Over the years we’ve seen a lot of data rooms, and many of them would have benefitted from some more work before being shared with investors. From missing documents, to denied access, to careless errors and inconsistencies, we’ve seen it all. And while we have invested in companies where the ‘data room’ was an ad hoc set of email attachments dripped out over a few weeks in response to our requests, that's not ideal, and the brutal truth is that many investors are unlikely to give you the benefit of the doubt in this way. Putting any friction into the due diligence process risks creating a bad impression and causing it to end early.
The data room is an opportunity for you to impress your investor with your thoroughness and professionalism, and make this an easy decision for them. And, it IS important—don’t make the mistake of putting all your effort into a perfect pitch deck, and lining up the investor meetings and then having nothing to follow up with.
However, when we looked around the internet, there was precious little useful content about what early stage climate VCs would like to see in a data room, so we thought it was time to pull together some tips to help founders get the basics right.
First off, what is the purpose of a data room? The typical process of engaging with an investor will start with a scoping conversation, and then usually one or two more conversations going a bit deeper about your company and technology. At that point, most investors will want to see more detail and evidence for your claims. The data room provides the foundation and sets the tone for due diligence—this next chapter of engagement. The more thorough it is, the smoother this process will be.
Structural considerations
Platform - while there are a lot of companies offering proprietary specialist data room software, this is expensive and unnecessary for most early stage rounds— Dropbox's Docsend is the standard, and has the benefit of being OS/email agnostic. Google Drive is cheaper and does the job excellently, but some investors in non-Googleaphile organisations may have problems with access. Many companies like using Notion which is great, but if you go down this route make sure you use it in a way which makes the most of its strengths using toggles and interlinking—a Notion page with a list of files to download is not better than a Drive folder. Microsoft Sharepoint / One Drive is OK, but often gives outsiders problems when logging in and looks pretty old school.
Don’t be cheap - it’s worth paying a bit for a better experience e.g. being able to organise documents into folders and subfolders. Equally, don’t worry too much about looking fancy—the content is more important, and nobody ever invested in a company just because they had a nice cover photo on their data room.
Security - make sure whoever you are sharing with can actually access your folders. Do a test with an external email on another IP address before sharing with anyone in anger. Don’t make potential investors create a new account to access your data room, ideally don’t even make them sign in—most will be ok with having their email address captured, but anything more risks disrupting the flow.
Tracking - it’s useful to get data on who is accessing your docs and when, but again try to do this in a way that doesn’t make a lot of friction. Asking someone to log in every five minutes is pretty annoying. Also, don’t go there with the stalker-esque emails like “I noticed you spent 17s looking at slide 2 of our Technical Deck—would you like to have a call about this?”
Customisation - some companies make a fresh copy of the data room for each investor. This can work pretty well - you might be further along in conversations with one company, and be happy to share more with them. They might ask for specific information you can drop into their folder. Keeping a doc with a running list of their Q&As is a nice touch. And, if they decide they aren’t interested, you can easily cut their access. However, generally, if one investor is interested in something it’s likely it will be of interest to more of them, so you will need to have a process to keep everyone’s folders up to date - a running list of all FAQs is even better.
Downloadability - We recommend that you let your potential investors download documents from your data room. This reduces friction for them, enabling them to share files with their internal team. Of course, you don’t want your confidential information wandering freely around the internet, but once you have an investor in your data room you should already have a reasonable level of relationship and trust with them. If you are worried, you can get additional protection with watermarks or footers reminding readers who the document is owned by, that it is confidential and even who downloaded it. If you have anything particularly sensitive, like unpublished patents, you can add additional protection e.g. additional password, or email on request.
To NDA or not? Ideally, don’t require an NDA to allow an investor to access your data room. Many VCs (especially US-based) will not be able to sign an NDA and this will be a showstopper. If you do choose to, be prepared for a delay while the right person is found to read and sign the NDA. Some companies get around this with a tiered approach:
Tier 1 / Tier 2 - some companies have a Tier 1 data room - a “non-NDA” or “less sensitive” version, and a tier 2 version which is unveiled after signing an NDA or demonstrating sufficient interest. Put as much as you can in this first tier—literally just unpublished patents or super sensitive data in tier 2. If you really think this isn’t possible, at least provide enough for the investor to make the decision to get more involved. Make it clear that there is a second tier and what is in it, so they don’t think you are skimping on details. And don’t overdo the cloak and dagger stuff, it is more likely to get in the way than create FOMO—investors are not likely to be trying to steal your IP.
Tier 3 - a lot of the data room is to help an investor get to a decision to invest - to write a term sheet. Then, there are reams of less-exciting paperwork that falls under the general heading of “governance” or "legal DD" which they probably won’t read in detail up front but has to be there for the detailed stage of due diligence—think employment contracts, rental agreements, insurance policies etc. However, it does no harm for this information to all be there from the start—it reinforces the impression that you are on top of your stuff, and have nothing to hide. There may also be some document in there which is critical for specific investors for specific reasons, like your exact company structure.
General tips
Naming - Do give your files meaningful names, especially your pitchdeck—so when it is downloaded your VC can easily find your docs and know it’s the latest version e.g. “Company X - Seed pitchdeck Dec 2024”.
Structure - do organise your content into folders. Our suggested organisation is in our wishlist below, but using your own system is fine. Consider using numbering with your file names so that your logic is preserved even if the folders are downloaded and messed up e.g. 2. Team, 2.1 Directors, 2.1.1 Directors agreements, 2.1.2 Directors bios etc.
