What should be included in a data room for due diligence?

Full Explanation

A well-organised data room accelerates due diligence and signals operational sophistication. Essential categories include: Corporate Documents (articles of incorporation, bylaws, board minutes, minutes from major decisions); Equity Information (cap table, option grant agreements, SAFEs, convertible notes); Financial Information (monthly P&L and balance sheet for 3 years, cash flow forecasts, tax returns); Contracts (customer agreements, supplier contracts, employment agreements, investor agreements); Intellectual Property (patent portfolio, trademark registrations, copyright ownership, invention assignment agreements); Personnel (executive CVs, employment offers, equity grants, key person insurance); Insurance (liability, D&O, key person coverage); Compliance (regulatory approvals, licenses, certifications); and Risk Documents (known litigation, HMRC disputes, customer concentration). A clean, well-organised data room signals that management is sophisticated and has nothing to hide. Common deal-killers in data rooms include: missing documents (incomplete cap table, unsigned option agreements, vague IP ownership); conflicting information (multiple versions of same document); missing disclosures (undisclosed litigation, customer concentration risk); and red flags (major customer about to leave, key employee considering departure, product being copied by competitors). VCs can tell a lot about a company by the quality and completeness of the data room.

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