My Christmas List Data Room

What to include in a data room

Last week, my partner Carly Anderson, published “All I Want for Christmas… Is More Nuclear Power”. I am going to be admittedly a bit less ambitious here, but all I really want is the information needed to get to an investment decision “Go / No Go” in a time efficient manner for entrepreneurs. A major part of getting to that decision is having the information we need to understand and evaluate a breakthrough scientific company. This post is targeted at entrepreneurs raising a Seed to Series A round of investment.

By “data room”, what I mean is an organized form of data that you plan to share with prospective investors when you engage in meaningful due diligence. There are post term sheet forms of data room which really means legal-docs for lawyers (ie charter docs, employment contracts, etc). I am specifically talking about business level due diligence docs (ie pre lawyers / pre closing). This can be shared via DocSend, Google Drive link, attachments. I personally prefer a format where if you (the entrepreneur) want to update it, I (the investor) can understand you have shared an updated version. So much of life is logistics :)

The following is on a sliding scale, meaning the more “pre-seed” you are, the less I am expecting, the more “Series A” you are the more I am expecting (knowing round names are somewhat meaningless….). This info sharing usually happens after a light deck and initial call; it is one of the steps in ‘peeling back the onion’.

Deck

• I could write a post entirely devoted to this topic! Please please please include:
• What problem you are solving (make it easy to understand!)
• Early traction (customer list, LOIs, etc — show vs tell that there is and/or will be a market for this)
• Business model
• Market size (how you think about TAM, SAM, SOM, etc)
• Moat, be clear on what this is
• Competition; you can help frame what the axes (think 2x2 matrix) are to evaluate your specific business (ie speed, cost, performance, etc)
• Fundraising (past rounds, current round, folks involved, milestones)
• I love when I get a version that has the “appendix” type slides (ie use cases, how it works / deep dive on the tech)
• Team (how well suited is the team to solving this problem….)
• Sometimes founders will include a “narration”. This is typically a type of doc that speaks in more detail to each slide in the deck. I love this. Your deck should be able to stand alone without you speaking to it (because you will not always be able to), but a supplemental narrative doc is priceless. This typically becomes the backbone for my internal investment memo.

Financial Model

• Include financial projections for at least the next 5 years, year by year (quarter by quarter is nice); I expect this is bottoms up where I can see the assumptions underpinning your revenue and cost structure
• Actual financials: I like to know how the company has performed in recent quarters compared to budget (revenue, cost, cash, etc)
• I typically do a long-ish call with a CEO solely devoted to walking through the financial model (step by step)
• Your model should help me understand the revenue model at a very deep level — what is recurring / one time, what are the customer types, who is already in the pipeline
• I look for a hiring plan by year (with specific salaries and equity packages attached)
• Future rounds; I expect to see the assumptions around a next round fundraise, including how much needs to be raised / when
• I love receiving the actual TAM calc (ie market size) and how you have thought about it, what your TAM bottoms up build is, what your sources are. I am looking at how revenue projections for the company on a bottoms up basis relate to the TAM (is the market growing at a high CAGR, is your share growing, etc)
• Please please please give this to me in Excel / google-sheet format. A 100 page pdf file honestly just makes me want to cry and get back in bed!

Customers

• I appreciate when a data room has a file that takes me through your current customers and how you project to do additional volume with them in the future (this may be # of units, different divisions, etc)
• I want to understand the life time value of some of your early deals
• LOI: if you have an LOI include it in the data room. This often informs what “customer reference calls I request”
• Sometimes I will get sub-decks just devoted to go-to-market and customer acquisition strategies

Cap Table / Fundraising

• Existing cap table (the basic who owns what); expect some follow-up questions on how you thought about splitting equity amongst the team
• Past rounds, what has been raised, at what terms
• Pro-forma cap-table. Your lawyers usually will put this together for a priced round (ie you have raised pre-Seed on SAFEs and you are now raising a priced Series Seed round). This seems super basic, but it really helps to understand and get everyone on the same page regarding how SAFEs convert, option pools, etc. No one wants to be surprised at the last minute by this.
• Vesting schedule for the founders

Technology / IP (especially important for Deep Tech companies)

• Product roadmap (be clear on beta units, production, mass production, etc)
• Patents (stage, path, what is going to be trade secret vs plan to patent)

Other

• JVs, partnerships

Ultimately, both entrepreneurs and investors want to reach a time efficient decision. A well structured and communicated data room can really aid in this process. It communicates both information and clarity of thought and process.

Here is a helpful comprehensive list from Y-Combinator.

Prime Movers Lab invests in breakthrough scientific startups founded by Prime Movers, the inventors who transform billions of lives. We invest in seed-stage companies reinventing energy, transportation, infrastructure, manufacturing, human augmentation and agriculture.

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