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Building a Comprehensive Data Room
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9 Data Room Components LPs Need from Emerging Managers
When the time comes for emerging managers to raise funds, a comprehensive data room can be essential. Your data room can provide limited partners (LPs) with a one-stop shop to understand your team, your strategy, and your track record. The stronger your data room, the more likely prospective LPs may be able to entrust you with their capital.
It’s a great time to be an emerging manager. According to the Wall Street Journal, “more debut-fund managers are striking out on their own [in 2021 than ever before], emboldened by strong returns in the markets.” In Q2 2021, first-time funds made up 40% of all venture fund announcements, according to research from Different Funds cited by the Journal. At the same time, fund investors are “increasingly looking for ways to back emerging venture firms, which, research shows, tend to outperform the market and be more diverse.”
Given the increased LP appetite and the attractive potential returns associated with this growing asset class, the market continues to heat up. Nevertheless, raising a new fund remains extremely competitive. Whether you’re a seasoned VC spinning out on your own, an operator turned investor or an angel raising your first institutional fund, it’s more critical than ever to prove to LPs that your approach is differentiated. A great data room can separate you from the rest of the pack.
At SVB, we’ve worked with hundreds of the top LPs, from family offices to endowments. Recently, we asked some members of that network to share their perspectives on what they’re really looking for in a data room. We’ve also asked emerging managers who have found success for their wisdom from the trenches. Below you’ll find their insights, plus more than 10 data room templates you can download and use.
Click on each topic below for best practices and component templates, including a breakdown of what each component is and why it matters to LPs:
It’s a great time to be an emerging manager. According to the Wall Street Journal, “more debut-fund managers are striking out on their own [in 2021 than ever before], emboldened by strong returns in the markets.” In Q2 2021, first-time funds made up 40% of all venture fund announcements, according to research from Different Funds cited by the Journal. At the same time, fund investors are “increasingly looking for ways to back emerging venture firms, which, research shows, tend to outperform the market and be more diverse.”
Given the increased LP appetite and the attractive potential returns associated with this growing asset class, the market continues to heat up. Nevertheless, raising a new fund remains extremely competitive. Whether you’re a seasoned VC spinning out on your own, an operator turned investor or an angel raising your first institutional fund, it’s more critical than ever to prove to LPs that your approach is differentiated. A great data room can separate you from the rest of the pack.
At SVB, we’ve worked with hundreds of the top LPs, from family offices to endowments. Recently, we asked some members of that network to share their perspectives on what they’re really looking for in a data room. We’ve also asked emerging managers who have found success for their wisdom from the trenches. Below you’ll find their insights, plus more than 10 data room templates you can download and use.
Elements to consider in your data room
Much like a founder’s investment data room, your data room may be the source of truth for prospective investors looking to understand your thesis, your track record and your fund strategy. Consider putting together the following components in a virtual data room before you begin fundraising.Click on each topic below for best practices and component templates, including a breakdown of what each component is and why it matters to LPs:
Data Room Best Practices
Component 1 of 9
Overarching principles to keep in mind as you develop your data room.
Overarching principles to keep in mind as you develop your data room.
Fundraising Pitch Deck
Component 2 of 9
One of the main qualitative documents LPs may use to vet your fund. A compelling fundraising pitch deck entices an LP to review the rest of your data room.
One of the main qualitative documents LPs may use to vet your fund. A compelling fundraising pitch deck entices an LP to review the rest of your data room.
Investment Track Record
Component 3 of 9
A quantitative spreadsheet detailing the key financial metrics for your previous investments.
A quantitative spreadsheet detailing the key financial metrics for your previous investments.
Investment Memos & Market Map
Component 4 of 9
Investment memos allow LPs to see your thought process as an investor at the time you made an investment. Market maps show overviews of the market you serve, categorized by theme or sector.
Investment memos allow LPs to see your thought process as an investor at the time you made an investment. Market maps show overviews of the market you serve, categorized by theme or sector.
Due Diligence Questionnaire
Component 5 of 9
A living document that LPs may use to compare your fund with others and answer typical questions that arise during the due diligence process.
A living document that LPs may use to compare your fund with others and answer typical questions that arise during the due diligence process.
Limited Partnership Agreement
Component 6 of 9
A document covering legal terms that may govern your relationship with limited partners.
A document covering legal terms that may govern your relationship with limited partners.
Fund Model
Component 7 of 9
A forward-looking financial spreadsheet that translates the investment strategy you’ve set forth in your pitch deck into a hypothetical portfolio demonstrating your fund’s performance potential.
A forward-looking financial spreadsheet that translates the investment strategy you’ve set forth in your pitch deck into a hypothetical portfolio demonstrating your fund’s performance potential.
Reference List
Component 8 of 9
A list of founders, venture capitalists and limited partners excited to share their positive experiences partnering with you.
A list of founders, venture capitalists and limited partners excited to share their positive experiences partnering with you.
Fund Contact List
Component 9 of 9
A comprehensive list of contacts for the partnership and the back-office support team.
A comprehensive list of contacts for the partnership and the back-office support team.
Read the other articles in this Emerging Manager article series
Establishing, Navigating and Maintaining LP Relationships
Learn about the different types of LPs and determine the right mix of LPs for your firm. You’ll get tips for how to interact with prospective LPs throughout an active first fund fundraise and understand the LP’s expectations once you’ve secured funding to be ready to deploy capital.
Pitch Your Fund by Highlighting What Makes You Noteworthy
Because the venture capital space continues to be very competitive, it’s important that first time fund managers communicate how they stand out from the rest of the crowd. Learn some best practices for making a first-time fund stand out helping to reduce the risk LPs take when investing in these new funds.
Cash Flow Management for Emerging Managers: How to Approach Capital Calls and Distributions
Learn how fund managers should think about cash flow management, as well as strategies for balancing the needs of GPs and LPs when mapping plans for capital calls and distributions.
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