How to Prepare a Data Room for Investor Due Diligence

Due diligence of investors is a crucial step in the investment process. Investor due diligence provides an opportunity for investors to look into the company’s financials and documents, analyze the risks and decide if they wish to invest. A well-prepared and organized data room can speed up the process, lessen the likelihood of misunderstandings or miscommunication, and increase confidence in the decision of the investor to take the next step.

While there are numerous items to include in a data area, this article will focus on a few of the basic items that all startups must have in place prior to pitching to investors.

Investor Updates

Investor updates can be an excellent way to demonstrate to investors you are still executing your plan and moving toward your goals. This is especially important in the beginning. It will also allow them to assess how far you’ve achieved since the last time you met and build confidence.

Intellectual Property Assets

Venture Capitalists and Angels are often interested in the intellectual property of a company and can play an important role in its valuation. Include patents, trademarks, and other relevant data, even if it’s not directly related to your product.

Cap Table

A clear cap table reveals to potential investors the percentage of ownership you hold and how it’s broken into pieces. Include your articles of incorporation, which provide legal context for your company’s structure.