What is the Purpose of a Data Room?

A data room is a space that allows sensitive information to be shared during due diligence and other business transactions. Data rooms are used across a range of industries, such as finance, healthcare and IT to share sensitive information with potential investors. Due diligence used to be done in physical rooms, but nowadays, it is conducted digitally. It involves a lot of documents.

Investors have many questions when they read the startup’s documentation and it’s the responsibility of founders to address those questions in a way that impresses investors data room and speeds up the process. Begin by creating an organization structure that is organized and clear, with clearly defined documents grouped into categories (e.g. legal, financial, contracts). Labeling these folders and documents will make it easier for the people to find the information they need. Metadata can be added to the data room to give each document additional 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 documents that incorporate the business certificate, company certificates, details on tax and an audited Financial Statement. This will show that the startup is a reliable and legitimate entity.