Data Room for Demo Day
You are required to submit a link to your company data room in order to participate in the Newchip Online Demo Day. Data rooms are one of the most important components of startup fundraising and their purpose is clear: to provide a centralized place where the most foundational and key company documents are located for easy investor access.
Data rooms are typically shared and accessed during the due diligence phase. Newchip will not share your data room with an investor until you provide us with said permission. Usually, after a few initial meetings, the investor will ask you for data room access via Newchip – we can do this for you, simply let us know when you grant written permission to the potential investor.
All Newchip Accelerator companies begin to work on their company data rooms early on in the program. In fact, all cohorts after March 2020 are now required to begin preparing their data rooms before the launch of their cohort. Although many companies will not have all of the documents typically found in a data room, you are encouraged to build it out as best possible with the most foundational information that investors expect to see at the due diligence phase.
If your company finally reaches the due diligence stage with a potential investor, we want the process to be as effective and efficient as possible. We don’t want you to lose a potential deal simply because you didn’t have your paper work in order. Remember that time can kill a deal. This is why you want to beat investors at their own game and have all of your documents organized in your company data room.
You are encouraged to use either a Google Drive private folder or a Dropbox folder for your data room. In regards to the Demo Day, your mentor will need to review that your data room is organized and prepared for potential investors. Failure to have a data room will forfeit your application to the Online Demo Day, so please make sure to have your data room ready when applying for the event.
Once your company data room has been reviewed in your Mastermind or in a 1-1 meeting, you will need to get it approved from your Newchip mentor before it is successfully submitted to the Online Demo Day. Remember to submit your data room as a link to either a Google Drive or Dropbox folder. If you require a password for access protection, please make sure to include that in the submission by emailing your mentor.
For reference, we’ve included below all of the guidance provided (from the Accelerator content) to our companies on preparing an a company data room. Please feel free to review this content to ensure your data room is ready.
Data Room Fundamentals
One of the things that investors expect from a startup is a data room, which is a secure online storage destination that has all the documents that an investor would want to see before investing in or buying a company. Examples of online storage destinations are Dropbox, Box and Google Drive.
When an investor is interested in investing in you and wants to conduct due diligence, you send the link to your data room. The data rooms make it easier for an investor to evaluate your company. Rather than going to a physical room to read all your company documents – which is how it was done decades ago – they have all the material in one place at their fingertips from anywhere, anytime.
Virtual data rooms are the norm now and they come with many benefits. They have strict control functions. Investors can read but not download if you choose. Or anything they download is watermarked with who downloaded the file along with a timestamp so that if confidential information becomes public you can trace where the leak was. You don’t need to spend a ton on a data room solution but find one that fits your needs and is straightforward to use. Since this is not multi-billion-dollar M&A, you don’t need a solution built for those large deals.
A well-organized, well-maintained data room with all the right documents saves investors time; they don’t have to dig around for the data from different sources. This action is part of the due diligence process that an investor does before investing money in your company. They want to confirm that you have given them accurate information and they want to see the official documents as verification. A solid data room keeps the momentum going. You don’t want the investor to ask for something that takes you two days to create, because that is two days more till close. You want the investor to have what they were looking for and maybe more if it makes you look good.
The better your data room is, the faster you could receive your money from investors. If your data room is missing documents or is disorganized, it can cost you valuable time and money. The earlier you start developing your data room and the more time you put into making it well-organized from the start, the easier it will be for you down the road when you do more fundraising, especially securing funds from venture capitalists.
In order to position the opportunity that you and your startup represent to investors, you need to maintain accurate and updated information on your company in your investment materials and commit to keeping these resources updated moving forward in your current round, and later rounds.
This article contains details on how to develop a company data room that will keep your most important company information organized for due diligence.
Please understand that these files you create (and keep up to date) will help both you and our team make effective and efficient intros with investors and much of what we are sharing is required for investments.
Important Details to Start Your Data Room
You need to make sure that you provide us with consistent, uninterrupted access to the folders with your deck and summary and data room so that we can access these materials for investors.
To this end, you are responsible for keeping these files up to date on a regular basis. The simplest way to do this is to utilize “public link access” but not indexed/searchable Google Drive folders which includes the aforementioned files, and then provide us the link to this folder.
The best format for this is to send with your company name and date of update (i.e. FY2018, 3Q19, etc.) as the subject. Remember that we don’t raise your round for you, your job is to raise capital, we connect investors in our network to you when you graduate and present at our quarterly expo.
We are an Accelerator, so our goal is to take momentum level traction and 25%-50% committed rounds to the next level with our networks. If we don’t invest in you during the program, your job is to keep engaging us and your advisor post graduation with your traction and milestones.
When traction and momentum are high, or when you just closed such and such investor is the BEST time to let us know because that’s the opportunity to accelerate momentum with additional investors and bring them all in at once- in investing nobody wants to lead but everyone follows.
Data Rooms Standards & Expectations for Newchip Accelerator Companies
To reiterate this crucial concept for any entrepreneur serious about closing a round of investment from serious investors: your company needs a due diligence data room. Now, you don’t have to share it out upfront, and we recommend not to do so. You just want to have your data room built and ready so you have an organized process to speed up diligence from months to a few days.
Top tier investors will always ask for access to the data room because that is where credible startups with viable investment opportunities will store access to corporate documents and materials for investors to easily “validate” your startup and check the boxes to make an investment. Not only will a data room demonstrate to investors that you’re serious about raising capital, but it will show that you are organized, responsible, and ultimately running a real company. Moreover, once you build an investment round, you will likely have a group of investors and the last thing you want is to deal with a growing variety of individual requests for this document or that document.
You can save yourself a great deal of time, effort, and headaches by taking the time to build a data room that includes the bulk of what most investors need to know before they write you a check. Keep in mind, each fund will typically have its own due diligence list which can include more (or less) items for revision.
