A data room enables investors to understand the investment opportunity in a clear and consistent manner. A data room can facilitate a quicker due diligence process and allows investors to learn about the company’s history quickly.
For founders who are pitching VCs for the first time, a data room is an important tool to showcase their business and help them close the deal. A recent study showed that the venture capital firm will take into consideration 101 opportunities for each deal they close. However, 4.8 of these moves on to the due diligence phase and only 1.7 of them proceed to the negotiation of the term sheet. The success of a VC deal hinges on various factors, including the expertise of the founding team as well as the business model and the market.
A comprehensive data room for investors includes financial documents such as profits and losses statements in addition to balance sheets, reports on cash flow as well as performance reports. Additionally, it contains legal documents such as articles of incorporation, board resolutions and shareholder agreements as well as intellectual-property documents, such as patents, trademarks, and copyrights. It also includes an ownership chart reasons to choose docsend as your virtual dataroom that outlines the ownership structure of the company and a comprehensive list of shareholders and their share of ownership.
In addition to these documents, the investor data room should also have a Q&A area that facilitates central communication between the parties and speeds up due diligence process. Version control of documents is also vital, as it allows investors to keep the track of changes in real-time. It should also have features that provide additional layers of protection for sensitive documents like dynamic watermarks that prevent printing and forwarding, and an NDA which can be displayed automatically to users whenever they login.