A data room enables investors to assess the investment opportunity clearly and consistently. A data room facilitates an easier due diligence process and allows investors to get information about the business quickly.
For entrepreneurs who are pitching VCs for the first time, the data room is a vital tool to present their company and help them close the deal. A recent study found that a venture capital firm will examine 101 potential opportunities for each deal they close. However, only 4.8 of these moves on to the due diligence phase and only 1.7 of them move on to the negotiation of the term sheet. The success of the VC deal is dependent on many aspects, including the caliber of the founding team along with the business model and the market.
A comprehensive investor data space includes financial documents, such as statements of profit and loss, balance sheets, cash flow reports and performance reports. Additionally, it contains legal documents such as articles of incorporation, board resolutions, shareholder agreements as well as intellectual-property documents, such as patents, trademarks, and copyrights. It also includes a cap-table that shows the ownership of the company, and a detailed listing of shareholders with their percentage of ownership.
In addition to these documents, an investor’s data room should include a Q&A section that allows for central communication between parties and streamlines due diligence processes. Document version control is also vital, as it allows investors to keep track of changes in real-time. Lastly, it should have features that add layers of security for sensitive files such as dynamic watermarks that stop printing and forwarding, and a NDA that is automatically presented to users upon login.