A data room is an archive of large volumes of documents that buyers review as part of the due diligence process during the course of an M&A transaction. Virtual data rooms are fast replacing the old method of physically visiting offices and signing stack of paper.
Investors conduct extensive research on early-stage companies prior to investing. Due diligence is a process which involves analyzing a variety of information, such as the business model, traction, and financials, in order to make an informed decision. A well-organized data room for investors can speed up the process, and give backers an accurate idea of what they’re investing their money into.
A data room could include a number of different types of documents, but it is important to remember that investors are looking for clarity and consistency. For example, if a section on competitor research includes one image, but a different reference to has a different figure, it could raise questions about the accuracy of the information. It’s also a good idea for investors to have an index or table document to help users navigate the content.
As a founder, it’s your responsibility to ensure all the information in the data room is accurate and up-to-date. It’s also in your best interest to present the data in a professional and professional manner paying particular attention to spelling, grammar and formatting. Investors will judge your presentation style based on the quality of your materials and will view an investment that is poorly presented in an unfavourable image.