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What is a Virtual Data Room and Why You Should Have One During Fundraising

Written by Alejandra Calvo and Daniel Tovbin, Associates at Initialized Capital

You’re raising a new round and starting conversations with investors. Great! Before you engage in these early pitch meetings, you should put together a virtual data room, or VDR, with key documents that give investors a better understanding of your historical and projected business performance.  

Our backgrounds are in investment banking and private equity and we’ve been creating, populating and managing virtual data rooms for quite some time. It’s one of the things we get asked about the most at Initialized. Below is a guide to help early-stage founders understand exactly what to include in a VDR. We’re excited to share this with our founders and anyone else looking for this advice.

Overall, you want to upload just enough of the right information to give potential investors a general idea of the state of your company without sharing too much. The reason for this is because it’s important to provide all of the necessary information they need to conduct their own diligence without overwhelming them with so much that your main points get lost. As the diligence process progresses, investors have the option to submit further diligence questions and data requests, which you can then provide to them ad hoc. 

For the “bare minimum data room upload” we usually recommend founders include the following information: 


  • Company Overview
    • Your fundraising deck.
  • Financials
    • Your operating model, including bottoms-up revenue and cost projections. (This is the area founders have the most trouble with. A detailed post on operating model construction for early stage founders is coming soon!)
    • A historical and projected income statement — annual, quarterly and monthly, if possible.
  • Market Data
    • Market sizing analysis — both internal reports and from external sources such as Gartner, Forrester or others. Show both a top-down and a bottom-up approach. 
    • Competitive analysis — for example, a slide on major competitors and how they differ from you.
  • Other
    • An employee census and an organization chart.
    • A current capitalization table. 

Nice to Have:

  • More Financials
    • Revenue splits by segment, geography and customer size for each customer. This is important for funds that want to calculate gross and net retention metrics over time.
  • Customer Data
    • If your company has a recurring revenue business model, provide gross and net retention analyses, both dollar and logo, and LTV/CAC calculations over time. 
    • Your upcoming sales pipeline, tagged by employee and channel. 
    • Sample contracts.
  • Other
    • Licensed IP and trademarks, if any
    • Product screenshots or videos
    • A login for a product demo
    • A more detailed product roadmap
    • Awards
    • Customer reviews
    • Press releases 

During our time at Initialized, we have found that the area most founders have trouble with is setting up operating models. Putting together a model is a quantitative way to articulate the founder’s vision and at times requires the eye of a financial expert. It is important to tell the right story to future investors and position the company’s historical and projected metrics well. 

It is also important to be ready for follow-up questions from potential investors. The questions founders receive most often are about revenue growth potential, gross margins and unit economics such as gross and net retention, LTV/CAC, and take rate. Founders are also often asked how they plan to use future funding, for example, for future hiring, salaries or marketing spend. We recently co-wrote a post with Initialized general partner, Alda Leu Dennis, about follow-on fundraising metrics and which ones to target specifically for when you are raising your Series A. See that post here.

We highly recommend having your VDR up and ready ahead of fundraising, and it’s even better if you produce some of these documents as part of your ongoing business operations. For example, have an operating model for your day-to-day operations that can easily be updated for your fundraising process. 

We usually recommend that founders allocate two weeks to gather the correct documents. Founders can set up these data rooms themselves or collaborate with their in-house business operations team. Common file storage solutions that work well for companies raising their Series A include Google Drive, Dropbox and Notion. For later stage companies, data room providers like Merrill, LightServe, and Intralinks could be helpful due to added functionality and dedicated monitoring and control services. 

As your investors, we’re always happy to double check the VDRs of our portfolio companies to make sure all the necessary files are there. Fundraising can happen at a moment’s notice and it’s important to be ready in case you plan on moving quickly. Once your VDR is ready, you can focus on more important things like running your business and engaging in fruitful conversations with investors. 

Good luck with fundraising!