An investor data room (IDR) is a virtual repository that allows you to share files with other parties or potential investors in fundraising and M&A deals. It helps startups organize their documents into a single space, rather than sending multiple emails with attachments. It lets startups track access to third-party accounts and protect sensitive information from accidental leaks.
Documents that are important to keep in an investor’s data room include documents relating to the company’s formation and legal paperwork, intellectual property (like trademarks and copyrights) and non-compete agreements. stock option plans, agreements with business partners and customers, and employee agreements. Startups can also include a pitch deck in their investor data room to showcase the potential of the company, market research and competitor analysis, and business model.
In the course of due diligence, experienced investors will want to review the entire set of company documents as well as an example set of financials which show how the business model is operated. You can accelerate the process by providing these documents in a condensed format, such as an investor data room.
As an added benefit the investor data room can be used to provide regular updates for investors throughout the year. This keeps investors engaged with the company and demonstrates that the team is focused on growth and executing on their plan. A well-designed investor data room will also include short messaging and commenting capabilities for potential investors to ask questions without leaving the platform.