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An investor data room is a virtual repository for sharing files with prospective investors or other third parties in fundraising and M&A transactions. It helps startups organize their documents in a centralized place, rather than distributing documents in multiple emails with attachments. It allows startups to monitor third-party access and safeguard sensitive information from accidental leaks.
Documents to keep in the investor data room include documents pertaining to the company’s formation and legal documents, intellectual properties (like trademarks and copyrights), non-compete agreements, stock option plans contracts with business partners and customers, and employee agreements. Startups can also include a pitch deck in their investor data room to showcase the company’s potential, market research and competitor analysis, as well as a business model.
When conducting due diligence, savvy investors will need to look over the complete list of company documents and a sample set of financials to show how the business model works. You can accelerate the process by providing these documents in a condensed format, such as an investor data room.
Additionally the investor data room is a great way to communicate ongoing investor updates throughout the year. This keeps investors interested and shows the team’s focus on growth and execution of their plan. A well-designed investor data room will also include short messaging and commenting functions so that potential investors can ask questions without leaving the platform.
