Why Your Startup Should Build a Data Room before Fundraising
Here’s a checklist to get you started.
Are you raising a seed or angel round? Cut down on fundraise time and maximize your chances of success by making a data room to share with potential investors.
How do you build a data room? It’s pretty simple:
- Compile all the things investors want to see into Dropbox or Google Drive.
- Once you’ve pitched to an investor, send the data room link as part of your follow-up.
→ If you’re concerned about sharing proprietary material, make 2 versions of your data room: one with simplified information and one with all the details.
A great data room tells investors that:
- You value and respect the investor’s time.
→ A well-built data room saves investors a great deal of time we would otherwise spend digging up your data.
- You’re an organized businessperson running a real company.
- You’re ready to raise capital and handle the accompanying responsibility to your investors.
A great data room is helpful to you as an entrepreneur because:
- It saves your time as well. Data rooms reduce the number of follow-up calls and questions from investors.
- It maximizes the chance that an investor will invest or refer to you other investors.
So what’s in a good data room?
→ This is not a complete due diligence checklist. Due diligence checklists are more in-depth and vary by investment firm. You’ll usually get that checklist from your lead investor.
→ Since your data room content will depend on your product and business model, some of these may not apply. You’ll need to decide for yourself what’s most critical to your company.
Data Room Checklist
1. PITCH DECK
2. COMPANY DOCUMENTS
a. Amended & Restated Articles of Incorporation (all versions)
b. Voting Agreement(s)
c. Investor Rights Agreement(s)
d. First Refusal and Co-Sale Agreement(s)
e. Stock Purchase Agreement(s)
f. Capitalization Table
→ The more detail on your cap table, the better.
3. BOARD MATERIALS
a. All board meeting minutes
b. Board consents and actions
a. Last year’s P&L
b. A pro forma for the next year
→ Or two years; more information is better, but early-stage investors know that this changes. We just want to see how you plan to spend the money we’re giving you and where it will get your company.
5. TERM SHEET
→ Your term sheet can be either executed or theoretical. If you don’t have a term sheet, it’s good to let your investor know the general terms and funding mechanism of the raise.
6. MARKET RESEARCH
a. Market studies
b. Competitive analysis with features and pricing
a. Sales process
b. Sales pipeline export
→ Graphs are always appreciated.
c. Sample sales materials
→ One-pagers, fliers, decks, etc.
d. Important customer contracts
e. Important LOIs or other indicators of interest from potential clients
a. Branding guidelines/vision
b. Marketing information
→ Social media materials, event plans, etc.
a. A list of all employees with date joined, title, and salary
b. Future critical roles and hires
c. List of contract workers and firms
— Spec list with pricing, vendors and/or factories
— Pictures of the hardware
— System Architecture Diagram
— API Documentation
— Database Schema export
— Details on any “special sauce,” like machine learning or big integrations
a. Product Backlog export or release map
→ High level, please!
b. Screenshots of existing products
c. Wireframes of future products
12. HISTORICAL INFORMATION ON PAST RAISES
a. Legal documents
b. Past term sheets
13. INTELLECTUAL PROPERTY
a. Granted and filed patents
c. IP strategy
→ You need this whether you plan to file 10 patents or none.
By the time companies get to their Series A or B raise, investors expect all of the above and more. But when you take the time to do this as early-stage company, you differentiate yourself, set yourself up for success, and impress us.