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The Data Room Handbook
A pitch gets you through the door, but the data room gets deals done.
David Steinley
15 min read
Table of contents
I. Why data rooms matter
While a data room is, at its core, a shared drive with a bunch of files in it that investors will ask you for during due diligence, you should know it’s not about the shared drive.
It’s also not about the files in it.
It’s about whether you can turn those piles of documents you have in Notion, in Drive, in Sharepoint, on your desktop, on your team’s desktops, in your Remarkable, in binders, on Post-Its on your walls, into an irresistible fundraising narrative.
This process of converting information from an unholy mess (don’t worry, us too) into a compelling business case worthy of investment is the reason we are constantly fascinated by this work.
In fact, we know that the real value of building a data room is that it's a forcing function for thinking through the entirety of the business opportunity that you are selling to investors.
While too much planning is bad, we find that creating the right-sized data room for your round, prioritizing information, thinking through how to show off your traction and strategy and market opportunity, and organizing things well, benefits a startup team greatly:
You’ll have everything you need for due diligence ready in a few clicks. No more making your investors wait, slowing down deals.
You’ll impress the heck out of those investors too. A founder who gets every diligence request over to the investor’s team in a matter of hours comes across professional, serious, trustworthy, and a good investment target. (Keep in mind this might be the first time an investor sees the quality of your work—makes a person want to do this well.)
You’ll add depth to your conversations with investors and improve your Q&A ability given you’ve thought through each important aspect of your business in great detail, and have taken the time to gather compelling support to back up your claims.
You’ll have a new operating system. Build it with your team and see where you agree and where you don’t, and make things better. Add to it after every strategy session. After every new thing you learn. After new data comes in.
You can use it for onboarding new hires, signing new partnerships, explaining to people what you are all about.
You’ll continue to need this sort of business information every time you do a large transaction that affects your equity or long-term debt.
End of the day, this is preparation, and the most prepared are the ones to bet on.
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What happens without a data room?
If you don’t have a data room, you don’t have a starting anchor for your negotiations. And if that’s true, you’ll more easily sway to the whims of others with better negotiating positions.
On that point, if you don’t know what you are, how could you possibly know what you’re asking for? We find that the founders who are less prepared are more likely to feel they're asking for charity. On the other hand, those founders who are certain about their opportunity, their value, and speak to this with conviction? That’s a recipe for personal power and a better valuation.
If you don’t have a data room you’ll spend countless hours sending files ad-hoc via email to your investors. The risk is if they can’t find what they need, they get slowed down, and when money flows fast, someone else who was ready suddenly becomes more attractive, simply because there were there to meet the moment.
If you make changes along the way, or for some investors and not others, you’ll have a ridiculous amount of version control issues.
Investable business opportunities
This is a critical point: Startups transact in business opportunities.
Think about it. You're not there yet, so you're definitely not selling what’s real today. If you were to do that, you would be very unhappy with your valuation.
What you are actually selling is equity in your future potential, aka an opportunity. Your valuation today depends on your ability to sell the significance of your business opportunity. If an investor agrees that you're onto something, it becomes worth it for them to give you some money to see whether what you say can come true.
To that end, the information that you put in a data room must do two things: 1) prove out your success to date, and 2) provide evidence there's a bigger opportunity in the future. One where everyone involved can make a very large return.
This is where a data room gets interesting. The goal is to sell something investable. You want the files to be selling for you even when you're not in the room, helping investors get closer and closer to a point of conviction. Data rooms are where you curate your business opportunity.
On that point, let's talk about a few indicators of investability you're going to want to emphasize in your data room information:
Severity. Share indicators that your customer's pain is serious enough that they will pay for a solution and break the status quo. Additionally, the more serious and potentially pervasive a problem, the larger the market size could potentially be.
Timing. There's a natural time for every business opportunity and the profit margins up for grabs. Too late and someone else will have captured it. Too early and the market's not there yet (although it could one day be). Your job will be to prove that the time is now. Macro changes that open new opportunities are commonly due to regulations, technologies, and emerging social needs.
