One of the first parts of a fundraising or exit transaction is a process called “due diligence”. As part of this process, your investor will generally ask their lawyers to carry out “legal due diligence”, and the first thing the lawyers will normally do is send through a list of documents they want you to make available in a dataroom.

The list below is intended as a guide to help founders understand what goes into a dataroom. It covers off the key points of focus for investors that frequently crop up in investment rounds.

Many founders don’t build their data room until an investor asks them to. However, building your data room early, before anyone asks for it, has some key advantages. Most importantly, it will show you where the gaps and issues are. Sometimes filling a gap will just take a call to an old employee, but sometimes you might have to do some work to fix it. Getting that sorted early is much quicker and less stressful than doing it during an investment round.

It also encourages a quicker and smoother transaction.  If you don’t start digging through your files until the lawyer sends you their shopping list, the process is going to take longer than if you’ve already made a start. Many founders find the dataroom structure helpful in keeping a good handle of company paperwork on an ongoing basis.

Show all

1. Corporate Documents

This folder will include things that relate to your company’s shareholding structure and corporate governance, including cap tables, shareholder registers and shareholders’ agreements.

Open all

1.1 Group Structure

If you’ve got more than one company in your group structure, then you should include a diagram to show what it looks like.

Make sure to annotate the diagram with ownership percentages if they aren’t all 100% owned. Also include the home jurisdiction of each company if they’re not all in the same country. Don’t forget to use the companies’ full legal names along with their registration numbers.

1.2 Cap Table

Whatever you’re using to keep track of your shares, options and convertibles (if you have them!) goes in here.

If you don’t have a cap table, then it’s worth putting one together in advance. An investor will be able to figure out your current cap table by looking at your history. However, it inspires more confidence if you’re able to show them that you’re on top of it.

1.3 Governing Documents (Articles and SHA)

An investor will want to see the governing documents of your company to understand the relationship between the company and its shareholders. They'll also want to get a sense of what rights existing shareholders have.

These documents are usually made up of articles of association and, sometimes, a shareholders’ agreement. If the company is very new, it might have been incorporated with the default set of “model articles.” If that’s the case, there won’t be much to include here.

If the company has adopted bespoke articles or has separately documented arrangements in an agreement that governs the relationships between the shareholders and the company, you should include those documents here.

1.5 Registers

The main registers an investor will ask for are:

  • The register of shareholders – a record of a company’s shareholding
  • The register of directors – a record of a company’s current and previous directors
  • PSC register – a register of individuals who have “significant control” over a company (this is usually anyone with over 25% of the shares)

Companies are legally required to maintain up-to-date registers, however, it’s common for startups to forget about them until an investor asks.

Top tip – have your registers ready in advance of a transaction. Depending on the number of shareholders you have, they can take time to draft.

1.4 Share History

Every time your company has issued shares, there will be paperwork that goes with it. As a minimum you should include the board decision (minutes or resolutions) and any shareholder or investor permission as well.

If you’re company has had multiple rounds of funding, you should break these into subfolders for each funding “event”. The pack of the signed paperwork for each investment will be its own subfolder. Any other share issuances might be another folder in between.

Top tip – use numbers in the folder names to keep them in chronological order.

You’ll also need to highlight anything other than the issuing of more shares. This could include the transfer of shares between founders, transferring shares back from a founder or early employee who left or the conversion of shares from one class to another.

1.6 Options and Convertibles

Include details about your option scheme here. If it’s not in your cap table, then a spreadsheet showing how many options you’ve granted would be helpful. If you have a central “scheme rules” document, include that too.

If your options with individuals are all on the same terms, then a template is fine. If each employee has a different deal, then include the document for each optionholder.

If you have an EMI scheme, make sure you have the letters from HMRC setting out the approved market value of your EMI options.

You should also include any other document you have which means someone could get shares in the future. This could be an investor document like a convertible loan, SAFE, advance subscription agreement, etc. or it might be a commitment you’ve written into a deal with an advisor or a big customer.

2. Accounts

Your annual accounts should go in here. Ideally for the last three years, if you’ve been operating longer than that. Along with management accounts for the period from the last accounts date up to your most recent month end. You or your accountant will be able to produce this from your accounting software.

3. People

Everything in relation to your employees. It might variously be named “Employees” or “Staff”, but it means the same thing.

Remember to include the general terms on which your company employs people and any specific employment terms that apply to the founders and any other senior executives.

