A virtual dataroom (VDR) is an online repository that permits you to store and distribute sensitive documents for high-risk transactions. These deals can include mergers, acquisitions and capital raising. They also can include divestitures, IPOs or any other type of transaction that requires due diligence. VDRs are used by businesses in a wide range of industries including financial services, healthcare and IT.
During the process of fundraising it is important to provide investors with supporting documents to support your overall narrative. The details of this narrative will differ based on the stage your business is at, but it should always be focused on creating an investment thesis that is able to move needles for your company.
For instance, a young company might focus on market trends, regulatory shifts and your team. However, a growth-stage company might focus on key accounts and partnerships, product expansions and new markets.
Once you’ve created the proper framework to structure your investor data room, you must be careful not to overload it with excessive details. This can slow down the fundraise, and cause a lack of momentum. The best way to avoid this is to stick to the framework above and be prepared to share additional supplemental materials that are relevant to the investment argument your company wants to establish.
While it’s tempting to use file-sharing apps for free such as Dropbox or Google Drive to store your investor data room, these tools don’t have the same auditing and security features that a dedicated virtual data room offers. This includes watermarking and permissions settings in addition to the ability to track which documents are accessed.