A due diligence data room is the secure, organized place where a company shares documents with investors, buyers or lenders during a review. If you’re new to the idea, start with what a data room is. This guide covers the setup and the folder structure. For the list of documents that go in each folder, use the due diligence checklist.
Before you start: what the room is for
The basic workflow can support fundraising, an acquisition, a loan or an audit, but the document scope, permissions and retention requirements vary. An acquisition may require additional categories, more historical records and specialist review. Agree the request list and access needs with the people handling the transaction.
Write down three things first: the deal, the people who will review the room, and the date you want it ready. If a Trusted Advisor such as a fractional CFO, accountant or law firm is helping you prepare, agree now on who owns the room.
How to set up a data room in 8 steps
1. Decide where the files will live
Some data rooms ask you to upload copies to the vendor’s site. Others leave the files in storage you already control and show them from there. Choose before you add anything, because switching halfway through leaves you with a second set of copies and a second set of permissions to keep straight. Diligence Ready keeps files in a folder you own in Google Drive or OneDrive, and the room shows them from there.
2. Build the folder structure from the diligence categories
A common starting index uses five categories: corporate and formation, cap table and equity, financials and tax, material contracts, and IP assignments. Make each one a numbered top-level folder, so the order never changes. Add a folder for employees and HR if your reviewers will ask for it.
A simple structure (illustrative):
- 01 Corporate & formation: charter and amendments, bylaws, board and shareholder consents and minutes
- 02 Cap table & equity: the current cap table, stock purchase agreements, SAFEs and notes, the option plan and grants
- 03 Financials & tax: financial statements, recent monthly or quarterly reporting, tax filings
- 04 Material contracts: key customer and supplier agreements, leases, loan agreements
- 05 IP assignments: founder, employee and contractor assignments, registrations
- 06 Employees & HR (if needed): offer letters, contractor agreements, key policies
Keep it to two levels where you can: a category folder, then a subfolder per document type. Deep folder trees make reviewers hunt. The checklist lists what goes in each folder.
This is an illustrative index, not a universal diligence checklist. Adapt it to the company, transaction and reviewer’s requests. In Diligence Ready, guest folders come from your diligence checklist categories; creating folders in Drive alone does not configure a room.
3. Add current versions with one naming pattern
Use signed, executed copies for agreements and approvals that require signatures. For financial statements, forecasts and other records, include the latest appropriate version and label its date and status. Clearly identify any draft a reviewer requests rather than presenting it as final. Pick one naming pattern and use it everywhere, such as date, document type and party (for example, 2026-03-14 SAFE Example Investor). If a document was amended, include the original and each amendment, so a reviewer can follow the history.
4. Give each reviewer their own access
Invite each reviewer individually and share only the documents appropriate to their role. Check the permissions your provider actually supports. If different reviewers need different document sets, use separate rooms or another verified access-control method rather than assuming each guest can have a different folder view within the same room.
5. Check watermarking, downloads and the access log
Check which file types your provider watermarks and how download permissions work. In Diligence Ready, PDFs served to external guests are automatically stamped with the guest’s identity. Check the room-wide download setting and any per-guest overrides, then review the access log. These controls do not prevent someone from photographing a screen or retaining a copy they already obtained.
6. Check what’s missing before you invite anyone
Walk the checklist against the room. Every item should have a document, or a note saying why it doesn’t apply. Gaps you find now, such as an unsigned grant or a missing IP assignment, are easier to fix before a reviewer asks than during the review. For the cap table, see how to prepare a cap table for due diligence.
Review sensitive records with the appropriate advisor before sharing. Redact unnecessary personal or account details and restrict access to payroll, employee disputes, bank details and potentially privileged material.
7. Invite reviewers and keep the room as the record
Before inviting reviewers, check the intended document set, access settings and known gaps. If the review begins before every item is ready, clearly label outstanding items and agree on who will provide them. When reviewers send follow-up requests, add the new documents to the right folder instead of replying with attachments, so the room stays the single record of what was shared.
8. Close access when the deal ends, and keep the room current
When the process ends, review who still needs access and close the room or revoke guests who no longer need it. Preserve the transaction record and follow agreed retention requirements.
Setting up an M&A data room vs a fundraising room
- Who sets it up: the company in both cases. In a sale, the seller builds the index and decides who on the buyer’s side can see what. Sell-side due diligence covers getting ready before a buyer asks.
- Who reviews it: in a round, the investors and their counsel. In an acquisition, the buyer’s deal team, counsel and accountants.
- How deep it goes: acquisition reviews may require additional categories, more historical records and specialist review.
- Structure: use the illustrative categories as a starting point, then adapt the index to the transaction and reviewer’s request list.
Example (illustrative, not a real company)
A two-founder software company expects a seed term sheet soon. The founder connects the company’s existing Drive folder, creates the five numbered category folders plus an HR folder, and moves executed agreements and current, dated records into place with one naming pattern. Walking the checklist turns up one gap: a contractor who wrote early code never signed an IP assignment. The founder raises it with company counsel, then invites the lead investor and the investor’s counsel, each with their own access and downloads off.
Where Diligence Ready fits
Diligence Ready organizes documents against a checklist whose items can carry a status, notes and attachments. Your files remain in connected Google Drive or OneDrive storage. An Admin creates a room from selected checklist documents and invites recipients individually. Guests verify access through an emailed code. PDFs served to external guests are watermarked with the guest’s identity, and guest file views and downloads are logged. See the diligence room.
The free Founders plan includes 1 data room with 3 guests. Standard is $99 per month when billed monthly. See pricing for current plan limits. Trusted Advisors who prepare rooms for several companies can work from one workspace.
FAQ
How do I create a data room?
Choose where the files will live, create a folder for each diligence category, add executed agreements and current, dated records with consistent names, and give each reviewer their own access. Check the room against a checklist before you invite anyone.
What folders should a due diligence data room have?
A common starting index has five: corporate and formation, cap table and equity, financials and tax, material contracts, and IP assignments. Add employees and HR if reviewers will ask for it. This is illustrative, not exhaustive: adapt it to the company, transaction and reviewer’s requests. Number the folders so the order stays fixed.
What documents go in a due diligence data room?
The due diligence checklist lists the common documents, category by category.
Who should set up the data room?
The company. The founder, CEO or CFO usually owns it, often with help from a Trusted Advisor such as a fractional CFO, accountant or counsel. In an acquisition, the seller sets it up and decides who on the buyer’s side can see what.
How long does it take to set up a data room?
It depends on how organized your records already are. Creating the folders is quick. Finding executed and current versions and fixing gaps takes longer. If you keep the room current between deals, most of the setup is already done when the next review starts.
Can I set up a data room in Google Drive?
You can share Drive folders directly. Check whether each reviewer gets their own access, whether documents carry a watermark, and whether you can see who opened what. Diligence Ready connects Google Drive or OneDrive, organizes the files already there against a diligence checklist, and adds individual guest invitations, identity watermarking on guest PDFs and an access log.