A virtual dataroom (VDR) can be an effective tool for securing and manage important business documents. It’s commonly utilized by M&A departments, but startups are also increasing their use to increase transaction value and speed up due diligence. In this article we will discuss the reasons why a VDR is a good tool for startup fundraising, and offer some tips on how to create one.
Startup founders must do their best when it comes to convincing investors that their business is the right fit. As such, it’s important to be as transparent as you can about your business. This will help ensure that due diligence doesn’t drag on unnecessarily and that your investors have the right information they require to make a quick decision and with confidence.
One method to accomplish this is to create an investor data room. This is a safe, online repository that has all the information your investors require to know about during their due diligence. This includes a comprehensive overview of your organization (an organizational chart, and possibly a hiring strategy) as well as financials (income statement, balance sheet, projections and more) and the cap table which lists all of the possible buying options for your company including preferred stock, common stock, and convertible debt.
In addition to these essential documents, it’s also worth sharing any research or reports that highlight your business’s unique position within the industry. In addition, a section that highlights customer testimonials and references can be an excellent way of demonstrating the value of your team’s knowledge is.