Investor data rooms are a place where startups can keep due diligence documents to be used by potential investors or acquirers in a fundraising round. These are documents that cannot fit into a slide or slideshare, but that potential financial backers must check before they invest in a company or sign an agreement.
Investors are eager to review these documents as they aid them in making a decision quicker and with less effort, which can reduce the time investment managers devote to the deal. They also allow investors to feel like they are part of the startup’s team which helps build trust and results in more informed feedback.
The most effective investor data rooms give startups visibility into who is accessing which data, ensuring that sensitive documents aren’t in the wrong hands. Transparency lets startups customize their interactions with investors and enhance the result of any transaction.
A shared folder could be used as an investor dataroom seed or angel investors. However, a purpose-built application is a better choice, particularly for Series A rounds and above. A high-end virtual dataroom system is more affordable than consumer-grade software and includes advanced security features, powerful file search, and other features. Some even offer digital right management (DRM) which is a feature that secures documents so they aren’t printed, copied, or edited by anyone other than the platform. CapLinked’s Investor Data Room service offers this feature, along with others.