Data rooms allow businesses to securely transfer sensitive information in business transactions and to simplify complex procedures. When you’re preparing to raise capital or trying to close an acquisition, a well-organized virtual environment can expedite due diligence and reduce the chance of misuse of information.
In addition to the necessary documents such as a deck table and term sheet, your data room should also contain detailed financial records as well as revenue projections, IP ownership documentation, and other important details that help investors comprehend the growth potential of your business. Incorporating these documents into your data room can increase investor confidence, speed up due diligence and increase the chance of closing an agreement.
Make sure that your data room can be easily navigated by including an index or table of contents document with links to different sections. It is also essential to label your files and folders with descriptive titles that are consistent, so that anyone who enters the room can comprehend them. Avoid sharing non-standard analyses (e.g., only showing only a portion of a Profit & Loss statement) since this can confuse potential investors.
It is also essential to regularly examine and update the content in your data room. This will improve transparency and accountability while decreasing the possibility of accidental disclosures. In addition, a regular audit can provide insight into the activities of users in your data room (i.e. who has accessed what and when) which can be helpful for compliance purposes. Also, consider adding watermarks to files that you plan on sharing outside of your data room to minimize the chance of file modification that is not authorized or theft.
