Preparing a data room for investor due diligence

Once an investor issues a term sheet, due diligence begins and the clock starts running. A well-prepared data room shortens that period and signals that the business is well run. A disorganised one raises questions on every page.

The folders investors expect

• Corporate: incorporation documents, shareholder agreements, board minutes and the cap table.
• Financial: audited and management accounts, the financial model, budget and forecasts.
• Tax: returns, assessments and notices for recent years.
• Commercial: key customer and supplier contracts, pipeline and pricing.
• Team: organisation chart, key employment agreements and ESOP documents.
• Legal and IP: registrations, licences, disputes and intellectual property ownership.

Start with the financials

Include reconciled monthly accounts for at least the last twelve months and the most recent annual statements. The financial model should start from those actuals and tie to them exactly.

Investors look for consistency. One mismatch between the deck and the books invites a dozen more questions.

Common causes of delay

• A cap table that does not match the share register.
• Missing signed copies of key contracts.
• Revenue in the deck that cannot be traced to the books.
• Unresolved tax notices or late statutory filings.

Keep it maintained

Name files clearly, date them and keep a simple index. Track which questions have been answered and which documents were shared. After the round closes, keep the data room up to date, because the next round, or the next lender, will ask for the same things.