Scale. Your investor wants to know if your business model can scale to a major size. That is, are you building something that the whole world can use? Do you intend to sell to the whole world? Or are you focused regionally, looking to build what looks more like a lifestyle business?
Speed. This is your ability to invest aggressively and earn market share quickly. The quicker you do that, the higher your investors’ internal rates of return, and the happier they are at their AGMs. This is good for your valuation. Showing lack of impediments to speed is important as well, e.g. being service-based isn’t a strong sell because having people involved in delivery slows things down.
Founder. Show investors your personal commitment to big outcomes, emotional connection to the problem, audacity, willfulness. They need to believe that you can be the CEO of a very large company. Prove your ability to shape the world around you.
Traction. Traction is your success to date and proof of it. With every milestone you achieve, it’s another data point on your journey. You want this story to be escalating, showing that with time and resources you can execute well and reach your goals.
The sum of this information, if presented right, is going to be what convinces others that your business opportunity is investable. This is table stakes if you're going to be successful raising capital from angel investors, venture capitalists, and/or corporate VCs.
We're going to go much deeper on the specific sorts of information that you'll want to put in your data room, along with how to present it in a way that makes it compelling, once we get into the full Frictionless Fundraising Program, release date December 2025.
II. What's inside a data room?
Before you begin:
Note that you don’t need everything listed here. How much you need depends on your stage of business. Pre-seed startups needs less data room information than seed stage, and seed stage needs less than series A.
When deciding what to include, ask yourself: Does this communicate a more investable business opportunity? Does it do useful work? If yes, include. If no, cut.
The Oyster Tech data room
Oyster Tech, the fictional startup we created for the Frictionless Fundraising Program training materials, currently has a data room with ~20 templated files. On top of that, you'll likely have another 10 to 20 drag n’ drop legal / financial PDFs. That's what your lawyers and accountants are for.
When you purchase the full Frictionless Fundraising Program, you'll get access to this entire data room asset (pictured in part below), including all 20 templated files, insights on what you’re really saying with each file, and instructions on how to create your own best-practice, investor-ready documents.
10 of the top data room files
Here’s a few of our favorite files, some of which we see as absolutely non-negotiable. We’ll tell you why.
Data room index
A brief spreadsheet that lists every file in the data room (pictured above). Helps investors find what they need quickly and avoid chasing you for information they should have had already.
Investment memo
This is the cornerstone of your data room. A tight 10–15 page overview of your complete business opportunity. Keep it skimmable. Add deep dives as separate files.
Scale-up plans
A unified view of product, ops, and sales milestones. Timelines, dependencies, and how each piece fits together. Looks like a Gantt chart.
Product & IP roadmap
Separate timelines for product development and IP strategy. Include past achievements (traction), current work (how you're spending this round), and the future vision (how big this can get = returns).
Forward-looking org chart
Make an org chart where roles that are already staffed are highlighted in color. Add additional roles that are colored grey, which you have yet to hire for. This shows visually what your team scale-up plans look like and should directly tie to your use of funds.
Competitive landscape
Discuss your competition in up to three categories: incumbents, startups, and status quo. Avoid villainizing. All deserve credit where due. But you've still got to show why your approach is best.
Market size analysis
A bottom-up estimate of your market. Start with potential customer counts. Multiply by expected pricing. Segment by geography. Support with sources and assumptions.
Go-to-market strategy
How will you reach customers at scale? Be specific. Show off unfair advantages in execution, traction in early GTM efforts, and unique insights based on your background or connections.
Sales pipeline & other traction
If you don’t have revenue yet, show pipeline, signed pilots, waitlists, testimonials, key hires, or product development milestones.
Cash flow model
Your quantified strategy. Show how you’ll use this round’s cash, what future cash flows might look like, and how it all adds up to an investable opportunity. Five-year forecasts are nice, but you can get away with a 2- or 3-year operating budget that shows cash inflow and outflow.
