What are the Key Elements your data room should contain?

When it comes to an M&A deal or any Fund Raising activity, how you present your company and specifically, how you present the documents that reflect and project your company’s strengths and performance plays a very important role. The intention, of course, is to present the most accurate and lucrative image of your company to the group of investors who see value of investing in your business for potential profit.

A virtual data room is the best online platform that enables you to store all your business sensitive data and the most secure file sharing medium between parties that are in the process of investigating one another for an M&A deal. The following are the most accepted and prevalent ways to leverage and enhance the value of the data stored in your data rooms during the fund raising or M&A process, including best practices for setting it up, and what your data room M&A should and should not contain or be shared.

The Documents that your virtual data room must include:

Because the primary aim of your  data room M&A is to put forward to the interested investors is your company’s investment worthy potential for future profit, the following documents must be included:

• Legal structure and articles of incorporation
• Records of previous capital raises and liquidity events
• Board of Directors’ meeting minutes or previous actions
• Business plans
• Company financials, including profit and loss statements and projections
• Tax returns, audits, financial evaluations and other reports from third-party professional service providers.
• Intellectual Property, including Patents and Trademarks
• Product and services information, including future roadmaps and plans
• Marketing plans, strategies and assets
• Sales strategy including that in the pipeline, existing customers MRR and ARR
• Information about employees, including compensation to them and their contracts
• Technology investments
• Additional operational liabilities, including capital expenditures, commercial leases and investments in R&D

While the list above details everything that could be applicable to your deal, it’s also important to note that not every business document needs to be included in your investor data room and that is because:

• The due diligence process can slow down as the review and analysis of additional documents will take more time.
• Irrelevant documents can distract, confuse the investor.
• The more documents included, the higher the risk of potential misuse or compromise.

Remember, more additional documents can be saved and furnished in your data room M&A the next stage of the investment deal, after the investor has expressed initial interest,wants to move forward and asks for that data.

The Mechanics of Leveraging your Data Room

Your ability and willingness to assemble all of the necessary and essential data and documents in your virtual data room will impress investors as it will save them valuable time during due diligence. It will also present the best picture of your company as a transparent, professional company. This is why you should leverage your data room to be intuitive and easily navigable for all parties involved. 

Here are a few additional considerations when setting up the data room:

Personalized Views

Create a base structure that includes all of the documents — but create different views and access rights for the individuals evaluating your documents. In this way, you can tailor your content and make it unique for each person. For example, it is not necessary that the investor’s legal consultant needs to see certain sales and marketing documents as it is not his domain. He would be scrutinizing only the legal aspects and pitfalls of your business.

Read-only Access

In the initial stages of your deal it is always wise to make sure that no document can be altered, copied, shared or printed without your permission.

Audit and Tracking Measures

Your virtual data room should provide a single view as to who has access to what documents at what time and for how long. If you notice any unusual activity, such as attempts to print or share, you will be alerted and you can take appropriate remedial measures with that individual. Further, you might notice that certain documents haven’t been accessed at all; you can ask why or consider that document need not be included in future investor data rooms in which you’ll participate.

Allow you Easy Updating of Content

Your data room should enable you to make updates effortlessly— removing or adding documents without much hassle. You should be able to update easily if you need to make a small change.

Easy to Review and Communicate Process

Short messaging or commenting should be built into the data room. This facilitates the review process and doesn’t force investors to leave the platform in order to send a message or make a comment if needed.

Present Data in a Professional and Unique Manner

Keep in mind that investors regularly review hundreds of companies’ financials and documents every month. While there are the “usual suspects” regarding documentation, consider presenting your documents in a slightly different way. This could simply be the user interface of your data room. Choose a data room provider that leverages extensive UX capabilities so that your company can really stand out from the crowd.