The provision of documents for fundraising meetings must not only be secure, but also fluid and fast. For this purpose, most companies today set up well-structured data room software to automate business transactions. Here is more about it.
The need for due diligence procedure for investors
One of the important stages in the process of raising investments is the signing of an agreement with the investor. But the fact that you have a signed document does not mean that you will receive funding. Investors often reject their offer. This happens for various reasons, and one of them is the unsatisfactory results of financial audits (due diligence). Each investor needs to carefully study a startup to minimize risks and make sure that his decision is based on reliable information.
The due-diligence procedure includes checking the financial condition, legal expertise, tax audit and assessment of investment and other risks, and an independent assessment of the investment object. That is, it is a comprehensive study of the company’s activities. Due diligence allows you to correctly determine the cost of a transaction, eliminate the risks of non-return of investments, identify and eliminate risks associated with legal shortcomings, tax obligations, and financial opacity.
Following vdraum.de, data room software goes beyond fundraising and investor due diligence. It is like a source of truth. With so many moving parts in a startup, it can be difficult to keep track of updated documents, processes, and metrics. By centralizing information in secure high-level, bite-sized formats, you are able to find bugs faster.
Virtual data room – modern IT solution for investors
Digital data room is a flexible, scalable platform that allows you to organize work with electronic documents (creation, modification, search) with contractors or partners, as well as the interaction between employees (transferring documents, issuing tasks, sending messages, etc.). The software enables companies to have controlled access to sensitive company data across company boundaries. Data Room specializes in tailor-made solutions for the entire value chain and lifecycle management of assets. Confidential business transactions are processed securely, transparently, and efficiently with this service.
The main areas covered by the data room software include:
- providing secure collaborative environment;
- ensuring the storage and processing of data;
- ensuring the interaction of the internal information system of the enterprise with external ones;
- collection of statistics, reporting.
The finished drafts of the documents described can be made available to potential investors individually or, especially in the case of a broader sales approach, via a data room. On the one hand, this is practical, but on the other hand, it also requires a lot of maintenance, since uploads have to be coordinated access rights regulated, and the data room has to be kept up to date at all times. Even a well-designed disclaimer, which precedes access to documents in the data room, only provides very limited protection against liability in the event of contradictions and incorrect information in the uploaded documents. Besides, the virtual data room should be organized by category (e.g. legal, intellectual property, marketing, etc.) to make it easier to find documents.
Investor data room checklist includes:
- pitch deck;
- Board Materials & Minutes;
- Team & Advisory Board;
- financial models;
- investor Updates (last 3 months);
- legal documents (e.g. trademark, patents, incorporation, etc.);
- product overview;
- marketing Strategy & Brand;
- growth strategy;
- competitive landscape;
- investor wish list.
So, the development of digital management processes via data room solutions will help increase the efficiency of organizations in general by increasing the speed, accuracy, and quality of management decisions.