Modern companies often use data room services to provide financial statements, management presentations, and other documents available to potential investors. In this article, we will analyze the role of virtual data rooms in fundraising procedures.
Due diligence in fundraising
Fundraising is a professional activity to mobilize financial and other resources for the implementation of socially significant and research nonprofit projects, which requires special knowledge and skills of the fundraiser, which can influence a positive decision of the investor.
Fundraising due diligence is the process by which investors thoroughly research a company before deciding if it is a good investment opportunity. If these facts are not straight, the process of this type of shell might take longer. Investors usually do the due diligence before investing in startups. They want everything about the company’s assets and liabilities before they decide on each other. Data-based knowledge of assets and liabilities helps to reduce risk.
Conducting due diligence gives an objective idea of the invested object, it shows all possible investment risks, an unbiased assessment of the subject of investment, and various other nuances. The main task of due diligence is a comprehensive assessment of the commercial attractiveness and legality of the proposed transaction or investment project, and due diligence also gives an idea of the possible risks.
How to use a virtual data room in fundraising?
During due diligence procedure, investors will want to read all of the historical documentation that will give them the information they need to make an informed investment decision about startup, and data room can speed up this process, providing a well-structured data repository.
The data room includes all documents that reveal the strengths of the further performance of the startup. It helps investors to evaluate the business more rationally when they diagnose a clear and compelling picture of it. Therefore, the better and more organized virtual space is, the faster and easier this process will be.
So, let`s analyze what useful functions data room ensures for a transparent fundraising process:
- providing employees with access to the latest version of the contract with the ability to view the history of changes
- automating contract routes using a workflow designer that supports serial and parallel types of approval
- track contract expiration dates with automatic email notification and automatic renewal option
- creating documents based on templates;
- search is based on file attributes and text.
Data room advantages
The software ensures the following benefits for its users:
- Single database
In other words, the purpose of the data room system is to achieve consistency in the work of various departments of the company, which can significantly reduce administrative costs and eliminate the problem of integrating data for different applications, since the entire enterprise works with a single system. A single database eliminates the possibility of information inconsistencies within the system.
- Document management
Disparate applications that previously provided data storage for various areas of the company’s activities are combined within one holistic system that ensures the integration of all business processes and allows you to go beyond the traditional functional and local boundaries in the resource planning process.
- Simplified collaboration
Thanks to the one-time data entry into the common database of the enterprise, the information can be used simultaneously by any number of users of the system, which increases the efficiency of both planning and control, and also ensures the coordination of actions of all parts of the enterprise and the productivity of management as a whole.