What Should be in an Investor Data Room?

Published July 14, 2020
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  1. Should I Have an Investor Data Room?
  2. Benefits of an Investor Data Room
  3. What Should Be in My Investor Data Room?
  4. What Shouldn’t Be Included in My Investor Data Room?
  5. Get the Ball Rolling With Visible

An investor data room is a powerful tool to better your odds of a quick and efficient fundraising process. When setting out to raise capital for your business investors will often ask to see past financials and historical metrics.

Having an investor data room prepared is a surefire way to speed up the process and impress potential investors. Andrea Funsten is an investor at Basecamp Fund so it is safe to say she has seen her fair share of startups. An easy way to impress Andrea and get her to move forward with the deal quickie? A data room. 

As Andrea Tweeted, “Even as early as the seed stage, an organized data room can make you stand out from the crowd. Sharing a list below of items that I received this week from a founder who is ~2 months away from raising. Left me so impressed and eager to move fast on the deal.”

Should I Have an Investor Data Room?

Before putting together your investor data room you need to ask yourself, “should I have a data room?” The idea of data rooms is widely debated between VCs and founders. As seen above, access to a data room allowed Andrea to move quickly on her deal. On the flip side, Mark Suster claims that “you should never have a data room.” Why?

Mark makes the case that a data room actually slows down the process. After meeting with an investor for the first time they may ask for a data room, hem and haw over the details, and delay giving a solid yes or no for as long as possible. This combined with the vested interest in collecting more data can certainly lead to slower decision making.

However, there are clear advantages of using an investor data room as well. If done correctly, a data room can field most questions and due diligence that investors will have. In a world that continues to move away from in-person events, the ability to control the story of your data and startup is vital. The scale at which you can contact and answer questions of potential investors will allow you to focus on other aspects of your business — not just fundraising.

If you have a line of investors out-the-door eager to write a check — sure, you can probably skip the data room. If you’re like the 99% of companies speaking to countless investors and pressing to close your round, you may benefit from a structured and scalable way to share your data.

If you have decided a data room is right for your company, the question now becomes “how and what should be in my investor data room?”

Benefits of an Investor Data Room

Building momentum in a fundraise, especially at the early stages, can almost feel impossible. Having your documents and assets in one place is a surefire way to speed up the process as much as possible. Unfortunately for founders, different investors will want to see different documents throughout a fundraise. In order to best prepare for one-off requests, it is vital to have all of your materials in 1 place to speed things up. A few benefits of a data room:

  • One central spot where all of your most important documents live
  • A forcing function to prepare the required materials before a fundraise
  • Easily share documents with investors
  • Track how specific investors are engaging with your fundraising materials.

What Should Be in My Investor Data Room?

Deciding what to include in your investor data room can be intimidating. You don’t want to include too much or too little. Remember the goal is to be more efficient to speed up your fundraise. However, most investors will be looking for similar things in a data room.

Company documents & financials

To start, you will want to include the basics for your fundraise. This includes your deck, basic financials (cash metrics, OpEx, etc.), projections for the following year, and your cap table. Be sure to include any happenings and commitments for the current round as well. All of these things should be easily accessible for you and should require minimal effort to get them together.

The team at Corl suggests including the following documents as well:

  • Amended and restated articles of incorporation.
  • Voting agreements
  • Investor rights agreements
  • First refusal & co-sale agreements
  • Stock purchase agreements
  • Capitalization table
  • Any documents/details on previous raises

Related Resource: The Startup Metrics Potential Investors Want to See

Past investor Updates

Not only will including past investor updates help them assess the growth of the business, it is a surefire way to show you take investor communication and transparency seriously. As Andrea Funsten Tweeted, “Recent investor updates for the last 6 months. Helps me not just gauge the level of transparency that they have with their investors (sharing the bad just as much as the good) but I can see the progression over time.”

Marketing materials

This can be a quick section showcasing your brand and marketing vision. Include your pitch deck as well as a deck you may share with customers. The team at Corl suggests sharing a 1-pager on your brand and marketing vision here as well. 

Related Resource: Are Your Marketing Efforts Really Enabling Sales Performance?

Market research

This section is intended to show you have a deep understanding of your market and your immediate competitors. Include any first hand market research or public reports that are relevant to your market. You will also want to share a competitive analysis showcasing different price point and feature differences. 

As Andrea Funsten wrote, “include a competitive Landscape Tracking Sheet – a list of companies that they are tracking, some that are not on the market yet. I love that they were not afraid to share this and were extremely thorough.”

The team

This is exactly what is sounds like, a section to highlight your team members. This should also show the exact titles, salaries, and job description for current team members. 

Also use this as a section to showcase where your next hires will be. This will not only help share the vision of the team you are building but can also allow investors to jump in and help hire from their network. To go above and beyond, you can also include things like onboarding documents to offer a glimpse of your culture and hiring process. 

What else?

These are the basics to get you started with your data room. While different investors may want to see different things, these should give you a solid start. You may be asked to include things like intellectual property, technology stacks, and more company documentation. 

What Shouldn’t Be Included in My Investor Data Room

As a founder it is important to control your story during a fundraise. To help with this it is important to make sure what your investors are seeing and engaging with throughout a fundraise. Certain data or documents without context can be dangerous to a raise so it is important to keep tabs on what is in your data room. A few things that might not be worth including in an investor data room:

  • Documents that aren’t vital to investors for decision making
  • Sensitive information or data that might require additional context
  • Documents that are not important to the stage an investor is at in the journey – for example, if they are only taking a coffee meeting, limit what you are sharing with them.

Get the Ball Rolling With Visible

To get the ball rolling for your fundraise, check out our free Fundraising CRM. Find investors using our free investor database, Visible Connect, add them to your Fundraising Pipelines, and engage with investors using our deck sharing and Updates tool. Raise capital, update investors and engage your team from a single platform. Try Visible free for 14 days.

 

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