Why having a fundraising data room is a must?

written by Anna Magiera, Senior Partner, Startups & Venture Business

Every investor is different, but all of them have something in common. They want to know everything about your startup before they decide to invest. And for them, one of the essential criteria is that they can get all the information they need from you. Relatively fast. Then you become their guru and expert, a professional they can trust and rely on. And that is crucial grounds for any successful business partnership.

What is a fundraising data room?

Fundraising is a 24/7 job; hence the more prepared you are beforehand, the less stressful and complicated it gets. One of the steps of getting ready is setting up and filling in the virtual data room.

A data room is a folder or numerous folders on Google Drive, Dropbox, or any other files sharing service where you store all your documents and reports to share them with investors easily.

What shall be in your virtual data room?

Depending on the stage (pre-seed, seed, Series A, etc.), the content and structure of the data room will vary. When you have two team members, an MVP, and a couple of beta-testers, it’s just a pitch deck, a financial model, a pre-shareholders agreement, and a cap table. But when you have a running business (even a small one), paying clients, employees, tech documentation, financial reporting, etc., that’s another story.

Here is a basic list of materials that will come in handy during the communication with VCs. Make sure you have it in place before initiating the talks with investors:

• Executive Summary/One-pager — some VCs still prefer this brief document instead of the deck to quickly analyze the opportunity.
• Pitch Deck — a detailed presentation of your solution, market, team, etc.
• Cap table — how equity is structured.
• Technology description and detailed “how it works” — what is the architecture, what is going on the backend, what are vital processes.
• Competitor analysis — extensive and up-to-date data with all the details important for your Go-2-Market, pricing, strategy, etc.
• Sales strategy/Go-2-Market — how will you sell your product/service, and which exclusive channels are available to you.
• Roadmap: product and business development — how will you grow your business and improve your product/service.
• Financial Model and Cash Flow and Profit & Loss reports: past periods and forecast (2–3 years), how previous round(s) was(were) spent.
• Metrics dashboard — your traction.
• Detailed use of funds — how will you spend the money.

Just imagine that you don’t have this finalized. There are just some notes here and there, internal documents that can’t be shown to anyone or understood by someone not involved in the business daily. And now remember that while fundraising, you will still have to focus on your sales and show results to prove you can execute. That is why we always advise entrepreneurs to start putting the important stuff together early on and structure it well before sharing it with VCs.