What Is a Data Room?
A data room is a space that can be used to store confidential documents with a sensitive nature or to store privileges during due diligence for M&A transactions. Before physical rooms were utilized to store these documents, but with the technological advancements virtual data rooms have become more popular and offer the same level of security as traditional methods.
Investors can review the documents in a matter of hours instead of weeks or months. However, deciding on what to include in an investor data room can be overwhelming for new entrepreneurs. There are, however, some basic guidelines that can be used as an excellent point of reference.
Investors are looking for important data points that provide them with a greater understanding of your business. This may include your financials as well as market research and a clear and concise presentation of your business plan. It’s also important to keep in mind that the amount of information that you need to provide investors will depend on the stage your company is at. An early-stage startup may need to present fewer financials to a Series A company.
It’s important to avoid sharing unorthodox or sloppy analyses, as this can make it difficult for investors to understand the data. Also, it’s not helpful to provide non-standard graphs or charts unless they add nuance to your presentation. This can be done by focusing on important metrics that are easy to comprehend for investors (e.g. by highlighting retention or engagement cohorts).