www.peoplevdr.com/what-is-a-virtual-data-room/
A data room is a digital archive of important documents that are used during due diligence processes during investment rounds. These data rooms are ideal for startups who want to improve their chances of raising money by decreasing friction. Moreover, they allow a startup to establish trust with potential investors and assist in making more informed decisions.
Investors typically need more information about the company’s finances and business model as well as its traction than they can get from a single meeting or pitch deck. The most effective startup data rooms offer one portal to access large data sets which makes it easier for multiple parties to share the data. This can significantly cut down on the re-inforcing of phone calls or emails that are typically a part of the due diligence process.
In addition, startups should consider a virtual data room provider that can customize user permissions. This allows them to set different levels of access for each individual investor, and protect sensitive information from getting into the wrong hands. The best providers offer access analytics, which allow startups understand who is studying their data and what they’re looking at. This will provide valuable information into the relationship between investors and the startup, and could be helpful when negotiating future terms.