A data room is a secure location to store confidential documents of a sensitive or privileged nature in due diligence M&A transactions. Previously, physical rooms were used for this purpose, however with the technological advancements virtual data rooms are becoming increasingly popular and provide the same level of security as traditional methods.
Investors will have the ability to look over the documents within hours instead of weeks or months. The new entrepreneurs might find it difficult to decide what information they would like to include in their investor data room. There are some guidelines that could be a good starting point.
Investors are looking for key data points that can provide them with a better understanding of your business. This may include your financials along with market research and a clear explanation of your business plan. It is important to keep in mind that how much information you share with an investor depends on the stage of your business. A start-up in the early stages will have to present fewer financials to a company in Series A.
Avoid sharing unstructured or unusual analyses as this can make it difficult for investors to understand the information. It’s also not helpful to share non-standard charts or graphs as long as they add nuance and depth to your presentation. This can be done by focusing on the key metrics that are easy to comprehend for investors (e.g. by highlighting the retention or engagement cohorts).
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