Compared to pitch decks, data rooms get much less attention when it comes to their role in the fundraising process. But these unsung heroes are actually quite important. A well-structured data room shows diligence, commitment, and professionalism. It also gives you the chance to shine a spotlight on your fund’s unique selling proposition (USP).
The content in your data room should bring life to your fund’s unique story and strategy, crafting a compelling narrative for potential investors. When done right, data rooms help move these prospects through the funnel and generate interest from other investors. See how four emerging fund managers leverage tech tools to save time for what matters most: relationship building.
Potential LPs need as much information about a fund as possible before making a decision on whether or not they’ll invest. And since they’re often pressed for time, giving them instant access to a centralized content hub could be the difference between losing or closing the deal.
We’ve put together a list of 17 documents to include when building your emerging funds data room, and 5 tips on how to use them most effectively.
17 documents to include in your emerging funds data room
- Pitch deck. This gives LPs an overview of your fund and what to expect when investing with you.
- Investment process. Demonstrate your thesis in action. Include your target market or sector, your understanding of this market, assessment of risk, decision-making framework, and competitive analysis.
- Investment memos. Describe in a clear, concise way why an LP should invest in your fund.
- Team. Include accomplishments and challenges your team has faced and some information about who you are as people.
- Resumes. Provide one for each GP on your team.
- References. List with contact information or include a written reference. Include references from past deals to demonstrate your value as an investor. If this is your first fund, include references from prior firms or companies you’ve worked at. These could include CEO references, LP references, or GP co-investor references.
- Newsletters or monthly updates. Archive of any communications you’ve sent out to your investors.
- Fund model. Include your average investment size, average valuation, target ownership, reserves for follow-on, new investments, average solution, percentage of ownerships or percentage of investments that will exit, target returns, IRR management fees, etc.
- Details on past performance. Contextualize which investments are outperforming, the value of your holdings, ownership of each investment, any co-investors, etc.
- Track record. Include deals with prior investors, co-investors, the date of investment, amount, percentage ownership, valuation, and where you sourced the deal.
- Portfolio investment strategy. Describe what you’re looking for, how many deals you want to make, and the expected outcome of those deals.
- Sample term sheet. Only include this if you’re a lead investor.
- Details on portfolio companies. Show details and performance of your investments at the company level. Include ownership of each investment, the multiple on invested capital, and the current value of the company.
- Legal documents. Fund management policies, how profits and losses will be calculated and distributed, compensation and fee structure, and what happens in the event of a dissolution.
- Limited Partnership Agreement (LPA). Include the legally binding agreement between the GPs and LPs of the fund.
- Audited tax returns. This gives LPs deeper insight into your firm’s finances.
- Due diligence questionnaire. Download the DDQ template from Institutional Limited Partners Association (ILPA).
5 tips to get the most out of your DocSend data room
1. Create a personalized look and feel
Creating a data room for your fund is essential for keeping all necessary documents in one place for potential investors to review. Data rooms are also your time to shine. Add personality with your logo, a custom banner image, and custom thumbnail images for each included document.
2. Enable email verification to see who has viewed your data room
DocSend gives emerging fund managers the ability to see exactly who views their documents. And since data room links have a tendency to get passed around from time to time, this can be incredibly helpful in potential LP outreach.
For example, if your data room is shared with someone you don’t know, you’ll get notified and they can’t access it without submitting their email address. Pre-plan for your data room getting into the wrong hands by setting up a blocklist of competitors or funds you don’t want to have access to your content.
Email verification doubles as a great opportunity for cold outreach. If you notice that someone new viewed your content, send them an email saying something like “Hey, I saw you looked at my fund’s data room. Let me know if you have any questions. Let’s set up a call.”
3. Protect your data room documents with a one-click NDA
Before sharing the link to your data room, ensure your fund’s sensitive information is protected by enabling a one-click NDA right within DocSend. This allows you to safely share proprietary information with potential LPs. Once the NDA is signed by all parties, your data room will instantly become available to view.
4. Notify selected visitors when your data room has been updated
Let’s say a potential LP requests a document that isn’t currently in your data room. Simply upload the requested document, select the visitors you’d like to update, craft a personalized message, and voilà! A notification with all updates to your data room will be sent to your recipients of choice.
5. Stage-gate your data room with access restrictions
Enable access restrictions for certain people or email aliases to reveal specific content in your data room only after potential LPs have reached a certain stage in your funnel.
For example, some of the content in your data room might be more general information about your fund, which you could share with all interested LPs. Your fund’s legal documentation, past performance, audited tax returns, and portfolio investment strategy are all proprietary and sensitive. Documents like these are better kept under lock and key until you can really gauge the interest level of a potential investor.
Raising an early fund is a lengthy endeavor, riddled with unexpected challenges. We surveyed nearly 50 VC funds to get an inside look at how GPs raise their early funds, how long it can take, and how many LPs the average fund has. Download the report to learn how you can raise more efficiently and understand what to expect when raising your first fund.