Selecting a Virtual Data Room for Startup Fundraising

A virtual dataroom (VDR) allows investors to securely share sensitive documents and data online. This tool assists startups in streamlining due diligence and build trust with investors throughout the fundraising process. By streamlining due diligence and eliminating the need for email back and forth exchanges, founders of startups can focus their time on generating leads.

Startups often have difficulty determining what information should be included in their data space for due diligence on investors. If they don’t include enough, they risk not being able to answer any questions investors may ask; too many details and they’ll be overwhelmed. The best VDR provider will allow you to organize, prioritize, and store important documents like financial projections and forecasts including business plans and cap tables, among others. to ensure that due diligence is effective.

Startup founders should include an in-depth analysis of competitors along with key financial documents. This useful reference section should prove that the startup is well-versed in its industry, including its immediate competitors, by highlighting key differences, such as price points and features as well as customer satisfaction ratings. The startup should also disclose any market research that it has conducted in addition to public reports that back the company’s claims.

Additionally, the startup should include its articles of incorporation as well as any updated or restated versions. This can help prove the startup’s legitimacy and also give a better understanding of its ownership structure. When selecting a virtual data room for fundraising at the start, choose a vendor that offers a no-cost trial or a demo to test the software and practice the presentation to investors. Also, choose a provider with a flexible pricing plan that can scale as the company grows through subsequent rounds of funding and transactions.