What to include in your investor data room (startup friendly)?

The Blackroom Team
The Blackroom Team

As a startup founder or CEO looking to grow your business, you probably know that the first recommendation is to establish strong relationships with VCs. Months before even starting any fundraising process. This will dramatically help you get where you want. We will go into further details below.

When the timing’s right, you can then start working on the fundraising itself. If you’ve done your homework, the process will be shortened and simplified as funds will already have a pulse of your business and heard your story. This part is more about storytelling structured with efficient data (per Business Unit) in the right tools (data room software is one of them).

Establish early stage relationship with VCs

So, you have a startup and you want to raise money from investors. Before we begin, let's make sure that you are ready for the journey ahead.

You first need to define the type of VCs you want to target.

You should have a good understanding of the venture capital firms (VCs) in your market and industry who could be interested in investing in your company. This includes understanding their investment strategy and how they would like to see themselves positioned within the market--e.g., early stage or late stage investments, growth equity versus buyouts, etc...

If you are unclear, do some research: get to know the VCs' current portfolio companies and your competitors. Several databases exist online where you can find the information very quickly (pitchbook.com, dealroom.co and many more). Look at some of the past investments they've made, what industries they are currently investing in, as well as which sectors they're exiting. These insights will help you decide whether you should target this firm or not.

Book meetings with the investors that make the most sense to you. Getting to know the funds and creating good relationships with them is a key factor in a successful fundraising strategy. The way investors work is quite simple: financials are obviously critical but they also need to understand your company’s story and get a good understanding of how you got where you are today. This is how they will get to love your business. There are plenty of articles on the topic, here is one we can recommend that highlights the human side of it: Building relationships with VCs

Prepare your storytelling and back it up with efficient data

In order to make their decision, investors need several pieces of information that are quite specific. We can separate them into 2 buckets: the story and the data. 

The story is about all the questions and answers. It can include product market fit, market size, the team and its organization, competitive analysis, what are your differentiators, which specific value do you bring to your customers and so on.

All those pieces assembled together should be perceived as a coherent story.

Now your story alone won’t be enough. It needs to be backed up with robust data. Especially for Series B and after, where investors need to know if your business is going to scale. To get funded faster and be more successful in the fundraising process, you (or your CFO) can create an investor data room.

The investor data room is a digital repository of business data. It is important to create an investor data room that provides the right level of information about your business to do due diligence on the company. The purpose of the investor data room is to give investors access to all the financial and operational documents they need in order to understand your company's performance, profitability, cash flows and projections.

It is highly recommended to structure your investor data in an efficient data room software that allows you to easily share documents with investors at any time. Choose a product that will help you gain time and improve your professionalism: it should be intuitive yet fully secure and bring strong collaborative features to ease the Q&A.

Below are the main data we typically see in a data room for startup:

  1. Financials KPIs

If you're looking for something to impress investors and make them want to invest in your company, it's best to go with the numbers. The financials are one of the most important aspects of an investor data room, so if you haven't already included these KPIs in there yet, now's a good time!

Let's start off with revenue growth--this will show whether or not your startup is growing at a healthy rate. If sales are increasing over time (and they should be), then that means people are buying what you're selling and it could mean big things for future earnings potential. The next thing we'll look at is profitability: how much money is coming in versus how much money goes out? If there isn't enough profit being made on each sale or transaction, then this could mean trouble when trying to expand into new markets or territories where competition may be fiercer than before because no one wants their own business model disrupted by another player entering their market space

  1. Product KPIs

Product KPIs are the metrics that measure your product's performance and can be used to determine if the product is successful or not.

Product data can be broken down into two categories:

Internal metrics: These are internal numbers, such as number of downloads, average revenue per user etc., that can only be seen by you and your team members. The business owner should have access to these metrics so they know how well their product is doing internally.

External metrics: These are external numbers like engagement rates (how many users come back again after using it once) or churn rate (percentage of people who stop using your app). These numbers will help you emphasize how well your product performs.

  1. Sales and Marketing Metrics

You're a startup. You have a great product, and you know that if you can just get the word out, your company will be a success. But how do you measure success? How do you know if your marketing efforts are working?

The answer is simple: data!

Your investor data room should include sales and marketing metrics that show how well salespeople are doing at closing deals, how many leads they're generating and where those leads come from (e.g., paid ads or organic search). It should also include data on customer retention rates--or how often customers purchase from or use the service after their first purchase--and conversion rates--the percentage of visitors who actually convert into paying customers.

  1. Operations Data (HR, IT, Operations)

Operations data is important for investors to understand how you run your business. It includes employee headcount, salaries and benefits, office space, IT costs and more.

Investors want to see what kind of resources are being spent on operations before they invest in your company. This can be included as part of a standard investor presentation or added as an appendix that accompanies it (if applicable).

Conclusion

We hope that this article has given you some ideas on how to create a strong investor data room. The tool is only part of the whole process and the fundraising process should be considered as a whole. It requires a lot of preparation, both at a relationship level and a data/tool level. But the efforts you will put in it will serve your business long term to support its growth.

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