Navigating Fundraising Success: Insights from Laura Lenz of OMERS Ventures on How Startups Can Stand Out

During the rush of late 2020 to early 2022, investors were quick to offer term sheets based on limited information, leading to a shift where VCs are now emphasizing thorough due diligence and moving beyond what Laura Lenz, a partner at OMERS Ventures, refers to as “ego-raising.” Lenz, with over 20 years of investing experience, highlights the importance of a high-quality data room for startups to stand out in the fundraising process. She shares a three-step process for building an effective data room.

A data room serves as a repository for a company’s information, providing a secure and shared platform with administrative provisions to control access. For SaaS companies navigating a dynamic and competitive landscape, having real-time insights easily accessible is crucial for swift adaptation and effective customer service. In the fundraising process, a well-organized data room plays a vital role in addressing any questions that investors or advisors may have, contributing to an informed decision-making process.

In the due diligence process, VCs often scrutinize various aspects, including historical financials, forecasts, product usage, retention data, roadmap, competitive landscape, sales pipelines, IP ownership, and cap table composition. The comprehensive nature of this information allows VCs to uncover potential advantages or address critical issues that could impact a company’s success. Laura Lenz emphasizes the importance of real-time insights for SaaS companies, highlighting the risk of relying on snapshots of data in spreadsheets for crucial decision-making. Having access to a well-curated data room enables VCs to make more informed investment decisions, even in situations where a single metric might initially raise concerns.

Creating a robust data room involves addressing challenges related to collating and updating information efficiently. Laura Lenz emphasizes three key steps in building a great data room: security, monitoring, and tiering. Security is crucial, requiring the use of appropriate tools to control permissions and access, both internally and externally. The monitoring aspect involves staying vigilant about updates and additions to the data room, such as incorporating quarterly financials or new employee contracts. Lastly, tiering ensures that information is organized in a structured manner, making it easily accessible to different stakeholders based on their roles and requirements.

Real-time dashboards and monitoring user engagement within the data room can significantly enhance transparency and trust during fundraising. Laura Lenz emphasizes the importance of real-time dashboards, offering the ability to drill down into data for a more detailed assessment of performance trends, risk identification, and growth opportunities. Furthermore, actively monitoring user engagement becomes a strategic tool, helping startups gauge investor interest and prioritize interactions. For instance, immediate downloads after document uploads signal strong investor⬤

Tiering data in the fundraising process involves organizing information into different levels of access based on the depth of discussions with potential investors. Laura Lenz suggests a three-tiered approach:

1. Tier One: This includes information that can be shared with every potential investor without concerns, such as a pitch deck, last year’s financials, a three-year forecast, competitive landscape, and market reports.
2. Tier Two: Reserved for data needed for initial diligence before a term sheet. It may include high-level usage data, revenue and pipeline numbers (without customer names), a high-level product roadmap, and general cap table information.
3. Tier Three: Accessible only during post-term sheet due diligence, containing sensitive legal files like employee lists, stock option valuations, incorporation docs, previous financing rounds, board minutes, and IP ownership information.

By implementing this tiered structure, startups can efficiently share relevant information at different stages, ensuring transparency without compromising sensitive details until a later, more advanced phase of the fundraising process.

A high-quality data room serves as more than just a repository for documents; it plays a crucial role in shaping the image of a company during the fundraising process. Laura Lenz emphasizes that a well-crafted data room:

1. Provides Information Easily: Investors can quickly access the information they need, facilitating a smoother due diligence process and building deal momentum.
2. Signals Preparedness: A thoughtfully organized data room signals to investors that a company is well-prepared for fundraising, showcasing maturity, thoughtfulness, thoroughness, and accuracy.
3. Demonstrates Maturity: By presenting a comprehensive and organized set of documents, a company can demonstrate its maturity and readiness for the challenges of fundraising, fostering trust with potential investors.

In essence, a high-quality data room contributes to the overall perception of a company, influencing investor confidence and shaping the narrative of the fundraising journey.