Building Your Seed Data Room

A few key takeaways

This guide focuses on the set up of a data room for seed stage start-ups. In addition to some guidelines on what to include, they also share a template data room built in Craft. While the tone is more focused towards tech startups, several takeaways are applicable to life science founders and CEO.

• A data room streamlines the fundraising process by pre-emptively addressing investor inquiries, saving time and energy while facilitating deeper discussions.
• A impressive data room demonstrates strategic foresight, serious commitment to fundraising, and deep market understanding.
• A data room should be a dynamic entity, continuously updated with input from previous investors and team members.
• Essential components of a data room include the pitch deck, team overview, product details, roadmap, metrics, and financial plan.
• While a perfect data room doesn't guarantee fundraising success, it enhances efficiency and augments the narrative and vision of the venture.

The article

Let's start with the basics: Why have a data room in the first place?

There are ultimately three core reasons why a data room can make all the difference in a fundraising process:

• To get a head start on the process. Before they have time to ask for long Q&A docs or send specific requests on a financial plan, you will have prepared something that covers most of their questions. This means that they will need to go one step deeper before they can come up with the next set of questions. And you will have saved a lot of time on the basic things that would have eaten away at your patience and energy.
• It will impress VCs. A really good data room sets you apart from the majority of other companies raising. A good deck is more of a hygiene factor than a differentiator. But a really good and comprehensive data room is something that most companies never build. It will show that you are planning ahead, take the fundraising process seriously, and, most importantly, it will be a way for investors to understand that you know a thing or two about the market you are operating in and why you are solving a massive problem.
• Team alignment around the future vision. A data room is not only something you do for others, it is something you do for yourself and the company. It is a time-consuming process, but once you have completed it, you and your team will emerge with a more coherent understanding of both the short-term steps and the long-term vision.

Now that we have gone through the reasons for having a data room, let's speak about how you build one:

1. Start by taking a look at our template and see what pieces you already have and what you potentially need to complement them with
2. Distribute the work within the team but make sure someone is the main owner of putting it all together
3. Compile all the material into a sharable workspace like Craft or Notion, or a file-sharing system, like Dropbox, or Google Drive
4. Ideally, if you have previous investors; could be a VC or angels, let them have a look and give feedback and iterate on the suggested changes. Especially have a look at the numbers part such as Metrics, Financial Plan, etc. as they are extra important to get right
5. And then when you are done, and for the investors that are going deeper after the first call, you can include a link to your data room in the follow-up email

So what should be included in a good data room? The elements of a data room we usually like to see - and the reasons for having them - are as follows...

Pitch Deck

The deck is a data room staple, and probably the easiest addition from your side. Even though you, in most cases, have shared the deck beforehand, it helps to have all the material in one place. If you have an extended version of your deck, this could also be a good place to add it.

Team

A stellar team is one of the best indicators of long-term success, and the founders' ability to recruit top-tier talent is an important signal. Since investors usually only get to meet the founders during the fundraising process, the data room is a good place to present your team - beyond the founders - and celebrate the strong individuals you have brought together. If you are more than 10 people, there is no need to do this for the entire team, but highlight founders + key individuals.

Product Overview

Fully understanding the product is crucial for any investment, but this can sometimes be difficult to do from an early website and grasp each technical aspect and functionality. As a result, the product is usually one of the areas in which we spend the most time, and it may be helpful to improve this process through more in-depth illustrations and descriptions. While a product demo might still be required down the line, providing a detailed presentation ahead of time will improve the quality of future discussions.

Product Roadmap

A company's product vision is one of the most important factors when investing at the seed stage. This means that, apart from deep diving into your current product, we as VCs want to understand what your product can become. Product roadmaps are usually helpful in illustrating this.

Metrics

Depending on how mature your company is, you might want to have a separate tab to highlight your current metrics. The set of metrics you will present will be hugely different depending on what you are building but here are some examples for a consumer- and a B2B startup. (More examples of general + specific metrics in the Metrics section in the template.)

• Consumer: User growth, acquisition channels (and share of organic), engagement (DAU, WAU, MAU), Monthly retention.
• B2B: MRR development, NRR, ACV + ACV development, Sales efficiency, Funnel conversion rates.

Customer Deep-Dives

Since it might be too early to provide hard numbers as proof of traction, customer references and insights can be a good way to show product-market fit. In this way, we can get a better feel for the product aspects that make you stand out and what motivates customers to choose your solution.

Financial Plan

To understand key assumptions and value drivers of the business in more detail, investors usually want to see a financial plan. The financial model is also a great way to show how you plan to grow and distribute resources in the near future. You don't have to plan for several years ahead but rather showcase the LTM + your idea for the coming 12–18 months. And if you have never built a Financial Plan before we have a great guide on how to go about this: Financial plan Series A template - Creandum.

Final comment

A perfect data room is not a guarantee for success in your fundraising. But it can make it both more efficient and augment the story and vision of what you have built so far and what you are envisioning for the future.

Feel free to use the Creandum Seed Data Room Template as a starting point and iterate to make you tell the best possible story for your company. If you think we missed anything or have any ideas for how to improve it, let us know!

Original Source: Seed Data Room | Creandum (creandum.com)