A data room is an electronic space that allows sensitive data to be shared during due diligence and other business transactions. It is used across multiple industries, including finance, healthcare IT, IT, and capital markets to help businesses share information securely with potential investors and other stakeholders. Due diligence used to be conducted in physical rooms but now, it is mostly conducted electronically. It involves a lot of documents.
Investors will frequently ask questions about the startup’s documentation. It is the responsibility of the founders to respond in a manner that makes them feel welcome and speeds the process. A good place to start is to create an organized and clear organization of your folders, with clearly defined documents that are grouped into categories (e.g. legal, financial, contracts). Labelling these documents or folders clearly allows users and other stakeholders to locate the information they require. Metadata can be added to the data room in order 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, business certificates, tax information and an audited financial statement. This will demonstrate that the startup is a legitimate and legitimate business.