Nuban Institute

The Importance of a Data Room for Startups

A virtual dataroom can be an important instrument to assist startups in their due diligence. It provides potential investors with an extensive and simplified view of the business, which can accelerate the process and result in more attractive investment offers.

Investors conduct thorough investigations of companies that are just starting out before investing, to reduce the risk. Early-stage investments are high-risk and investors should have a a complete, up-to date overview of the company’s assets and liabilities. In the past investors would review documents and financial information in chambers. Today this process is much more efficient when you have an online data room.

An investor data room enables founders of startups to present a cohesive story of their business through the organization and accessibility of company files. The platform’s central access, search capabilities as well as indexing and labels facilitate a more efficient due diligence process. This streamlines the acquisition or fundraising processes and decreases the time spent by investors.

The most important documents that should be included in the data room for startups include investor decks, pitch books and whitepapers, business plans and forecasts including articles of incorporation, cap table, investor rights agreements onboarding documentation, as well as co-sale agreements. The data room should include the startup’s intellectual portfolio which includes patents, trademarks and other legal documents. Additionally, it is essential to include HR documents and the names of employees to provide an insight into the startup’s workplace culture and hiring processes.

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