A data room is an electronic space that allows sensitive information to be shared during due diligence and other business transactions. It is utilized in a variety of industries such as finance, healthcare IT, IT and capital markets to allow businesses to share information securely with potential investors and other stakeholders. Due diligence was previously performed in physical rooms however, nowadays it is done electronically. It involves a lot of documents.
Investors will have a lot of official site questions about the startup’s documentation. It is the responsibility of the founders to respond in a manner that impresses them and speeds up the process. Begin by creating a folder structure that is clear and organized, with clearly defined documents 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 to give each file more 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 as well as business certificates, tax information and an audited financial statement. This will prove that the startup is a credible and legitimate entity.