Keep it concise - try and keep the tone factual and precise, rather than wordy and vague. Add detail where it illustrates how good your company and product is, not just for the sake of filling space. Be thorough but avoid extraneous detail and repetition.
Be truthful and not misleading - don’t make any statements you can’t substantiate, and avoid hyperbole - of course paint your company in a positive light, but be very careful not to be misleading. In particular, don’t overstate the problem, don’t underplay how good the competition is, and don’t overstate how good your solution is. You will get found out and it’s hard to rebuild trust you have lost.
Provide independent substantiation where possible - linking to quality independent content including government reviews and regulation, respected trade body policy papers, peer-reviewed scientific articles, data supporting your ideas around valuation and exit potential (and providing copies in the data room) helps to build the investment case. This is useful to help the investor understand market size and dynamics, customer needs, legacy solutions, and competitor products.
However, be careful with exit scenarios - as an early stage company, any exit discussion is highly hypothetical and the investor will certainly be doing their own research and have their own views here, along with investment goals and constraints from their fund thesis, fund structure, and their own investors (LPs). It’s worth having a discussion about their parameters first to make sure you aren’t closing a door prematurely—for example, you might be fully committed to building a big valuable company and your investor needs an exit in three years time (or vice versa).
Do provide working spreadsheets not PDFs, in particular for your TEA and cap table models
Formatting - It doesn’t hurt for your documents to look good—spend some time getting formatting consistent (font, size, logo etc), and have consistent file names and formats.
Check and check again - make sure you are consistent across documents e.g. market size numbers, capitalisation, spelling, hyphenation etc
Be ready for background checks - often part of Tier 3, some investors will want to do this earlier. It’s totally routine (usually legally required) to run background checks on all directors of a company (identity, criminal record, anti-money laundering, politically-exposed person, etc). Have copies of your government-issued ID and a recent utility bill at the same address ready. Investors will also run “social due diligence” so make sure there is nothing out there on the internet that you might not want them seeing—check social feeds for founders and directors, and repeat this for key employees and previous shareholders.
And, be ready for references - most investors will want to speak to one or more professional and possibly one personal reference, as well as potential customers and key suppliers. Have good contacts lined up.
Data room wishlist
(download latest version of this list here)
For preseed or early seed rounds, it may be that you don’t have all of these documents prepared yet which is fine - please provide what you have and we can talk through any gaps.
High level
Pitch deck.
Impact
Your estimate of the annual Emissions Reduction Potential for your technology in 2050 (see this blog).
Any additional information about the current impact of this problem including non-emissions impact e.g. SDG indicators.
Technical
Technical deep dive covering the key innovations and opportunities for further development
What are the key innovations already discovered and measured?
What are the remaining risks and areas for scientific innovation?
What are the benchmark metrics for your technology and how do you perform?
White papers / publications.
Modelling outputs.
Experimental results, both your own and any independent results.
Technical roadmap for next 2-5 years— - focus on what you will learn / prove as well as what you will build. Include TRL and MRL levels, and key work packages to progress.
Details of any patents, licences, assignments, trademarks, URLs owned as well as planned IP strategy going forward.
Organisation
Org chart at time of funding and after planned hires.
Founding team biographies / CVs.
Director agreements.
Employment contracts.
Any details of contractual workers and their agreements.
Advisor biographies / CVs.
Advisor agreements including any equity or remuneration.
Details of any options plan in place or planned.
Commercial
Market background - size, drivers, incumbents, regulatory considerations.
Business model - initial and planned evolution.
5 year business plan covering capital expenses, operating expenses and revenues - focus on capital and operating expenses needed to get to Series A/B.
Techno-economic analysis (TEA)
Drivers of costs and profitability at scale.
Sensitivity to key unknown metrics.
Detailed use of funds for existing financing round - at line item level
Clarity on R&D vs commercial expenses.
Customer validation / progress indicators (interviews, LOIs, contracts, etc).
Go to market plan for production with key suppliers/partners identified, and how it is anticipated this will change over time.
Clear business and technology milestones for the next 5 years including TRL levels.
Competitor analysis
Both technical and commercial analysis of both incumbents and new technologies.
Focus on cost, emissions and technical parameter comparisons, not feature comparison (i.e. charts/matrices).
Link it back to your TEA.
Financial
Cap Table of company before and (forecast) after financing round, including any convertibles or other outstanding commitments even if not converting.
Details of any grants received or expected including any grant applications underway.
Quarterly management accounts.
Annual financial accounts.
Governance / docs
Certificate(s) of Incorporation.
Company structure chart including any subsidiaries or parent companies, countries and dates of incorporation, and how this is anticipated to change post-round.
Memorandum / Articles of Incorporation.
Copy of insurance contracts e.g. professional indemnity, Directors and Officers, key person, office.
Copy of any customer or supplier contracts.
Copy of labs and/or offices rental agreements.
Copy of any previous investment round paperwork.
Details of any grants or other non-dilutive funding received.
Name of accountant and agreement with them.
Name of lawyer and agreement with them.
List of directors of the company, and any other Directorships they hold.
Board packs + minutes of previous board meetings
Minutes from any other committees e.g. remuneration, strategy.
EIS advance assurance from HMRC if relevant for the syndicate (not required by ZCC).
That’s it! You’re now ready to build your data room. Go wow your potential investors and good luck!