www.dataroomtools.com/faq-about-the-due-diligence-process/
A data room is an online location where startups can compile all of the important information that investors will want to see during due diligence. The most cost-effective virtual data rooms will typically include features that allow startups to decide the information that is shared with who. This way, only the appropriate documents are placed to the right people. Startup teams can protect their investors with comprehensive access control, expiring links, and password security.
For instance, if you are involved in fundraising at an early stage and an investor wishes to know more about your product than is presented in your pitch deck, the investor can ask for specific additional information to be included in the data room. However, it is vital that the information included in the data room doesn’t overwhelm an investor as it could hinder the due diligence process, and even cause the investor to pull out from the deal.
Another key document that is frequently found in the investor data room is a complete financial model. It should be both historic and projected. This is what investors ultimately look for to determine if the value you are selling is actually present in your business.
Startups may also use the data room to store other documents that are relevant, such as HR and legal agreements. They can also contain market research, intellectual property or any other pertinent information. It is important to not overburden the investor data room, as this could cause confusion to investors or increase the risk that they will misuse or tamper with the data.
