3 Pre-Seed Data Room Red Flags

Founders, I'm doing two diligence on a few deals right now and just wanted to share some red flags that have popped up on data rooms so that you can avoid these. Goal is to make due diligence really quickly and easily for investors so that they can get you a term sheet and cash faster. The first red flag is if your cap table is not updated and detailed. That's one of the first things an investor will look at: who owns what, is there any outstanding debt or SAFEs and equity, how much do the co-founders split, and so on. So just make sure that it's totally up to date and detailed. The second is messy file dump. Pre-Seed Data Room - Folder List: 1. Legal - Inc docs + IP, 2. Cap Table - SAFEs + equity, 3. Team - Contracts + advisors, 4. Traction - Demo + users, 5. Money - Financials + burn, 6. Market - TAM + Comps. You don't want to provide too much information and you don't want to provide too little. So I know it's a tough balance, but try to use folders and organize things logically and try to keep information that is complete and accurate. The third red flag is lack of transparency. Transparency Increases Trust. Any lawsuits or legal disputes (settled or ongoing), Background - bankruptcies or fired-for-cause, Cap table oddities, IP or ownership disputes, Equity promises made verbally, Any regulatory investigations/fines. If you have a lawsuit going on or some co-founder that owns a large percent and has equity, you don't want investors to discover things by Googling. So just be upfront, be transparent and clear. Hope this is helpful. I did actually post on LinkedIn the link in my bio to articles and see the best practices on data rooms here. And I hope it's helpful. Follow me for more tips on all things startups from a founder turned investor and happy building.