If you're struggling with the modeling (as many founders do, by the way), let us do that for you as an add-on to the Frictionless Fundraising Program so you can finally understand your financial perspective and impress the heck out of your investors.
What really matters
You're not trying to impress with volume.
You're taking this opportunity to whittle down reams of information into what really matters—proof that you’re on the path to major returns.
Next up, we'll tell you all about the process we use to get data rooms done right.
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III. Our process for creating data rooms
First, build an investment memo
This is the central document for your data room. See Bessemer Venture Partners’ example memos to understand what an investment memo is.
Essentially, an investment memo is what venture capitalists use internally to document critical information about a potential investment. The lead on the deal will make their go/no-go recommendation here, and then share it with the other partners to get their agreement.
The point is these memos are public now, and VCs like Bessemer have shown us what matters most to them. So let's use that. Let's use the investment memo as the central repository for all the things that matter most about our business opportunity.
What we do first with our clients at Frictionless Fundraising is draft an investment memo. We do this by asking many questions and documenting the answers across a few specific categories. Then we scaffold up a lightweight version of the memo where we can make edits quickly among the whole team, before spending the time to fill it in.
Supporting documents come next
Once your memo is mocked up, you will see where you need additional information. Wherever you make a bold claim that someone could ask you to verify, you need additional information.
If you’re not sure where to go deeper, ask: Where’s my biggest risk?
Tech risk? Add depth to your product folder.
Market risk? Build out the market materials.
You can always ask mentors, chummy investors, or advisors about your business opportunity and see where they push back most. This is a good indication of where the risk is and where you need more support.
Legal, financial, and deal materials
Now we’re into the material most founders expect to see: models, legal docs, summaries, terms.
And by the way, this isn't the old antagonistic “dump files for lawyers, shoebox of receipts for accountants” way.
Legal and financial information speaks to your ability to run a business. There's no honor in being unprepared because you're a Maverick founder. These legal files and financial files, if not prepared, can take months to get, and no investor is going to wait for this. You will lose the deal.
What you want to show is that you're professional. You understand how all the regulations work, and that you're on-side of them. This builds trust between you and your investors. You become someone they want to work with over the long term because you know what matters.
We also see the legal package of information for the current round as a source of competitive advantage. The easier you make it to buy your shares, the easier it is to get cash in the bank.
A few key things to include:
Cap table + central securities register to support
Shareholders’ agreement and new share subscription agreements / SAFE agreements.
Incorporation docs
Board resolutions, minutes, structure
Tax filings and historical financials
And yes, get your books and taxes done. Don’t let this trip you up months into the raise.
Now create the business summary info
Think of this like surfacing the tip of the iceberg. It’s easier, and far more powerful, when you’ve already built the detailed files.
Now you can distill:
The rest of the investment memo
Pitch deck / exec summary
Investor FAQ
Using the data room
Here’s where it gets fun. What you've built yourself is an operating system for everything about your business opportunity. You'll continue to use this information at every one of your most important business transactions that deal with equity and long-term debt. And not just that, you'll use this information when you're talking strategy with your team, onboarding new team members, signing partnerships, and generally trying to convince people of what you're doing.
Here’s a few specific use-cases:
Grant applications
Onboarding new employees
Partnership conversations
Raising angel / VC / CVC dilutive capital
Purchasing a subsidiary
Exiting
And if we were working on this together, this would be what we do to close it up. We would get you very clear on what to do next when you enter the fundraising process:
How much to raise, on what valuation, and what equity instrument.
What sources of capital are available to you beyond just selling your equity, so you can save more of your equity for yourself and build your most efficient capital stack.
What style of process you’re running, what timelines to expect, and how to manage it.
What diligence will require, and how to stay a step ahead.
How to find the right investors, and how to know when you're ready to go out and raise.
