Albeit the devastating effects of Covid-19, the past few years have been years of startups. Idea generation, market research, feasibility reports, and planning is the first step in launching a startup. However, the second and probably the most challenging part is fundraising. Modern startups are using virtual data rooms to increase the chances of getting big investors.
But how can a virtual data room boost the chances of quicker fundraising? VDR software is not just limited to M&As anymore — it is a strong component in modern fundraising methods.
Sounds intriguing? If you are willing to explore more benefits of a data room for startups, keep reading.
Virtual Data Room Definition
A virtual or electronic data room is a cloud data storage facility for storing corporate or personal documents or any other form of data. Virtual data rooms are commonly used by businesses from all sectors; they are reliable solutions for storing and sharing business data, collaborating online, directly dealing with clients, and executing business deals.
Apart from that, a secure data room is an integral component of significant business transactions like fundraising, auditing, initial public offering, due diligence in mergers or acquisitions, capital investment, etc.
Top 5 Benefits Of A Virtual Data Room For Startups
1 Better security
While pitching your idea in front of investors, how sure can you be that your months of hard work will not be stolen or shared with others? The truth is, your potential investor can easily steal your idea, feasibility report, and business plan, and you might not be able to do anything. Yes, bad guys exist everywhere.
However, a virtual data room can make sure that your data remains yours. For example, as the admin in your data room, you can decide who can or cannot access your documents. With a data room, you have the power to restrict document access as per your will.
If you don’t want your investors to copy your documents, you can activate “fence view” mode. It protects your documents from screenshots and snaps. Also, the investors won’t be able to download or print those documents.
If you are still not satisfied with that, you can use built-in, customizable NDA templates to legally restrict the investors from using your documents. In addition to that, you can record the whole process through the screen recording feature and use it as evidence in the worst-case scenario.
2 Central data storage
Imagine pitching your idea to investors via emails and then waiting for their response. What if they ask for additional documents again and again before agreeing to a presentation? Don’t you think it would be unprofessional to frustrate your potential investor even before winning a presentation?
You can get rid of this problem by using a data room. Just upload all the necessary documents in the VDR in an organized manner and give access to the investors. When the data is available in a central place, they will be able to analyze the documents at their ease.
3 Faster communication
Virtual data room software ensures maximum communication between you and the investors. You can communicate through multiple channels such as emails, one-to-one private messaging, Q&A sessions, and audio and video calls.
Apart from that, the investors can add notes or annotations to the documents if any queries arise. Most importantly, all of this happens on a highly secure, centralized platform.
4 Transparency
Virtual data rooms keep everything transparent, and this is one of the biggest advantages of using VDR software. You can generate detailed audit reports, providing every single piece of information about data room activities. For example, you can see which documents your investor viewed, the communication between both parties queries raised and answered, etc. Data room audit reports bring transparency and help win investors’ trust.
5 Faster deals and more opportunities
You can add multiple investors in the data room and deal with them separately. You can keep your communication private, arrange separate presentations and Q&A sessions, share documents, and give customized access to investors according to your needs.
Apart from that, even if an investor doesn’t agree with your proposal, you can ask for private feedback and make improvements while pitching in front of other investors. Besides, when you have multiple investors, you have more chances to get the best possible outcome.
Not only this, but you can get contracts signed within the data room using the electronic signature feature.
When everything, including documentation and communication, is kept in one place, the chances of striking a deal increase. To be honest, investors prefer online channels for such transactions to save their time.
Final Words
Fundraising for startups is not just pitching your ideas and impressing the investors. You also need to make sure that your important data doesn’t fall into the hands of greedy investors. The best possible way to secure your data is to use a virtual data room. Remember, faster communication and remote access to documents can boost the chances of convincing the investors.
Here is more about virtual data rooms and their benefits for startups: https://vdrsolutions.org/
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