What is the Purpose of a Data Room?

A data room is a digital space that allows sharing of sensitive information during due diligence or other business transactions. Data rooms are utilized in many industries including healthcare, finance, and IT for sharing sensitive information with potential investors. In the past due diligence was generally performed in a physical room, but nowadays, it is done digitally and typically involves large numbers of documents.

Investors will be asking lots of questions regarding the startup’s documentation. It is the founders’ job to answer these questions in a way that is impressive and speeds up the process. Begin by creating an organization structure that is clear and organized with clearly defined documents grouped in categories (e.g. legal, financial, contracts). Labeling these documents and folders allows users to find the information they require. It is also helpful to add metadata to the data room to provide additional context to each file.

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 of incorporation as well as business certificates, tax information and an https://gooddataroom.com/how-vdrs-can-keep-deals-alive/ audited financial statement. This will show that the startup is a credible and legitimate entity.