You'll learn all of this and more in the Frictionless Fundraising program. When you buy the program, you get an hour-long session included. We recommend you use this when you're done prepping your data room from the training videos and templates we provide you, that way we can review what you've done together, ask the hard questions so you're prepared, and help you finalize your terms.
IV. Raising successfully
Here are some first-principles things you can do to fundraise more successfully.
Narrow focus
Do one thing exceptionally well at scale. That’s the mantra. That’s all you have time and resources for at any given point. And it applies across every section of the data room:
One unique perspective
One killer feature
One offer
One customer
One go-to-market
One domain of knowledge
One vision for the future
Trust us on this one: having more than one of any of these things will make it that much harder to communicate what it is that you do. It looks like hedging. And when you can't be clear, it destroys the trust you otherwise could have built with your investors.
It's always the case that early-stage companies don’t have the luxury of breadth. Not until you win at the first thing you do. But after that, once you're cash flowing? Feel free to invest in other opportunities.
Until then, make sure your story is narrowly focused.
Past, present & future
Startups grow in a sequence from past to present to future. No one expects everything to happen at the same time. And in fact, if they do, that's bad. See Narrow focus.
It's important to keep separate what's going to happen at different times:
Past shows traction, shows your accomplishments, builds your credibility.
Present shows execution prowess, what you plan to do with this raise.
Future shows potential for returns; why you're doing this.
Making good use of timelines will help you separate what you're currently working on and what you're going to be working on. Again, proving focus.
Experience > strategy
You are uniquely valuable because you have insight into an opportunity that an investor doesn't. This gives you an information advantage, and you have to sell that. This could be from your industry experience, your experiences working with customers, research you’ve done, data you’ve collected, and on goes the list.
This is the hard information, and from here comes your strategy. Never the other way around. If you start with strategy and try to backfill the information you need, you'll grip too hard to uncertainties and not allow the business to unfold naturally. Your writing will sound stilted and unbelievable.
So talk about what you've done, what you know to be true that others don't. That's the stuff that builds trust, that's the stuff that gets you investment. Then build your strategy from that.
Vigorous information
Vigorous information is that vivid, specific, personal insight that sticks:
A conversation with a customer that changed your roadmap
A failed experiment that clarified your market
A quote from a user that’s still ringing in your ears
These details show how closely you’ve been paying attention. How much you care. And how deep your understanding really goes. Capture these anecdotes and put them in all of your documentation to give it a feel of rarity and practicality, not just intellectual bluster.
Specificity wins
Be exact.
Don’t say “fast-growing market.”
Say: “23% CAGR with 18,000 buyers in North America alone.”
Don’t say “great customer feedback.”
Say: “9.4 average NPS across 60 users in our closed beta.”
Specificity creates confidence. It brings your story to life.
And it’s not just words. Use charts, screenshots, videos, product walkthroughs: anything that makes your claims concrete.
Useful work
Every sentence, every slide, every file should do useful work. If it doesn’t move your story forward, cut it.
Just like in fiction writing, business writing is sharper when it’s edited with care. That's the hard work.
Consider the sculptor. Said Michelangelo: “I just remove everything that is not David.”
Remove what doesn't belong and leave whatever's doing useful work.
Make it skimmable
Write so that someone in a rush can still get it.
Use bold, contextual subheaders that carry meaning on their own. Make sure someone could read just those headers and still understand your business.
Then, when something catches their eye, they’ll dive deeper, into your paragraphs, your charts, your links. That’s how good data rooms are designed—with the readers’ experience in mind.
Show your desire
Investors are looking for the reason that you'll hang around this business when things get tough. They want to know why you'll be here for 10-15 years as you build this into something very large. The more urgent the problem, the more conviction you show, the more investors will buy into your ability as a founder.
At the early stages, you are half the decision.
That's it. Thanks for reading everyone. We hope you'll sign up for the Frictionless Fundraising Program waitlist for early-releases, discounts on future programs, and even more insider fundraising insights.