Open all

3.1 Employees – General

Create an anonymised spreadsheet with key information about your employees, including length of service, usual work location, salary, job title, hours (if not full time) and any benefits. If you already track this information then just remember to anonymise it when it goes in the folder.

You will need to include any standard employment terms. If you’re a larger company, you might have multiple different standard terms, e.g., one for senior employees and one for junior employees. If anyone has a bespoke arrangement, include an anonymised copy of their contract.

Top tip – in the early stages of the business you may have multiple pieces of paper with each employee as you deal with things like intellectual property and confidentiality separately. If that’s the case, put those documents in here as well.

3.2 Employees – Founders / Executives

An investor is going to want to see the employment agreements of the founders. Don’t worry if your current founder employment agreements are out of date – as investors are very likely to want you to update them with their own comments as part of the investment round.

If the company has any directors in addition to the founders, their director service agreements should go in here. 

3.3 Consultants

A similar spreadsheet as the one mentioned in the Employees section, but for your consultants. An investor will be focused on the terms of payment and scope of work for your consultants.

If you engage consultants on standard terms, they should go in here too.

3.4 Immigration

Are any of your employees working for you on a working visa? If so, include your sponsor licence from the UK Home Office.

3.5 Policies

If you have more than a couple of employees, an investor will want to make sure that the company has policies in place for workplace behaviour, anti-harassment and discrimination.

3.6 Pensions

If your company has employees, you’ll need to have a pension scheme in place.

Your pension scheme will have scheme rules which sets out the pension terms and level of employer contribution. 

4. Commercial Contracts

The level of detail here will depend on the stage of your business. If your company is well established with lots of customers, there will be more to include here. If your company is in its early stages, there will be less to include.

Top tip – investors will be interested in identifying your key customers and main sources of revenue, as well as the agreements with those customers.

Open all

4.1 Customers

If your company relies on a handful of key customers who make up a large proportion of revenues, you'll likely be asked to identify those customers and set out roughly what percentage of the company’s revenues they are responsible for over a certain period. Generally, the previous financial year. Also include your contracts with these customers.

If your company’s customers are spread widely, you can just include standard terms and conditions.

4.2 Suppliers

Does your company rely on a handful of key commercial suppliers? If so, an investor will want to know who those are and look at the contracts you have with them. 

5. Data Protection

Practically all businesses collect and use personal data. This could be employee, customer or client data, or even data belonging to other businesses when the business performs its services.

“Personal data” generally means any electronic information relating to an identifiable person. “Processing” means doing anything with the personal data such as collecting, using, storing, or even deleting it.

Your business may be classified as a “data controller” or a “data processor”.

  • A “data controller” makes decisions in relation to the collection and use of personal data which is used for the benefit of a data controller. Data controllers have the most obligations under data protection laws. A typical data controller would include a business in respect of its individual consumer data or its HR data.
  • A “data processor” processes personal data on behalf of a data controller. It acts on the instructions of the data controller and doesn’t have its own purposes for using the personal data. A typical data processor would include a B2B software company that performs services on behalf of a B2C corporate customer.

Open all

5.1 Registrations

Most data controllers in the UK need to be registered with the data protection supervisory authority, the Information Commissioners Office (the ICO). These records are available on a public register, but it’s good practice to provide a copy of this registration to demonstrate that the business is meeting a basic obligation.

5.2 Privacy Notices and Consents

Data controllers have obligations to inform data subjects, such as employees or customers, about how and why their personal data is collected and used. In some cases, the consent of the data subject is required (for example, in most forms of electronic marketing).

An investor may ask the company to demonstrate how it provides information to data subjects. This could include privacy notices and cookie notices, along with how the company obtains the required consents.

If your company processes customer data, you should include documents to demonstrate how you recognise and respect data rights requests, including requests to access or erase customer data.

5.3 Data Processing Agreements

Where another company processes personal data on your behalf, such as a service provider, or you process personal data on behalf of another company, a data processing agreement must be in place. These agreements impose contractual obligations to control how personal data can and can’t be used. It also covers matters such as instructions for processing, information security, audit rights, retention of data, and deletion of data at the end of the contract.

If this applies to your business, then include a template copy of your data processing agreement along with any data processing agreements for your data processors.

5.4 Breach Notifications and Gap Reports

Any letters or other documents relating to personal data breaches, data subject complaints, or any investigations by the ICO or other regulators should be included.

Top tip – a “gap reporting exercise” audits the business and identifies “gaps” in compliance. If your business processes a lot of personal data, gap reports can reassure an investor that the business is aware of where data protection improvements need to be made. It also shows you have a plan for fixing any issues.

