A data room is a virtual space to share sensitive information during due diligence or other business transactions. It is utilized across a variety of industries that include finance, healthcare IT, and the capital markets to help businesses share their information in a secure manner with potential investors and other stakeholders. Prior to this due diligence was typically conducted in physical rooms, however nowadays, it is conducted digitally and usually involves a large number of documents.
Investors will have a lot of questions regarding the startup’s documentation. It is the responsibility of the founders to respond in a manner that impresses them and speeds the process. Begin by creating a folder structure that is clear and organized with clearly defined documents that are grouped in categories (e.g. legal, financial, contracts). Labeling these documents or folders clearly allows stakeholders and users to find the information they require. Metadata can be added to the data room in order to give each file more context.
Other useful sections that founders can include in their data room include a competitive analysis, a list of current customers and referrals, as well as a customer references/testimonials section. Lastly, a company organisation/formation section includes any documents that show how the startup is legally registered and operated. This could include articles incorporating the business certificate, company certificates, details on tax and an audited Financial Statement. This will prove that the startup is a reliable and legitimate entity.
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