A virtual data room (VDR) is a secure online repository that allows sharing sensitive information and documents with investors. This tool can help startups streamline their due diligence process and build confidence with investors during the fundraising process. By simplifying due diligence, and eliminating the need for email back and forth exchanges, startup founders can focus their time in generating leads.
Startups often have difficulty deciding what information should be included in their data rooms as part of investor due diligence. If they include too little information, they risk not being able to answer any concerns investors might have. Include too many details and they will be overwhelmed. Luckily, the right VDR provider will allow you to prioritize and organize important documentation such as forecasts, financial projections and cap tables, business plans and more to help with effective due diligence.
Alongside the most important financial documents, founders of startups must also present a comprehensive competitor analysis. This section should prove that the startup is well-versed on its market, and includes its immediate competitors, by highlighting key differences such as price points or features, as well a customer’s satisfaction ratings. The startup should also disclose any first-hand market research it has conducted, as well as public reports that support the company’s assertions.
Additionally, the startup should include its articles of incorporation as well as any modified virtual data room provider or revised versions. This can help establish the legitimacy of the company and provide a clearer view of its ownership structure. Find a company that provides a free demo or trial version to test the software and practice presenting to investors. Additionally, select a service with flexible pricing plans that increase as the company expands through subsequent rounds of financing and transactions.