The use of virtual data room software for fundraising or M&As is not just an option for the management; it has become a standard practice these days. Buyers, sellers, potential investors, and intermediaries prefer using virtual data rooms for managing investments and mediating fundraising or M&As.
Online data room software also allows businesses to manage their investors in a better way. For example, companies can easily involve investors in decision-making and keep them updated about all major business events.
However, as data room software technology is relatively young in terms of expansion, many investors are yet to explore VDRs. Therefore, companies need to follow good practices while connecting with their investors through virtual data rooms.
Today’s discussion is about some of the best practices related to managing investors via VDRs and the benefits of data room software for investors. Before that, here is a brief introduction to virtual data rooms.
Virtual or online data room software is a digital document repository for businesses and professionals where they can store, access, share, edit, and manage personal and corporate documents. Generally, virtual data room services are hired for three primary functions:
- Data storage and management
- Virtual collaboration
- Deal management
All virtual data rooms are cloud-based online data storage platforms where you can safely store your documents, access them remotely, edit them within the VDR, and share them with others by adding them to your data room.
In addition to that, you can also communicate with other users in your data room just like you do on other communication platforms. You can send and receive messages, talk via audio/video calls, and arrange meetings with multiple users through video conferencing tools.
Most importantly, you can manage long and complex transactions like fundraising, IPOs, mergers, acquisitions, licensing, and partnering on virtual data rooms. VDRs allow data sharing, task management, and communication between parties involved in these transactions.
Some of the best virtual data room providers for M&As and fundraising include iDeals, Firmex, Merrill, DealRoom, and Caplinked. You can read more about top virtual data rooms here.
A company manages hundreds or thousands of documents but not all of them are relevant to the investors. Adding investors in shared data rooms may not be a good move as they will have to navigate through documents that don’t concern them. The best way would be to create separate data rooms for investors and upload/update relevant documents only.
Your investors don’t have to talk to your factory workers or mid-level managers — they need to stay connected with your company executives and advisors. Allow them to participate in senior-level meetings (if allowed by company policy), and give them access to meeting minutes, notes, and other important documents.
Moreover, make sure they can easily communicate with your board members and other executive-level employees. Allowing your investors to add their personal advisors and giving them access to relevant material is also a good practice.
Even if you upload specific documents for your investors, make sure you structure them in a clear and simple manner so that someone with no knowledge about VDRs can navigate through them quickly.
It is better to create different sections for financial documents, HR records, legal documents, etc. You can also improve the document search process by having the full-text search feature in your data room.
Although most virtual data room providers try to ensure that a person with basic IT knowledge can easily operate a data room, try to guide your investors at every step. You can also provide them with instructional materials or ask your provider to arrange a training session specifically for investors.
Your investors have access to the data you provide them, and their decision-making is based solely on the information presented to them. Therefore, updating documents regularly is not only a good practice but also a legal obligation. Virtual data room software will immediately notify investors about any updates in data.
Online data room software benefits investors in numerous ways. Here are some of them:
- It provides 24/7 access to corporate documents from anywhere.
- Depending on the company’s policy, investors can easily participate in board meetings.
- Virtual data rooms allow investors to communicate with board members, company advisors, and other investors.
- Access to the latest information is one of the major benefits of online data room software for investors.
Virtual data rooms are one of the best ways for investors to stay connected with the company board and other investors. VDRs provide investors uninterrupted access to corporate documents. Businesses can follow the above-mentioned practices to make VDRs more effective for investors.