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How to Create a Data Room for Investors and Due Diligence Teams

A data room is an encrypted virtual space that allows businesses to keep confidential information about high-stakes transactions. These include mergers, acquisitions or initial publicly-traded offerings (IPOs) and fundraising rounds. The data rooms permit authorized individuals — such as due diligence teams and investors to review and assess sensitive information without sharing the original data files.

To make it easier for potential buyers to view and understand your information, make clear folder structures and clearly label all documents in the data room. This will make it easier for potential buyers to see the relevant data they need to make an informed decision. It helps to keep your data well-organized and helps avoid potential errors.

Some startups separate their investor data rooms into different types of documentation depending on the stage they are at during the process. For instance that if you’re only raising your first round of capital it may be necessary to keep certain information secret until you’ve verified that an investor is interested in moving forward.

It’s tempting for you to provide as much information as you can. But, the information that you provide should be part of your overall narrative. The narrative will vary based on the stage in which your company is, but it should always include the main factors driving your current success. A seed-stage startup may focus on trends in the market and regulatory changes along with your team. A growth-stage business may be more focused on customer references, revenue growth and product development.

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