In my experience, securing startup fundraising from an angel investor or venture capital group typically goes like this:

1. Introduction to investor (give 5-15min pitch)

2. Diligence: If they are interested, they ask to see your data room

3. If they like the data room, they move forward to more thorough QA with partners

4. If they still like it you agree on terms, sign the papers, they wire the funds, boom

What is a data room?

It's essentially the secure folder where you keep all your critical business documents so you can share them with investors (or partners, stakeholders) during fundraising / due diligence. There are a number of data room tools you can use for this (Carta, Visible.vc, Mantle, DocSend, etc) - I've always used a simple Google Drive shared folder because it's simplest (and free :-).

Why does a data room matter?

The main purpose is to be the centralized place where investors can see your documents (business plan, financials, legal, organizational stuff, etc) to assess your business. Your goal is to make it quick and easy (and obvious) for them to find what they need to decide if hey want to invest. You need to convey that you have your isht in order and that you are inevitably an investable business.

What should go in a data room?

This will vary by your startup's stage, industry, etc. — I like to organize my data room into six top-level folders: 1) Overview, 2) Finance/Accounting, 3) Operations, 4) People, 5) Intellectual Property, and 6) Legal. This structure seems to work best, here's what I put in in each:

1) Overview

Your Overview folder is your opening act - it should give investors the 10,000-foot view of your business and make them excited to dig deeper into the details. It's the first impression. It sets the tone for your entire due diligence process. Key files:

• Data room table of contents (Google Doc outlining where everything is)

• Executive Summary (1-pager PDF overview of business)

• Investor pitch deck (10-12 slide presentation + appendix)

• FAQ's (accumulated answers to questions from other investors)

• Monthly Updates archive

2) Finance & Accounting

Here the rubber meets the road - investors want to see hard numbers that prove your business model works and can scale. This section should have the evidence supporting all the claims in your pitch deck:

• Financial projections (any financial models to forecast future rev/expense)

• Financial statements (past statements from your bank accounts)

• Taxes, insurance, workers comp info (can put here or in "People" folder)

• Banking docs (direct deposit info for any bank accounts)

• Invoices from past contractors

3) Operations

The Operations folder shows how your business actually functions, it outines the HOW. this is where investors get a peek under the hood to understand your customers, go-to-market strategy, and product development. It should demonstrate that you have a systematic approach to generating and retaining revenue:

• CRM (list of existing or prospective clients with their info)

• Sales & Marketing materials (strategy, proof of value, documentation, PR, etc.)

• Partners + vendors (info about who you're working with)

• Specifics about the product/service (roadmap, tech diagrams, dev docs)

4) People

Think of your People folder as the who’s who of your startup - investors are betting on your team as much as your idea, so this section needs to showcase the talent and advisory support you've assembled. It outlines (showcases) the stakeholders involved (past, present and future). It should make clear that you have the right human capital to execute your vision:

• Investors (docs for each investor, terms, cap table, etc.)

• Advisors (docs for each advisor, biographies, etc.)

• Employees (founder bio's, W2 employee agreements, etc)

• Contractors (contractor agreements, folder for each)

• NDAs (any doc's signed to protect IP, can go in folder 5 or 6 too)

5) Intellectual Property

This is boilerplate but essential. The IP folder protects and showcases your competitive advantage - even if you don't have patents, you need to demonstrate that you've thought about protecting your intellectual property and have a strategy for building a defensible moat around your business:

• Record of any IP owned (trademarks, patents, website/brand assets, etc)

• IP protection strategy + roadmap (investors love this)

6) Legal

Also boilderplate. The Legal folder is your business's birth certificate and proof of legitimacy - these documents show that your company is properly structured and compliant, which gives investors confidence they won't inherit any legal headaches. Boring but absolutely essential:

• corporate org documents (certificate of incorp., bylaws, EIN, etc.)

• state registrations (BOI, good standing, etc.)

• board minutes / actions (Legal docs from your attorney..)

Other Things to Think About

Do I need all of this stuff right away? No, you should build your data room incrementally over time and add more as you go. I've built this over like 2 years.

Better than 90% of data rooms: having your pitch deck, cap table, product roadmap, incorporation docs, investor memo

When should I start creating a data room? Right now :-) even as simple as creating a shared drive in Google and putting a pitch deck in there is better than nothing. Add incrementally as things come about over time

Common data room mistakes should to avoid: information overload (don't dump everything you've ever created), outdated docs (nothing says "disorganized startup" like a pitch deck from 6 months ago), broken links or missing docs, or no clear navigation (create a master table of contents so investors don't hunt for files)

What are data room best practices? Assign an owner to be responsible for keeping it updated (usually the CEO), maintain version control by dating documents and keeping only the latest versions (I put an “Archive” subfolder in each main folder to keep old versions of docs), keep it fresh by updating monthly with new financials and metrics, and have a trusted advisor review your data room before showing it to investors.

Okay but what else do I need to know to raising investment? A few of my favorite resources for raising investment: 1) My friend Maria Heyen's guide to running a fundraising process, and 2) Amanda Zhu's "How to Raise a Seed Round" LinkedIn guide

Okay that’s all for now, peace!
Ramsey