To understand what investors want to see in a deal room, MFN spoke with three experienced investors in our network: Seth Masters (Vice Chair of NY Angels), Tom Balderston (Managing Principal at SustainVC), and Cairn Cross (Co-Founder of FreshTracks Capital). Each offered practical advice for founders building or refining their deal rooms. Each investor relies on deal rooms to support their due diligence processes. Here’s some helpful notes from each of them:
Seth Masters emphasizes the importance of deal room organization and clarity. He noted that having a table of contents makes it easy to navigate. He also said “an effective deal room should include basic company and team information, a thoughtful financial analysis, and up-to-date P&L, balance sheets, and cash flow statements.” Most startups operate on a cash basis, he notes, but investors still need to see evidence that the team understands their business model.
Tom Balderston says he typically asks to see a startup’s deal room after introductory meetings. “Once we decide we want to take a deeper look, that’s when we ask if the company has a deal room,” he says. “We’re not trying to make work for the management teams. We want to better understand the team, the business opportunity, and the impact.”
According to Tom, many companies scramble to assemble materials once investors start asking questions. By preparing ahead, founders can answer many investor questions at once, saving time and presenting themselves as organized. “It’s an upfront burden,” he says, “but it pays off when you’re speaking with multiple investors.”
Cairn Cross suggests thinking of your startup’s deal room as a living, breathing organism. “Consider what you would want as a repository of historical information that keeps getting updated for your company, this will actually help you down the road to save yourself some time.” Frequently tweaking your deal room will ensure you’re always presenting the best and most up to date information.
In addition to frequently updating your deal room and including a table of contents, it’s also important to ensure your sharing permissions are correct. Cairn and Seth noted pain points in viewing deal rooms that require a complicated sign-in process or if the access has been changed. You don’t want a potential investor walking away because they can’t navigate your deal room.
Cairn also mentioned that he prefers Excel spreadsheets with editable cells rather than PDF documents for financial data. “If I can see the formulas and their assumptions, that’s far more useful to me than time with a PDF and a calculator.”
A strong deal room is about making your company easier to understand and your opportunity easier to act on. While it may take time to prepare, it’s one of the best ways to streamline your fundraising conversations and build trust with potential backers. If you’re curious about learning more about deal rooms check out our recent MFN profile here on what to upload – and what to leave behind for now.
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