If you’re in the midst of raising Series A funding or trying to conclude a merger, acquisition or investment deal, a data room for investors is an essential tool to conduct due diligence. It allows you to consolidate all of your documents in one place and let third-party users access the information in real time without having to send email or ask for updated copies.
While it’s tempting to cram your investor data room with all the information you’ve got Be careful not to overwhelm your potential investors. The accumulation of too many documents can make the due diligence process lengthy and frustrating for both sides. A well-organized data room is key in ensuring that investors can quickly and easily evaluate the company’s performance, operational strategy, financial health and legal standing.
Investors will want to be able to view your startup’s historical and projected financial statements, including the source and reasoning behind any assumptions and modeling. You could also include a list of past capitalization tables, financing agreements and other information. Founders with a strong enough pitch to attract VC interest often upload a copy of the pitch deck to their data room too.
The most important thing is that your investor data room should have clearly defined headlines for each slide. If the titles of a technical slide show are unclear or confusing it may be difficult for investors to follow. Avoid using non-standard analyses instead of conventional ones (e.g. showing a small portion of the Profit & Loss statement as opposed to. a full view).
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