A startup creates an investor data room which is a repository of information online that it curates in order to answer due diligence questions from investors or M&A investment bankers. The aim is to the process of negotiating a deal and reduce the time needed for all parties involved. There are a variety of software options to assist with this process. They include the most popular solutions such as Google Workspace or Dropbox, but also more specific ones like CapLinked or Contract Zen.
Some VCs, founders and entrepreneurs have argued that data rooms slow the process due to them allowing investors to take their www.onlinevdr.com/what-is-financial-reporting/ time by deciding what data they want to view. This isn’t necessarily the case, but data rooms should only be used sparingly.
Typically, a VC or investor may request access to a data room at two specific stages. Stage 1 involves the data required to prepare an investment memo or to present you with the Term Sheet. This could include parts of the data space, such as financial models and fit to market. It could also include more specific information like the bios of your top team members and securities-related documents.
Stage 2 is when investors want to conduct more thorough due diligence on your business. This could include analyzing your intellectual property and technology stacks, as well as more detailed financial data and a full list of all agreements. It is also possible to provide more specific pitch decks at this stage.