An investor data room is a digital repository that allows sharing of files with prospective investors or other third parties in fundraising and M&A transactions. It lets startups organize their documents into a single area, instead of sending multiple emails with attachments. It also gives startups an opportunity to monitor third party access, and protect sensitive information from leaks by allowing only authorized users to view or download documents.
Documents to keep in an investor dataroom include documents related to company formation and legal documents, intellectual properties (like trademarks and copyrights) and non-compete agreements. stock option plans agreements with customers and business partners and employee contracts. Startups can also include a pitch decks in their investor data rooms to highlight the potential of the company market research, competitor analysis, as well as a business model.
In the course of due diligence, experienced investors will need to look over the entire list of documents and an example set of financials which show how the business model functions. Offering these documents in a consolidated format, like an investor data room, can help accelerate the process and allow you to close deals more quickly.
A data room for investors could be a great way to communicate updates to investors regularly throughout the year. This keeps investors interested and highlights the team’s focus on growth and execution of their strategy. A well-designed investor data room can include short messaging and commenting functions to allow investors who are interested to ask questions without having to leave the platform.