My Rant About 'Rough Draft' Folders: Either Decide, or Don’t Disclose
Uploading 'Draft' versions of documents is a self-inflicted wound. Comments and track changes reveal internal doubt and potential fraud. We disclose only the Final State.
Indecision is Blood in the Water
You believe that sharing your “work in progress” shows transparency. You think it humanizes the company to show the drafts, the redlines, and the alternate scenarios.
To an investigator, a draft is a confession.
When I look at a “Rough Draft” folder, I am not reading the text. I am reading the metadata and the marginalia. I am looking for the internal arguments you had before you settled on the official story.
The Red Flag: The Comment Bubble
The most dangerous artifact in a Data Room is the Microsoft Word comment bubble.
I have seen comment bubbles that say:
- “Are we sure we own this IP?”
- “Let’s delete this clause, hopefully they won’t notice.”
- “This number seems low, bump it up for the pitch.”
This is not administrative debris; this is evidence of Scienter (knowledge of wrongdoing) or, at best, gross incompetence. Even if the final document is clean, the draft proves that you knew there was a problem and tried to massage it.
You have handed the opposing counsel the roadmap to your vulnerabilities.
The Protocol: The “Final Only” Rule
The Data Room is a showroom, not a factory. We do not let the customer see the sawdust.
Rule 1: PDF is the only Format Unless a document must be functional (like a financial model), it should be a PDF. PDFs do not carry track changes. PDFs do not have hidden rows. PDFs are final.
Rule 2: The Sanitization Scrub Before any Excel model enters the room, run the “Inspect Document” tool.
- Remove personal information.
- Remove hidden columns.
- Remove comments.
- Hardcode values where the formula refers to an external workbook (which will break anyway).
Rule 3: One Version of the Truth
There is no v1, v2, vFinal, vFinal_REAL.
There is only the file. Rename it: 2024_Strategic_Plan.pdf.
The version history stays on your internal server. The buyer sees only the decision.
[TO EDITOR: Guidance for illustration. Diagram of a funnel. Top: ‘Internal Server’ (Contains v1, v2, Comments, Arguments). Middle: ‘Sanitization Filter’. Bottom: ‘Data Room’ (Contains only the pristine Final Version).]
The “Scenario” Trap
Founders love to upload multiple financial scenarios: “Base Case,” “Upside Case,” “Downside Case.”
Do not do this. If you upload the “Downside Case,” the buyer will treat it as the Base Case. If you upload the “Upside Case,” the buyer will treat it as Fiction.
Pick one narrative. Defend it. If you present three options, you are asking the buyer to choose the one that lowers your valuation. And they will.
FAQs
What if the contract is still being negotiated?
Then it belongs in a 'Pending' folder, clearly marked as non-binding. Never mix executed contracts with redlines.
Do we need to save old drafts for our own records?
Internally? Yes, for version control. In the Data Room? Absolutely not. The buyer buys the outcome, not the process.
How do we scrub comments?
‘Inspect Document’ in Word/Excel -> ‘Remove All Comments and Personal Information’. Then print to PDF.