In the past, if you were trying to sell your business, potential buyers would visit your office and review hard copies of all the documentation that constituted the company. Due diligence used to be known as “doing your due diligence.” Nowadays, due diligence can require you to look through thousands of confidential files. This process is more efficient — and less risky — when it is managed online by using a virtual data room.

A data room is used to facilitate a range of critical processes, including M&A transactions, fundraising, corporate finance, insolvency, joint ventures licensing agreements and bidding on procurement contracts. The capability to track access to information and who has viewed what is able to reduce timeframes, decrease risks and boosts deal success.

Startups should utilize a digital investor information room to help them stand out from the competition and speed up the funding process. This helps them avoid the headache of sending and resending documents to investors. It also gives them the ability to present the most precise and current information at any point in time.

It also demonstrates your professionalism, which helps investors believe in the company. It can include sections like the company’s presentation deck, financial data, documents pertaining to people, as well as market research. Some entrepreneurs also include references to customers and a section to show how they have been able to grow their customers. It’s also important to keep your data room current throughout the fundraising process.