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Building your investor data room 101

June 22, 2023

In the fast-paced and competitive world of startups, founders often find themselves racing to secure investments to fuel their growth. When it comes to approaching investors, however, many entrepreneurs make a common mistake – they start the process before having all the necessary resources in place. This can lead to delays, bottlenecks, and a loss of momentum. To avoid these pitfalls, it is crucial to be well-prepared and have all the essential items ready to share with potential investors. 

In this article, we have compiled a comprehensive list of these items, which should be readily available in your investor data room. By having these materials organized and easily accessible, founders can promptly respond to requests for additional information and maintain investors’ attention. However, it’s important to remember that the information included in the data room must strongly support your company’s narrative without overwhelming investors with excessive details.

Let’s see what’s needed to make a powerful impression on investors and maximize your chances of success.

Pitch deck

This goes without saying – you must have a clear pitch deck that tells your story and provides all key information about your business. Think of the pitch deck as the first document an investor would see, based on which he’ll decide whether to move on with a meeting or not. Therefore, your story must be really compelling and catchy. Here is a great resource to help you build your storyline. 

Once you start speaking with investors, you’ll notice if some questions repeat or some information was not clear. Make sure to consider this as feedback and improve your pitch deck on the go.

Short memo 

We also advise founders to write a  2-3 pages long memo, which can help them tell the story better. It shows a founder’s clarity of thought in how they tackle the problems in their industry.

Why write the memo? Most investors are of average knowledge or below-average at best about your industry. Re-explain the industry and how your business fits in it in normal language (think of it as an article in the Economist or NY times – make it educational and grasping to read). You can choose to send the memo early on in the process, together with the deck.

Financial projections

You might argue that detailed financial projections for early-stage companies would never hold true, hence are not necessary. And you are right, but only to a certain extent. It’s true that projections of early-stage companies rarely happen as planned, but they are still extremely valuable for us as investors. We don’t use them to hold you accountable if some of the numbers don’t materialize, but we use them to understand your vision and quantify it. The assumptions you put on, your hiring plans, and the channels you plan to use, all add up to building a strong investment case. 

A few things to keep in mind: 

  • Find a balance between too little and too much information. You want to show your plans and vision, but you do not want to overwhelm your potential investors with 30 pages of Excel tables. You also do not want to disclose every single detail of your business and give them a reason to doubt some of your assumptions. 
  • You want to include all key KPIs of your business, such as expected LTV and CAC, burn rate, sales (by customer groups and geographies), acquisition costs, margins, personnel costs (by function), COGS breakdown, number of customers. Think of industry or business specific metrics that are important to share as well.

Sales breakdown / Traction to date

Most investors will require you to provide some validation of the traction to date. For B2B companies this would likely be sales breakdown by type of customers, number of customers, duration of contracts, size of contracts, date of signing. A trend the investors will be looking to spot is the increasing number of customers, with increasing average tickets/licenses. They will also be looking for PMF (product-market fit) – are you able to close deals easily with a specific customer segment, or do you have 10 customers from 10 different segments? If your historical data shows some negative trend (low retention for example), make sure to include a note with possible explanation. 

For B2C companies, you should be able to demonstrate both sales and users’ growth MoM. It’s good to also include some cohort analysis, churn and retention, and key markets.

Sales pipeline

In addition to your realized sales and closed deals, investors will also be interested to understand your pipeline building process. At this stage, think of providing anonymized information on your pipeline. Include also: 

  • Size of total pipeline;
  • Potential customers by stage of discussion (demo, negotiation, Letter of Intent, contract, etc) and probability of success;
  • Potential customers by distribution channels.

Cap table

Here you should include your shareholder’s structure to date, including shares held by other investors. In addition, it’s useful to include a calculator for the current round – how will the shares change after the round closes? The cap table should also show your dedicated ESOP. 

A free online tool for calculating your cap table is available here.

Market segmentation & competition

While most investors will do their own market research, it makes a great impression to provide them with your materials on the topic as well. You can only gain by “educating” your investors on why this market is hot and how it will evolve over time. After all, you are expected to have spent substantial time in evaluating the market trends yourself. Some things you could include: 

  • Market research – Consider including research papers or other external reports summarizing the market size and trends. The goal here is to update investors’ knowledge and support the claim that now is the right time. Think of including market drivers as well (what economical, technological, social or political forces drive this market? Why is it expected to grow? Why is it important now?).
  • Market size analysis – calculate your bottom-up market and provide the key assumptions. Include market size, submarkets, growth rate. A great guide on market sizing was prepared by our ex-Partner Vassil Terziev. 
  • Who are the traditional players in the market? Why are they not good enough? 
  • Who are your competitors? What do they do in which markets? How big and successful are they? What makes you better? Think of providing a much more detailed overview than in the deck. 
  • Are there any notable deals or exits in this market?

Team profiles

This one is not mandatory, as most investors would rely on LinkedIn to evaluate your team. However, it is a nice addition to have short profiles of all your team members and advisors, including their roles and responsibilities within the company and former experiences. It’s also good to emphasize on your story together as a team.

Other nice-to-haves

  • Sales deck;
  • Pre-recorded product demo;
  • Incorporation documents – likely, the investors will only look at them later in the due diligence process;
  • Industry specific information – if you operate in а scientific field, for example, it is a good practice to include information on the various methods and science related to your business. Very few (if any) investors will have the same depth of understanding as you, so educating them in the underlying science and current alternatives would be beneficial.

In the highly competitive landscape of fundraising, founders need to be strategic and well-prepared when approaching investors. Building a strong investment case requires having all the necessary resources readily available in a well-organized data room. Remember, the key is to strike a balance between providing enough information to support your narrative and overwhelming investors with excessive details. By following these guidelines and being prepared, founders can make a lasting impression on potential investors and increase their chances of securing the funding they need to propel their business forward.

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