The work of any modern enterprise is unthinkable without the use of software systems that simplify and automate the management of business processes. In this article, more about the role of Data Room for Venture Capital deals.
Due diligence checklist for Venture Capital deals
Implementation of innovative achievements is a complex and risky process that requires long-term financial investments and professional assistance to bring a novelty to the market. These tasks are entrusted to the shoulders of venture capitalists who invest the necessary funds on an interest-free and non-returnable basis in return for a stake in the company.
High risk of invested funds – investing in emerging or young companies with an increased degree of risk, primarily in the innovation sphere, which does not have other sources of funding. Thus, due diligence for Venture Capital (VC) is an obligatory procedure.Due diligence is a service that is aimed at obtaining information about the activities of the company you are interested in, person, business reputation, as well as a description of the financial situation and recommendations on the advisability of cooperation.
Virtual Data Room – a necessary tool for Venture Capital due diligence
Companies in their VC transactions must process a significant number of confidential documents. Thus, they use data room for due diligence to automate these procedures and provide a secure collaborative environment for file-sharing with contractors.
The main functions of the Data Room electronic document management include the following:
- centralized, structured, and systematic storage of documents in an electronic archive;
- reducing the cost of printing, mailing, and storing paper invoices;
- a uniform approach to the procedures for the formation and processing of a document (registration, approval, etc.);
- reduction of time for delivery, registration, and approval of documents;
- the speed of signing documents;
- the ability to carry out any operations with documents online around the clock: search, download, print, reconciliation, rejection, as well as track their movement;
- formation and accumulation of a database or archives of electronic documents of any type with the possibility of multi-criteria search both by the content of documents and by complex logical conditions;
- organization and control of personnel work, accounting, and planning of working hours.
What are the advantages of Data Room?
Automation of this work allows you to significantly reduce the time and, as a result, financial costs for entering documents, minimize the risk of data loss and the number of errors caused by the human factor. Due to its flexible architecture, the Virtual Data Room solution fits into almost any streaming input implementation scheme. This system is especially effective in such large-scale geographically distributed projects as the above-mentioned project in an oil company.
The advantage of the created storage system is that it can be accessed through a regular browser. Computers on client workstations are undemanding to the level of performance, and for the company, there is no need to maintain a large staff of system administrators in each separate division to maintain the system. Access to a local network with a gateway to the Internet is the only requirement. Such systems are focused on supporting the teamwork of employees of geographically divided branches of the organization.
Besides, the use of the Data Room system will ensure that all automated business processes are always performed in a unique, project-appropriate manner, that all user actions are recorded, and that there is a documented legally correct trace of the execution of each stage.