A data room is an encrypted virtual space that allows companies to store confidential information on high-risk transactions. This includes mergers, acquisitions, first publicly-traded offerings (IPOs), and fundraising rounds. The data room allows individuals who are authorized, such as investors and due-diligence teams, to examine and review sensitive documents without sharing the original documents.
To make it easier for people to understand and view your information, make clear folder structures and clearly label documents in the data room. This will make it easier for prospective investors and buyers to find the information they require to make informed decisions. It helps you keep your data in order and avoids errors.
Some startups divide their investor data room into different types of documentation depending on the stage they’re at on their journey. If you are raising your first round of funding you may want to keep certain information until the investor has expressed desire to move forward.
It’s tempting for you to provide as much information as you can. However, the data you share must be part of your overall narrative. That narrative will vary depending on the stage of your business, but it should always contain the main forces that are driving your current success. For example, a seed-stage company might focus on trends in the market regulatory changes, market trends, and your team, while companies in the growth stage might focus on customer references, revenue traction and product enhancements.
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