Data Room Analysis for Startups

A data room is a powerful tool to showcase the value of your company and its potential to investors. It is often used for due diligence in M&A transactions, but can also be helpful for fundraising, IPOs and other investor meetings. However, preparing a data room is a time-consuming and often overwhelming task. How do you determine which documents to include, how should they be organized and grouped and how to set permissions?

As an early stage startup, you must focus on sharing data to support your overall narrative. It will differ by stage, for example, seed-stage startups may want to share data about market trends, regulatory changes and compelling “why now” forces; whereas growth-stage companies should focus on the trends in key metrics, new revenue, customer acquisition and other similar data.

Be careful not to include too excessive information. In fact, too much information could cause investors to become overwhelmed and could indicate that your team doesn’t know what is important to the business. Be sure to ensure that the metrics you use are representative of the complete data rather than selectively presented (like only displaying “bright spots”).

An annotation tool lets users to add questions and comments to any document that is in the data room. This helps keep discussions focused and helps to manage the Q&A process. Furthermore, access permissions for granularity that can be customised on the level of folders and documents are crucial to reduce the risk of sensitive data being shared with third-party parties. Also, look for a vendor that provides an array of reporting tools which track user activities including what documents are being viewed and the times they are viewed.