business software

The fundraising data room as a way to impress your potential investors

Through the combination of management consulting and corporate finance, data room software offers startups a comprehensive range of services from business planning to the execution of tailor-made financing rounds. So, how can this software impress your potential investors?

The role of data room in the fundraising process

When it comes to fundraising for start-ups, a standard process has been established between the start-up and institutional/corporate and public investors, which is described below:

  • Business Plan/Pitch Deck: In the first step of fundraising, the start-up creates the business plan. If confidential information is to be communicated, it is advisable to conclude a Non-Disclosure Agreement (NDA) with the potential investor before sending the documents.
  • Dispatch of a pitch deck: If the investor is interested in the project, he usually wants a pitch deck with non-confidential information, which then serves as a basis for discussion with the investor for the further procedure.
  • Investor meeting/video conference: The next step is a meeting with the investor, where the investor’s team wants to get to know the start-up team, discuss the business plan, and clarify open questions.
  • Due diligence: For this purpose, the start-up creates a virtual data room solution with all relevant information, contracts, etc. for the project. The interested investor then receives time-limited access to the service.
  • Term Sheet Review: If the start-up receives term sheets from several investors, these term sheets are checked internally. It is common to put together a syndicate of investors with a lead investor for larger financing rounds.
  • Signing/Closing: After the start-up has agreed on the final text of the contract with the investors, the contract is signed by all parties involved at a notary (deal signing).

What is the fundraising data room?

As the typical development phases of start-up progress, the capital requirements usually also increase. The due diligence process as part of the fundraising process includes potential investors examining the company for opportunities and risks. To make the process as efficient as possible, it is important for start-up teams to be familiar with all relevant documents and examination content and to prepare them professionally.

Due diligence describes the detailed examination process of potential investors in a company and represents an important step in convincing and attracting investors. Among other things, the company is checked for its commercial orientation, legal and financial situation, and personnel structure. Professional preparation can speed up the exam process and increase the likelihood of investing. This includes above all the preparation of the respective documents and the subsequent data room management. With fundraising data room software, you can do this in a secure environment that is both accessible to you and safe from data leakage.

Virtual Data Rooms (VDR) help you organize your most valuable documents into categories, insert a question and answer module in them and later share them with the interested parties. VDRs are already being used in large M&A transactions around the world, and there is no reason why you shouldn’t use data room services for your startup companies as well.

Data Room information systems according to the criterion of construction logic are divided into the following groups:

  • CIF (Customer Information File) – a system of collecting information about customers from various sources and providing it to other users;
  • SFA (Sales Forse Automation) – sales and marketing automation systems;
  • Service Desk – service support systems;
  • Contact-center – a system for processing contacts with real and potential customers through various channels of interaction;
  • Analytical data room.