The craft
Reviewing a data room
What should be in it, what its absence tells you, and how to review one in two hours rather than twenty.
Realistic time Two to four hours
A data room is a folder of documents shared with investors during a round. At seed it might hold twenty files; at Series A, several hundred. Its purpose is to let investors verify what they have been told without asking the founders for each document individually.
The most efficient way to read one is not to read all of it. Three or four documents carry most of the information, and the rest is either confirmatory or irrelevant to a small cheque. Knowing which is which turns a twenty-hour exercise into a two-hour one.
The second thing a data room tells you is about the company's organisation. A complete, well-structured room assembled quickly indicates a company that keeps its records in order — which correlates with a great deal else. A room that arrives in fragments over three weeks indicates something too.
01
What should be in it
At seed the essential set is short: the fully diluted cap table with convertibles modelled, the constitutional documents, all existing investment agreements including outstanding convertibles, employment and contractor agreements with IP assignments, the largest customer contracts, management accounts, and the current bank balance.
At Series A add: cohort and retention data, the financial model, a full contract schedule, employment policies, insurance, any regulatory approvals, and the technology and security documentation.
What is usually missing and worth asking for specifically: the previous round's deck, the last few board packs, and any equity promised in offer letters but not yet granted. None appears in a standard index and each is informative.
Check
- Fully diluted cap table with all convertibles modelled.
- Articles or certificate of incorporation, and any shareholders' agreement.
- Every outstanding SAFE, note or ASA.
- IP assignment agreements for founders, employees and contractors.
- The largest customer contracts.
- Management accounts and current bank balance.
- Ask separately for the previous round's deck and recent board packs.
02
How to review it in two hours
Start with the cap table and read it against everything else. It is the document most likely to contain a surprise, and it provides the frame for the rest — who owns what, what is outstanding, and what your position will actually be.
Then read the constitutional documents and the shareholders' agreement, specifically for the provisions that will apply to you: share classes, liquidation preferences, drag-along thresholds, transfer restrictions and pre-emption. These are the terms that decide your outcome and they are rarely summarised accurately in a deck.
Third, read the largest customer contract in full. It tells you the real commercial terms — pricing, length, termination rights, change-of-control provisions — and it frequently contradicts an impression given in a meeting.
Everything else can be skimmed unless something specific has raised a question.
Check
- Read the cap table first, and reconcile it with what you were told.
- Read the drag-along, transfer and pre-emption provisions.
- Read the largest customer contract in full.
- Check the bank balance date — is it recent?
- Skim the rest for anything that contradicts the narrative.
03
What absence tells you
Missing documents are informative in proportion to how basic they are. A company that cannot produce a current cap table has an organisational problem; one that cannot produce contractor IP assignments has a legal problem it may not know about; one that will not produce customer contracts usually has a commercial reason.
The useful move is to ask once, clearly, and note what happens. A document requested twice and not produced is a finding rather than an administrative delay, and it should be treated as one.
Check
- List what you asked for and what actually arrived.
- Note anything requested twice and not provided.
- Ask why a missing document is missing rather than assuming.
- Check whether documents are current or years out of date.
04
Your own record
Keep the documents you were given and a short note of what you were told. Data room access is usually revoked after closing, and a decade later — at a follow-on, a secondary or an exit — you may need to establish what your rights were and what was represented to you.
A one-page summary written at the time of investing is worth a great deal in year eight, when the details have gone and the people have changed.
Check
- Download and keep everything relevant to your own position.
- Keep your executed documents and any side letter.
- Write a one-page note: what you invested, on what terms, and why.
- Diarise any maturity dates or notice periods that apply to you.
Stop and think
Red flags
- No current fully diluted cap table available on request.
- Contractor IP assignments missing or never obtained.
- A document requested twice and never provided.
- Management accounts several months out of date during an active raise.
- Customer contracts withheld while customer numbers are used as validation.
- A shareholders' agreement whose terms differ materially from the term sheet summary.
Take these into the room
Questions to ask the founders
- Is this cap table fully diluted, and are the convertibles modelled?
- May I see the deck from your last round?
- May I see the last two board packs?
- Has any equity been promised but not yet granted?
- Why is this document not available?
- What is the date of the most recent bank statement in here?
From the decoder