Years ago, the organization purchasing a company would ask to see financial and historical company documentation as part of the due diligence procedure. These documents would be housed in a secure place that was always patrolled.
The chamber would often be visited by individuals who were crucial to the decision-making process to review the papers. These places are now referred to as investor data rooms and are only available online.
A VDR is one indication of a well-run company, and if you want to utilize data to tell the story of your firm, having one might be quite beneficial.
Construct Data Room
No of the form of financing, you really must consider a capital round.
Establish a Data Room Before Starting a Fundraising!
Additionally, keep in mind the following when setting up your VDR:
Use Google Drive or Dropbox if necessary. There are other options, although their premium versions might be pricey.
Create a tidy, intuitive organizational hierarchy that is easy to navigate. Contributors’ time is valuable, so make sure your structure is as simple as you can.
Allow read-only access only! Outside parties shouldn’t download or change your company’s data.
What Information Must Be Provided in a Data Room?
It can be challenging to decide which documents to include in your data rooms. Contributor won’t have the information they need if you include too little. If you add excessively, you run the danger of overwhelming them with data and making them expend time attempting to sort it all out.
Consider including the following:
Articles of incorporation that have been modified, voting contracts, investment rights contracts, co-sale and first refusal agreements, stock purchase agreements, tables of capitalization, and any information or records on earlier increases are examples of company documents (if any)
Financials: a capitalization table, asset register, management accounts, audited accounts, pro forma financial estimates for the upcoming year, profit and loss statements, and data on previous increases are all included.
Intellectual property includes domain name ownership, trademark ownership, IP strategy, software license information, a list of any used open-source software, and issued and submitted patents.
Employees: all contracts for existing employees, including a breakdown of their job descriptions and compensation, as well as any agreements for previous and present interns and consultants.
Backers can see that you are willing to provide both the positive and negative information by looking at previous investor updates in your VDR. It’s a terrific way to show them that you appreciate transparency and candid dialogue with contributor, which will boost your credibility.
In the “employees” section, describe the purpose of the group you are forming. This gives contributor the opportunity to use their own networks to find the team members you need.