A investor or VC has expressed interest in your startup and you want to move forward with the investment process. This is when an online data room is required to provide more comprehensive documentation on your business model, strategy along with financials and traction. This large dataset of documents requires to be tracked, organized and easily accessible. Private equity platforms can provide this functionality, but it is crucial to look for a provider that provides security, tracking, and granular access controls to ensure that the correct data is placed in the hands of the proper users.
Investors will also likely need to see your articles of incorporation as well as shareholder agreements and the consolidated balance sheet. The information available in a virtual environment can simplify due diligence process, resulting in an easier decision and a quicker term sheet presentation. If your investors are from the same field, or are part of a comparable network, having this information at their fingertips can help them build trust with your team and company.
It is important to include only relevant and current documents in your investor data room. Including irrelevant or out-of-date information can slow down the review process for investors, leading to frustration and confusion. It is a good idea have short messaging or commenting features built into the virtual data room to ensure that the investor doesn’t have to leave the platform to ask a question or to make a note of something.