How to Create a Data Room for Investors and Due Diligence Teams
A data room is a secure virtual space that allows businesses to store confidential information on high-risk transactions. These include mergers, acquisitions, first publicly-traded offerings (IPOs), and fundraising rounds. The data room permits authorized individuals, including due-diligence and investors, to examine and review sensitive files without sharing the originals.
To help parties to view and understand your information, create an organized folder structure and clearly label your documents in the data room. This will allow prospective investors and buyers to find the information they require to make informed decisions. It helps you keep your information well-organized and helps avoid mistakes.
Some startups divide their investor data room in different documents based on where they are in the process. For example that if you’re only raising an initial round it may be necessary to hold certain information until you’ve confirmed that an investor is interested in pursuing further.
It’s tempting for you to provide as much information as possible. However, the data you share should be part of your overall narrative. This narrative will change depending on the stage in which your company is, but it should always include the main factors driving your current performance. A seed-stage startup may focus on trends in the market and regulatory changes, as well as your team. A growth-stage company may focus on customer references, revenue growth and product growth.
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