How Do You Build a Data Room for Due Diligence?
You’ve had a successful pitching session with an investor and they’re keen to conduct further due diligence. You’ve probably heard that this is a standard procedure and that a well constructed data room can accelerate the process of fundraising.
It is essential to provide them with a secure online space to review confidential documents that are able to be accessed and downloaded from any location, including mobile devices. The aim is to facilitate a quick and secure, transparent and safe review of key due diligence documents for investors who are looking to invest. You can also track the activities within your VDR. For example, you can see who is viewing files and for how long.
The key is structuring your data room in a way that accommodates different needs and requirements. For instance, you’ll need to include the bare minimum of information required for stage 1 due diligence (e.g. fit to market, product, financial model and cap table). However, you’ll need provide more specific information for stage 2 due diligence, including documents for the company, documents related to securities, material agreements and staff bios.
You’ll need to decide who will have access to your data room, including administrators, regular users and guests. You’ll also need to consider whether you require a version control, which permits you to monitor changes made to a document and ensure that your team members are working with the latest version of any file. Additionally, you’ll have to select a company that offers an online data room that can meet your specific business requirements. Choose a vendor that has auditing capabilities for instance, if your business needs to know who has access to what files and for how long.