A data room is a secure online platform that startups can use to compile all of the important details that investors want to see during due diligence. Virtual data rooms that are most cost-effective ones will have features that allow startups to control who gets access to what data. This way, the right documents get in the hands of right people. Startup teams can secure their investors with granular access control, expiring links, and password protection.
For instance, if are in early-stage fundraising and an investor would like to see more detail on your product beyond what is provided in your pitch deck, the investor can request that specific additional information be included in the data room. But, it is essential to ensure that the information provided in the data room isn't going to overwhelm an investor as this could slow down the due diligence process and could cause the investor to pull out from the deal.
A thorough financial model is another crucial document that is often found in investor data rooms. It should include both historical and future projections. Ultimately this is what investors are looking for to make sure that the value that you are selling them is present in your business.
Startups can also utilize the data room for any other documents of importance such as HR and legal agreements. They can also contain research, intellectual property or any other relevant information. It is crucial not to over-stuff the investor data room, as this could confuse an investor or increase the chance that they will misuse or alter the content.