At Knightley we often get asked: what even is a founder data room?
Plain and simple, a data room is an online location for storing due diligence documents, the important evidence you show to investors to prove you have your sh*t together. Traditionally, this could be a google drive or dropbox folder that accumulates documents as your business grows. Depending on the needs of your business, this could include incorporation documents, property and assets, IP documentation and much more.
As a startup founder, you’ll be putting lots of energy into getting funded. Getting investors is an amazing achievement, and one that takes tons of works behind the scenes of a glossy pitch deck. But to close the deal, you will need to go through the process of due diligence, showing that you have your business in legal order and that you are serious about your company. This is where the data room comes in. Having a buttoned up, organized system can be that extra push to prove that you are a responsible founder, and makes the whole deal-closing process that much more easy and enjoyable. If sharing important documents is as easy as a click of a button, neither you nor your investors will have to waste any precious time to get you that hard-earned seed funding. This can help you avoid stalls in closing the deals or, worst case scenario, the entire deal falling apart.
There’s no one straightforward answer to what documents are absolutely necessary for a data room, as this can vary depending on your specific business and your investors’ needs. But the [Knightley data room] lays out for you all the documents you could possibly need custom to your specific business, including some that you might not even have thought to include but could be incredibly important down the line as your company grows. Important elements such as security encryption and the ability to quickly remove access to any or all assets are built in. While the structure may be a little intimidating at first, this could save you hours of time and potentially thousands of dollars, when you look at the rates that attorneys charge to do this type of organizational work. Even more, there is a seriousness that comes along with accepting new partners who will own huge parts of your company, and having everything buttoned up can add an extra level of comfort on both sides of the deal.
Once you have secured funding, providing investors with [updates] is incredibly important and can be streamlined through a well-organized data room. Whether it be quarterly updates or records of new contracts, incorporating updates without hiccups into your data room ready is an invaluable tool for your business’s long-term growth.
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