Is an Investor Data Room Really Necessary?

The investor data room is an important central repository for all due diligence materials making sure that everything is centralized. It can also speed up the process, and give both parties peace of mind. It’s a must for any startup raising money from buyers or investors outside the company, but some founders wonder whether it’s worth the extra cost and effort.

The answer to this is usually yes, however it is contingent on the amount of information available and how it’s presented. Investors want all the information they need to make an informed decision. However sharing too many details or data that isn’t relevant can take up their time and reduce the impact of crucial information.

As an entrepreneur, you’ll need to determine what information you include in your investor data room. Only share the information that is necessary to the due diligence process. Also, you should consider the type of investor you are targeting and tailor your content to meet their needs.

For instance, you might have a section for industry reports and publications, customer references and testimonials and a competitive assessment. It is important to include a section for the due diligence process legal aspects of your business, including documents such as articles of incorporation, corporate bylaws, and other documents relating to the structure and governance of the company.

You’ll also want to include details about the intellectual property that your company holds (patents and trademarks). This is among the primary criteria that angels and VCs evaluate when making their investment decisions. This information can aid in accelerating the deal, and ensure that investors are aware of the risks that come with their investment.