6. Intellectual Property

If your business is a technology business then your intellectual property, or “IP”, will likely be a big area of focus for any investor as part of their due diligence.

Open all

6.1 Material IP

As a starting point, you might want to prepare a document that lists the material IP the business uses. Divide the list into sections:

  1. Set out the material IP that the company owns – include any software or code that has been developed in-house as well as any patents, trademarks or logos the company has.
  2. Set out the material IP that the company licences from third parties – include any AI models or SAAS products licensed by the company.

Top tip – remember that IP does not only cover IP that is registered with an authority, such as a trademark or a patent. It also covers unregistered IP like copyright, software, code, ownership of domain names, designs, know-how, etc.

6.2 Registrations and Applications

Any information relating to trademark, design or patent filings you have made. You should include a clear indication of the country in which protection has been sought, details regarding the mark/patent title/design image, any application or registration number and filing details.

6.3 Licences In and Out

Your company should have a licensing agreement in place if it's licencing IP to generate revenue, expand the business geographically or launch new product lines. Your company will also need a licensing agreement in place if it licences someone else’s IP.

Technically, we all licence IP we don’t own on a daily basis. The terms are based on licence terms included in standard T&Cs. For example, every time you use an app on your phone you will be using someone else’s IP under a licence. An investor therefore won’t expect you to list out all those licences here – their focus will be on:

  1. Exclusive licences, being a licence which means that no one else can use the IP in question
  2. Sole licences, which is a licence where only you and the owner can use the IP
  3. Licences which are on non-standard terms

7. IT

Your IT and technology estate gives investors a good idea of how developed and risk adverse your company is as well as how your computer systems work together.

Open all

7.1 Overview of IT Estate

What does your IT estate look like? Include a document which outlines:

  1. What computer equipment the company owns
  2. Whether employees use their own equipment in carrying out work for the company
  3. What SaaS products the company uses
  4. What domain names the company owns

Top tip – you might find that you registered the domain names personally during this exercise. Now is a good time to transfer the ownership of those domains to the company.

If you have agreements for any part of your IT stack, add them into a subfolder. If you’re just making purchases on standard terms from big providers then no need to dig through their website and find their T&Cs at this stage.

7.2 Disaster Recovery

An investor may want an understanding on your business interruption and disaster recovery process. If your company is in its early stages, it’s probably relying on the redundancy and backup provisions of the hosting provider. Regardless, it’s helpful to set out something that shows you have identified those provisions.

8. Real Estate

If your company rents out or uses any property space (including office, warehouse or parking spaces), then include the documents which detail the terms of that use, such as the lease or licence. If not, there will be nothing to worry about for this.

Top tip – include any relevant property information such as any recent service charge statements, wayleave agreements or notices served on you by your landlord or any neighbour.

9. Litigation

If your company hasn’t been involved in any disputes or litigation, and none are being threatened, you’ll need a short note confirming that.

If the company is or has been involved in a dispute, or someone has threatened taking the company to court, then an investor would want to see a note describing that dispute.

In describing a dispute, make sure you include the cash amounts involved (or the estimated amounts) and the current status. If the dispute is historic and has been settled, then include the final judgment or settlement document.

Top tip – check with your lawyer whether or not you should be anonymising the other parties when describing the disputes and disclosing any related documents.

10. Borrowing

Include any documents that relate to debt available to your company. Any security you have granted over your assets will have included a pack of paperwork that you should include here. This could be a debenture, plus additional separate documents depending on what assets have been secured in connection with the loan.

Larger companies with multiple loans might have documents setting out which lenders can claim their security first, also known as an “intercreditor” agreement.

Top tip – if your company has given any guarantees, or if anyone else has given a guarantee to cover the company’s obligations, then remember to include those as well.

Finally, if you have an overdraft on your company bank account that’s also technically a debt facility, but likely doesn’t come with a separate document. A simple note outlining this would be good to include.

11. Regulation

Does your company operate in a regulated industry? For example, if your company operates in the financial services sector, it may regulated by the Financial Conduct Authority.

If your company is regulated, include the certificate confirming registration.

Has your company received inquiries from its relevant regulator? This could include, for example, acting in non-compliance of regulatory rules, or if you have been subject to investigation by a regulator or other official body. Any details about the status of those inquiries or investigations, along with related correspondence from the regulator, would be included here.

Ready to start preparing for your fundraising round? Click here to download our handy toolkit filled with checklists and top tips from our expert team.