You just had a great first call with an investor.

They liked your story, asked some good questions and overall the conversation was positive. 

And right before you hang up: "Can you send over your data room?"

If you’re like 99% of founders you fall in one of three scenarios: 1. you either don’t have any Data Room materials at all; 2. you’ve built some partial materials, but they’re outdated; 3. you have done your homework and prepared a full Data Room in advance.

If you’re in scenario #3, good for you and congrats for preparing!

But if you’re in #1 or #2, I’ve got bad news for you - you’ll spend the next several weeks piecing out a below-average Data Room. Meanwhile, your relationship with the investor would cool down and they’ll move on to the next deal.

Let's make sure that's you don’t get into scenario #1 and #2.

In simple terms, a data room is a digital folder with your most important company documents. Google Drive or Notion work well as a tool.

Investors use it to check everything you've pitched to them and dig deeper into your company. For you, it's the chance to expand more on things which are too long for a deck: the numbers, your research, some analytics and other details.

Very often, and I’ve done this myself back as a VC, investors use the information in your data room to write their internal investment memo about your company.

My advice is to treat your data room as a sales asset.
If the goal of your deck is to get you a meeting, the goal of the data room is to build a stronger case for your business in the head of the VC.

You need your data room ready before your first investor meeting.

As you saw from the example above, investors could start asking for data room materials as soon as after the first call. If you leave building your materials for the middle of the raise this would totally ruin your momentum of investor conversations, especially if you aim for a Blitz Raise.

And the questions investors ask are predictable, so you can prepare for most of them today.

Have in mind two things:
1. Sometimes investors might ask for individual materials at a time - Financial Model, Competitor Analysis, Market Deep Dive, etc. Other times they might request everything you have at once - the entire data room.

2. Some materials are truly confidential and should be shared only after a term-sheet. In the free checklist below, we’ve marked down exactly which are which.

Now, let’s walk through the 7 data room sections.

Imagine this as the front door. It answers one question: what is this company briefly?

What should go in here: your pitch deck, an Investor FAQ, potentially one pager.

In the FAQ you try to get ahead of the investor. Write down the most frequent questions you receive during investor calls and answer them properly. VCs appreciate that effort and this also shows them that there are other investors you’re speaking to - a little bit of a fomo trigger.

In your deck it’s impossible to give a detailed overview of your product. So this section digs deeper in it.

The product is the bread and butter of a tech startup and investors with tech or product background do like spending a bit more time here. Show them what’s your vision for the product, how users are currently using it, what is the tech stack behind it and how it would evolve in the future.

What should go in here: a product overview and roadmap, a demo video, your tech stack, and deeper technical docs (after term sheet).

By the way, a short demo video goes a long way here.

Investors see the market size as your ceiling. It caps how big the company can become, however good the team is. And your competition tells them how hard the fight for that market will be.

What should go in here: your market sizing (bottom-up and top-down), industry reports that back it up, and your competitor analysis.

And please don't claim you have no competitors. For an investor, that's an instant red flag. Also just FYI, VCs much more prefer bottom-up market calculations instead of top-down numbers from industry reports.

At pre-seed and seed, investors are betting on you more than on the product.

They want founders with relevant experience and complementary skills, fully committed to the company. And they want to know who does what.

What should go in here: a team summary, short profiles of the founders and key people, an org chart, plus key contracts and your option plan (after term sheet).

The traction part here is must. The stronger your traction - the bigger of a positive signal for VCs that is. Show them usage, revenue, pipeline and customers who are ready to vouch for you.

Then there’s the GTM part which shows that you can or have a plan on how to repeatedly acquire customers.

What should go in here: your ICP, pricing, acquisition channels, customer journey, usage metrics, sales pipeline, customer list and case studies.

This section is all about numbers. And it shows investors where you are today and how you generally think about the financials of your business. 

They'll also check who owns what before they come in.

What should go in here: a 2-year financial model, your KPIs and unit economics to date, use of funds, a fully diluted cap table and a summary of past rounds.

Keep the financial model simple, with assumptions you can explain on a call. If you're still figuring out how much to raise, here's my 3-step method.

The least fun section, and the one founders leave for last.

Investors need to know the company is clean: properly set up, owning its own IP, with no land mines from past deals and no open disputes. Messy legals are a red flag for VCs.

Everything here is confidential and usually gets shared later, during legal due diligence.

What should go in here: incorporation docs, past deal documents, IP agreements, compliance docs and any legal risk disclosures.

Start collecting these early.

As part of Fundraise Ready, Gergana and I are preparing to launch a full Data Room System to help founders. It’s the ultimate resource with over 40 guides, templates, examples, for every document you might need while fundraising.

We are launching it on October 20th as a product.

Meanwhile, you can get your FREE Data Room checklist which shows you exactly what materials you need to have ready.

Oh, and by the way, by getting the checklist we also give you a discount code for 20% off on the Data Room System once we launch on the 20th (everyone else gets the full price).

That's all for this week.

See you again on a Thursday (or Friday 😉) soon.