How Do You Build a Data Room for Due Diligence?
So you’ve had a great meeting with an investor and they’re interested in doing more due diligence. It’s a common practice and that having a well-organized data room can speed up the fundraising process.
You should provide them with a secure online location to view confidential documents that can be downloaded and accessed from any device, including mobile devices. The aim is to provide an efficient, transparent and secure examination of crucial due diligence documents for investors who are looking to invest. You can also monitor activities within your VDR. For instance you can track who is looking at files and for the length of time.
The key is to arrange your data room to meet different needs and requirements. For example, you’ll want to include the bare minimum of data needed for stage 1 due diligence (e.g., product-market fit financial model, cap table). You’ll have to provide more detailed details for the second stage of due diligence. This includes documents from the company, securities related documents, material agreements, and bios of staff.
You’ll need to decide whether you want to grant access to your dataroom to regular users, administrators or guests. You’ll also need to consider whether you need to use version control, which allows you to monitor changes made to a document and ensure that your team members are working with the latest version of any document. In the end, you’ll need select a vendor who offers an online data room that meets your specific requirements for your business. For instance, if you need to see who is viewing which files and how long, find an option that provides auditing capabilities.