A data room is an online destination where startups can gather all the vital details that investors want to look at during due diligence. Virtual data rooms that are the most cost-effective include features that allow startups to decide who has access to what data. This ensures that the correct documents get to the appropriate people. With granular access control such as expiring links, watermarking and password protection startups can ensure the right investors have the information they need to make a sound investment decision.

For example, if you are in early-stage fundraising and an investor wants to see more detail on your product than is described in your pitch deck, the investor may request that additional information be included in the data room. It is crucial that the information in the data room isn’t going to inundate an investor, as it could hinder the due diligence process, and even cause the investor to walk away from the deal.

Another important document that is often found in the investor data room is a comprehensive financial model. This should include both future and historical projections. This is what investors will ultimately be looking for to ensure that the value that you are selling is present within your business.

Startups can also use the data room to store other documents of importance including HR agreements and legal documents. They can also include market research, intellectual property or any other relevant information. However, it is important that a startup doesn’t overflow the investor data room with too much information as it could confuse investors and increase the risk of them committing fraud or compromising the data.

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