder structure, with clearly defined documents that are grouped into categories (e.g. legal, financial, contracts). Labelling these folders or documents clearly makes it easier for users and others to locate the information they require. It can also be helpful to add metadata to the data room to give additional context to each file.
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 or business certificates, as well as tax information and an audited financial statement. This helps to show that the startup is a legitimate and credible entity for consideration by investors.