The moment is finally here. You’re ready to raise funds. You’ve prepared an investment one-pager, pitch deck, business plan, financial model, legal documents, and an MVP. Then when you start talking to the investor, you are shocked that they asked for a data room for investors. Before freaking out, you probably already have an investor data room.
I was interested in selling this website around a year ago before deciding to shift it into a business-focused freelance marketplace. I was surprised that many of the potential buyers were asking me to send them the “investor data room.”
Then when I started consulting and creating it, I realized it was extremely simple. I’ll even summarize it for you. An investor data room is a folder that has documents about your company. Let’s say you only have a single pitch deck and a financial model. Then put this with your product information, and you’ve got yourself an investor data room. The aim of it is to spare time by showing investors everything they need to see.
How it looks like
For the example that I mentioned before, I used Google Drive to assemble all the data I had about my company back then. I had purchased designs, had a ton of marketing content, plans of how the organization is, what projects were created, and all the financials and legal documents as well.
This was everything I had for my startup. Hence, this was my Data Room. Yet, if you’re looking for the perfect structure based on my conversations, here you go.
Recommended Content For A Data Room For Investors
I recommend putting the investor data room somewhere secure. I used Google Drive and gave authentication to the people I trust. Additionally, you could force an NDA to be signed before letting them see the documents. But in many cases, this is froundupon.
An investor usually has a reputation. They’re unlikely to damage it by sharing information they saw about your company. Nonetheless, if you believe it to be vital, let them sign an NDA beforehand.
Usually, an investor data room has your latest pitch deck. When I explore projects, the pitch deck is the first thing I look at. I’m sure many investors would do the same. The aim is to see what your project is all about in a few minutes. Then if your project is interesting, an investor would move on to reading something more comprehensive.
That’s why you should also have your business plan there. Always assume that this investor will spend a few hours checking out your data room. When that happens, you’ll realize that a pitch deck won’t be enough. That the investor will have to ask you a lot of questions, which is inefficient.
But, no matter whom you’re speaking to, any investor is a financial person. They’re interested in their return on investment, which is not a bad thing. If you’re a business, you must clearly convey how you make money and how much you will make in the future.
Hence, put your financial model and make it as detailed as possible. In many cases, I always tell my clients that true investors would only need to look at your financial model to truly assess a good business.
Legal Data For The Investors
If all the above clears the initial checks, it’s a formality to review the legal documents you have and your contracts. Scams such as FTX’s scenario are showing the world that due diligence must be more thorough than how it is these days. So don’t blame an investor for double-checking.
If you have a product that has a patent or anything that adds value to your business, you need to clearly state that. It’s an extremely strong addition to your data room, as the investor would be investing in that as well.
Team & Organizational Structure
How are things working in your company? I got this question asked by a few investors when I was showing them the data room. The answer is quite simple if conveyed in a big organizational and process chart. I need to show them who works where and with whom. Just in case I vanish and they have to take over, they need to ensure a good solid structure in place.
Operations & Upcoming Plan
Finally, how are your operations in detail, and what are your upcoming plans? This has to be addressed. You could be working on a business model that you aim to change in the future. While this might be in the business plan, the details of it might not. Showcase a Google sheet or an excel with your exact milestones and timeline pre and post-investment.
What if you don’t have those many documents for your investor data room?
Simply, you have two options:
- Send your investor data room with the information you have – The investor wants to invest in your company. If there is a deal breaker, then they will ask for that document(s)
- Create those documents – If you want to feel extremely safe, then create what’s missing from the above. You can do that yourself. You can use our guides here on this website. Alternatively, you could hire some of our freelance consultants to create the document you are missing. Do whatever suits you.
Ultimately, and most importantly, take a breather and enjoy this moment. The end of anything is usually the start of something new! Get excited!
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