What is the Purpose of a Data Room?


A data room is a digital space for the sharing of sensitive information during due diligence or other business transactions. It is utilized in a variety of industries that include finance, healthcare IT, IT, and capital markets to assist businesses share information securely with potential investors and other stakeholders. Prior to this due diligence was typically performed in physical rooms, but now, it is generally conducted digitally and usually includes large quantities of documents.

Investors are often faced with a myriad of questions when they look through the documentation of a startup and it’s the job of founders to address those questions in a manner that will impress investors and speed the process. Start by creating an organization structure that is organized and clear, with clearly defined documents organized into categories (e.g. legal, financial, contracts). Labeling these documents and folders helps people to find the information they need. Metadata can be added to the data room to provide each file with additional context.

Other useful sections that founders can include in their data room include a competitive analysis, a list of current customers and referrals, as well as a customer references/testimonials section. Lastly, a company organisation/formation section includes any documents that show how the startup is legally registered and operated. This could include articles incorporating business certificates, business certificates, information on tax and an audited Financial Statement. This will show that the startup is a reliable and legitimate business.