Why does a startup need an investor data room?

Before the advent of the Internet, companies used dedicated physical data rooms to store sensitive documents for transactional purposes and due diligence. The rooms were heavily guarded, but this did not always ensure against data leaks. With the advent of the Internet, all documents gradually began to be digitized and stored in online spaces. One of such spaces is a virtual data room – now, it is an indispensable tool for business in any industry, including startups. In this article, we will discuss the importance of using VDRs in startup fundraising.

Increased security

How confident can you be that giving investors access to your valuable data won’t fall into the wrong hands? No one can be sure, and that’s why companies appreciate the high-performance security that VDRs provide. Startups especially need strong protection because companies don’t have a big budget to give a strong IT structure for their business. In addition, startups have important intellectual property, and if it leaks, your plan fails with no way to recover. VDR provides these security options:

    • Security license -prove your right to work with sensitive documents
    • Double Authentication – protects your login
    • Detailed access permissions – deny visibility, copying, printing, editing, and a screenshot of the document
    • Activity Control -you can see absolutely any action of other users inside your VDR and your documents
    • Watermarks – additional protection against leakage

Reducing costs

Startups are often cash-strapped, so maintaining a physical repository would be out of their price range. After all, in that case, you would have to pay rent for the room, salaries for additional employees, cover investors’ costs, and buy special equipment for protection, such as a video recorder. While a VDR also varies depending on its function and quality, it will still come out much cheaper and more efficient. Investors can examine your documents without leaving their office, and you do not need to spend money on any additional costs.

Easy access

You would think that the ease of access would be hard to catch users because they can easily send some document or presentation by e-mail or through google drive, right? That’s true if you’re willing to share your materials with unauthorized users who ignore the value of the NDA. Virtual Data Room provides users with the same ease, but with it, you will be sure that you are only giving access to the users you intended to give it to in the first place. In addition, VDR supports all types of OS and devices for greater mobility and flexibility.

Fast feedback

The main goal for a startup is fundraising, which would help fund your project. However, it’s only natural to approach several dozen investors before finding someone willing to do the deal. Give a large number of potential investors access to your data at once, so you don’t waste time, at which time they won’t even know anyone else is in the room. This will facilitate a faster fundraising process as well as more immediate feedback. Invited users can write to you right inside the VDR in an encrypted chat or question-and-answer section, and you can also respond to them quickly. If investors refuse to fund your deal, you can ask them for their feedback to help you improve in the future.

Transparency with investors.

When you are confident in your security, it gives you more freedom in dealing with your investors. So, you begin to have a more transparent transaction process, which in turn leads to more positive feedback.