It’s our recommendation to give a fund “more” than they ask for in regards to a data room as it will set you apart from entrepreneurs with no diligence documents and help you close a deal faster. Build a robust data room that keeps investors interested and engaged in your startup opportunity so they trust you. You will also need to have all of this information and documents ready, and potentially more, when your company reaches Series A territory. So it would behoove you build a solid data room now and prepare for your future investment rounds with bigger investors. Always be prepared for the unexpected.
So how do you build a data room? The simplest and most effective way to do this is by compiling and organizing this information in a centralized document sharing solution, such as Google Drive or Dropbox. There are professional systems out there, however most companies opt to keep it “affordable” and keep their non-secret items (ie, your code, patents, etc) out of these rooms.
Your data room should be organized per the categories listed below and your documents ought to be prepared in their appropriate file type in respect to their purpose (ie, financial models exist in Excel or Sheet files, Product roadmaps exist in PDF or Word Doc/Document files, company pitch decks exist in either PDF or PowerPoint/Presentation files, etc.
Just remember to label each folder clearly and organize the right documents into the appropriate folder, also remember to include the date on the filename so investors know what is most current and how recent it is.. In doing so, you will likely delight your potential investors and often it will be so complete that they will not “dig” as much compared to if they had to ask for every single document individually.
Filename format: DocumentName_M-D-Y.pdf
Standard Data Room Checklist for Startups
Here is a Google Excel that we’ve already created that you can simply duplicate into your own Google Drive, just make sure that you create a separate folder to put it in and that every item in the folder (and the folder itself are set to public access, or you can also make an entire folder access by specific email so you can then give that folder access to an investor and every file in it will have access for them).
Will you need all of this for a Seed round? Very likely no. However in our experience during diligence for an entire round you will end up with such and such asking for this and another investor asking for a different document which will culminate eventually in all of the following.
So even just having a bare template of a 25% of the following (what you have already and what may take 1-2 days busting ass to create), will lead to better investor engagement and trust in you as an entrepreneur.
Excel Sheet Resource: See bottom of page
“Average” Data Room Contents:
1. Expanded Company Pitch Deck
Presentation diving into detail on the company’s business model, expansion, etc. We often call this the “expanded” deck in that a regular intro deck is 10 slides and the expanded deck is often 30-40.
However, these are not “designed to impress”, but focused on more bullet points and a deeper dive into the model, yearly objectives, team member bios, channel strategies, ad / brand creative, strengths/etc.
The expanded deck is also typical if you are raising $1M or more, or going after investors investing $500k or more in individual checks as these firms will expect this deep level dive.
Largely much of the expanded deck is “strategic” and business plan focused that coincides with largely being a “really long use of funds” slideshow that shows how you will use the money to grow in each department and area.
2. Company Documents
- Amended & Restated Articles of Incorporation (all versions)
- Voting Agreement(s)
- Investor Rights Agreement(s)
- First Refusal and Co-Sale Agreement(s)
- Stock Purchase Agreement(s)
- Capitalization Table
3. Board Materials
- All board meeting minutes
- Board consents and actions
4. Financial Models
- Monthly P&L
- A pro forma for the next year
- Use of funds
- Note: Seed Accelerator Companies should provide a three-month forecast of their growth metrics (i.e. users, revenue, or whatever else is measurable and demonstrates progress)
5. Term Sheets & Previous Raise Docs
6. Market Research
- Market studies
- Competitive landscape
- Regulatory environment
- Go-to-Market strategy
- Sales process
- Sales pipeline
- Sample sales materials (one-page slicks, etc.)
- Important customer contracts
- Important LOIs or other indicators of interest from potential clients
- Customer ARR & MRR
- Branding guidelines and vision
- Marketing strategy
- NPS (Net Promoter Score)
- A list of all employees with date joined, title, and salary
- Future critical roles and hires
- List of contract workers and firms
- Hardware (ie, pricing, vendors, factories, technology, etc.)
- Software (ie, System Architecture Diagram, API Documentation, etc.)
- Product road map
- Product Backlog export or release map
- Screenshots of existing products
- Wireframes of future products
12. Historical Information on Past Raises
- Legal documents
- Past term sheets
13. Intellectual Property
- Granted and filed patents
- IP strategy
Pre-Seed companies will 100% very likely not have the above so don’t have a heart attack when you see what is on the diligence checklist. Focus on creating a data-room in which you can put what you have, and add materials as investors ask for them or you have time to build them out.
Seed companies will 50% have some of the above if they’ve raised institutional capital or from professional investors. What I’ve always recommended was bring in team on weekend for deep strategy session to really outline business plan in a business plan tool for the strategic parts.
Due Diligence is about Investors Trusting in your Team’s Ability to Execute
Below are some of the main questions are asking when they perform due diligence on your company:
Is the team capable of making it happen?
Is the team experienced in this market?
Do you have momentum (not just traction but is it growing at a rate of X)?
Is it legally put together/no founder/cofounder/investor or legal issues?
Incorporated in Delaware, clean cap table, no issues, etc.
Is there a market opportunity here or is it 1 of a 1000 doing same thing?
Do you know the competitor landscape?
KPI’s, cost of acquisition, customer lifetime value?
Do you understand the market size?
Does strategic roadmap exist or make sense
Do you have an actual plan or are you winging it?
Does your roadmap make sense / is it possible?
Do you have a hiring plan/deeper use of funds plan
Other than 20% engineering, 30% marketing, 30% salaries, etc
Your goal with building and maintaining a data room is to not send “tons of stuff” but to convey that you can execute on the plan you present, and that you will provide a future exit and return on the investors investment in an X multiple of what they give you. That is the whole point of investing.