Why does your startup need a virtual data room for the fundraiser?
Data rooms initially were created as a solution for M&A deals and due diligence. But eventually, businesses began using this software for other purposes, too, including fundraising. Today a virtual data room is a truly versatile and indispensable tool for any organization that wants to collaborate effectively and reach desired goals. And if you still doubt whether our not your startup needs a dataroom, here are the reasons for you to adopt one.
It protects you from data leaks
A data leak costs a business a lot of money and effort. And it can quickly destroy a startup. With a virtual data room, such a predicament simply can’t happen. VDR providers protect both the storage and data transfer methods with the most reliable encryption to eliminate any chance to intercept the files. And to avoid a human mistake, vendors add security features such as watermarks and fence view to protect documents. Also, data rooms offer multi-factor authentication and granular permissions to make sure unauthorized users can’t access the repository and work with files. Moreover, invited parties will have to sign an access agreement before entering the data room — this will add another layer of security as you have to share documents with many people.
Easy access for potential investors
Invited parties can access a data room from any location and device as long as they’re connected to the Internet. And if they’ve entered the workspace before, they will be able to view some documents even if they’re offline. Such effortless access, combined with the impeccable security, makes data rooms vital for a fundraiser.
A good first impression
Sure, you could just upload all files to a free cloud repository and neglect the need to protect your information. But when you send potential investors an invite email customized with your corporate colors and logo, and then they enter a virtual data room that’s also featuring the identity of your startup, they will see that you’re serious about your business. While such things might feel unnecessary for startup owners, investors are often experienced enough to know that presentation matters, too.
Users can leave notes and comment files in a virtual data room, thus communicating with each other. Also, this software offers a Q&A section where investors can ask questions and get answers very quickly. Moreover, since all this communication happens in a data room, it stays here. It’s essential both for corporate information safety and the convenience of investors who won’t have to ask the same question twice or look for details elsewhere.
Additionally, most data rooms allow businesses to set up notifications so that invited parties get alerted when something changes — for example, a new file is added, or an existing one is altered. Then investors can react quickly and review the latest information.
Easier due diligence
It’s important to pitch your product. But even the best pitch doesn’t take away the need for thorough due diligence. It will be easy for investors to study the documents in the data room. And it will be more effortless for you to gather and accelerate those files in a way that perfectly presents your startup. And finally, a data room creates that much-needed transparency of due diligence both for investors and startup owners.
Better control over the process
Data rooms allow businesses to see all the activity of invited users. It’s a valuable feature both for security and strategy. Reports can provide you with insights that could let you see which move would be best considering the documents investors are interested in. And you can detect suspicious behavior and prevent a data leak using reports. The best thing is that invited investors don’t know about each other as they review your files in a data room. This gives you the advantage that’s very useful during fundraisers — remember that other startups are fighting for money along with you.
Choosing the data room for a startup
Sure, virtual data rooms are useful not just during deals or fundraisers — a lot of companies utilize them for everyday document maintenance. But this software costs money, and that’s an issue for many startups. Because of the price, they prefer to use free tools. However, having a small budget doesn’t mean that you can’t afford a data room. You just need to spend some time looking for a suitable solution. Many providers offer rather attractive prices for plans that were created specifically for small companies and startups. Also, you can pay attention to vendors that use the following pricing approaches:
- Per page pricing — since you won’t have too many files, the data room will be relatively cheap.
- Per project pricing — at the moment, you have just one project — your fundraiser.
- Per gigabytes of storage — documents don’t need much space.
Additionally, opt for more straightforward data rooms as they tend to be cheaper. You quite likely won’t need advanced features as a startup, so why overpay for them? And note that some providers exist for a very long time and have a good reputation among large corporations — these vendors will have high prices while not offering any advanced features. Their image allows them to make the software more expensive simply because they already have a large customer base.
Your main criterion for choosing a provider should be security. All the other features you and your investors might need are basic, and virtually any vendor offers them. Just read the reviews and customer testimonials to see if there are any issues with the software. It will let you understand how good a VDR is.
Once you find a solution that seems to be a good fit, leverage the trial period or a demo version — all providers offer one of these options. Then you’ll get to see the data room from the inside and make sure it suits your requirements before paying for it.