So, it’s time for your startup to fundraise. The process of attracting investors and convincing them of your business's potential can be both exhilarating and daunting. While we know you’ve been busy creating your pitch deck, trying to acquire most customers, and working on developing the product, there’s one key tool that shouldn’t be overlooked — the “Investor Data Room.”
The concept of a “data room” has been around for a while, and used to refer to a tangible, physical room in which businesses securely stored their important financial files. A space in which potential investors can access confidential information that might not be included in a pitch deck. It’s how investors will do their due diligence and verify that everything you’ve pitched is really true, which helps them get a deeper understand the risks and value of what they are putting their capital into.
These days, the “data room” term has stuck, as has its importance, but it’s now almost always a “virtual” space. Today, it refers to a secure online repository in which startups can organize and store their essential information, in the form of documents and data, that potential investors can access during their due diligence process. Think of it as a digital library that contains everything an investor might need to make an informed decision about investing in your company. This ranges from financial statements and business plans to legal agreements, intellectual property documentation, and market research.
While it can take time to organize and store this information, we believe all startups should have an Investor Data Room ready when they begin their fundraising journey for their next round. It’s never too early to start creating one. Regardless of your company’s stage, it’s always a great exercise and a good habit to put one together early, and to keep it updated over time.
Here are some reasons why we think it’s important:
Don’t be too overwhelmed when you get started, since you’ll likely be missing some information that is deemed to be “critical,” but just go for it and keep adding as you go!
While “data room” by definition refers to the overall central repository of tons of documents and information, as explained above, we wanted to highlight the importance of the pure data part — the startup metrics. It’s worth pointing out that there’s a reason “data” is included in the name itself, even if it can be misunderstood as a big dump of files and information. So, let’s not forget about the data itself!
This part is crucial, and if I was an investor, the startup metrics are the main I’d want to see and monitor. In my view, it’s the greatest overall indicator of your company health and potential. Depending on the business model of your startup, these key financial metrics might differ slightly. In SaaS, for example, investors will always want to know your:
While Excel spreadsheets and powerpoint slides are common ways of sharing data visualizations of growth metrics, it will be impossible to keep this data updated and accurate, without manually calculating these formulas on a daily basis, and uploading them in to the data room repository. That’s an extremely heavy lift, and very time consuming!
A better way is to leverage a BI platform that displays these metrics in a dashboard (or a series of several dashboards), which you can share externally to your investors in the data room. The BI platform pulls data directly from your data warehouse, so that the information is updated live and can always be refreshed.
BI platforms like Whaly offer the ability to quickly get up and running with your revenue dashboards, in as little as 1 week. Once you set up these dashboards, our “Portals” feature allows you to share dashboards externally and manage user access. You can even fully customize and brand these dashboards to your investors’ brand colors and liking - to appeal to them even more.
This allows for a great, packaged way to showcase your live revenue metrics. Plus, they’ll be impressed that you’ve set up a scalable foundation on which you constantly track and monitor your data, as opposed to spending tons of time number-crunching in Excel for every metric request. It shows that you value efficiency, and that you're a data-driven founding team.
This way, you can also reduce the back and forth and number of questions you’ll get from potential (or existing) investors. They can access the dashboard themselves, whenever they need the numbers. Once you have the dashboards ready in an external link, you can simply include them somewhere in the data room.
In summary, an Investor Data Room is a powerful tool that can streamline the due diligence process, enhance credibility, and provide startups with a competitive edge in your search for funding. By creating a well-organized, secure, and up-to-date repository of essential information, startups can convey transparency, professionalism, and preparedness to potential investors. With a BI platform in place to showcase a live view of your startup metrics, you can appear even more proactive and impressive to investors. Consider creating customized dashboards specifically for your investors, with all the metrics they care about, and save time and effort on manual number-crunching.
Want to get started with an investor dashboard for your Investor Data Room? Try out Whaly for free today!