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A virtual data room (VDR) is an online, secure repository for sharing sensitive information and documents with investors. This tool helps startups streamline due diligence and establish confidence with investors throughout the fundraising process. By eliminating the need for email exchanges and streamlining due diligence, startup founders can focus on cultivating leads.

Startups often struggle with deciding what information should be included in their data rooms as part of investor due diligence. In case they provide too little information, they run the risk of not being able answer any concerns investors might have. Include too many details and they will be overwhelmed. The right VDR provider will allow you to prioritize, organize, and store important documents such as financial forecasts and projections, business plan caps tables, etc. for effective due diligence.

Startup founders must include an in-depth analysis of their competitors, along with their most important financial documents. This section should prove that the startup is well-versed in its field, including its immediate competitors, by highlighting important differences, such as price points and features, as well as customer satisfaction ratings. The startup should share any market research that it conducted, as well as any public reports that support its claims.

The startup should also include the articles of incorporation along with any revised or restated versions. This can establish credibility of the startup and give a better understanding of its ownership structure. Look for a provider who offers a free demo or trial for the software to try it out and to practice presenting to investors. Choose a provider that offers flexible pricing plans that scale as the company grows through subsequent rounds of transactions and financing.