In the process of project financing, the VDR (Virtual Data Room) serves as a core platform for information management and sharing, which can greatly improve the efficiency of due diligence and ensure information security. For beginners who are new to virtual data rooms, mastering the standardized usage process in financing scenarios is crucial. The following 7-step process will help beginners get started quickly and enable the virtual data room to maximize its value in financing.
Before operating the virtual data room, it is necessary to first clarify the financing stage the enterprise is in (such as seed round, Series A, Series B, etc.). Investors focus on different information priorities at different stages, so the framework of the virtual data room needs to be designed accordingly.
- Seed round financing focuses on team background, product prototypes, and business models, and 3 primary directories can be set up: “Core Team”, “Product Introduction”, and “Market Analysis”.
- Series A financing requires supplementary financial data and initial operational results, so new directories such as “Financial Statements” and “User Data” can be added.
- For Series B and subsequent financings, more detailed legal documents, financing agreements, etc., need to be included, and the directories can be refined into sub-items such as “Equity Structure”, “Major Contracts”, and “Financing History”.
When building the framework, the principle of “clear logic and distinct hierarchy” should be followed. Primary directories are divided by information type, and secondary directories are sorted by time or importance, facilitating investors to quickly locate the required content. For example, under the “Financial Statements” directory, subdirectories can be set as “2022 Annual”, “2023 Annual”, and “2024 Quarterly” to ensure the data is presented in an organized manner.
After building the framework, it is necessary to systematically sort out the core materials required for financing to avoid missing key information. Essential materials in financing scenarios include:
- Basic qualifications such as business licenses, equity structure diagrams, and articles of association;
- Financial documents such as audit reports of the past 3 years, monthly financial statements, and tax certificates;
- Intellectual property materials such as patent certificates and trademark registration certificates;
- Operational data such as user growth data and revenue composition;
- Legal documents such as labor contracts and supplier agreements.
Before uploading materials, unify the format (it is recommended to convert to PDF format to avoid typesetting confusion) and upload them classified according to the directory structure. The virtual data room supports batch upload function, allowing multiple files to be imported at once by dragging and dropping, and the system will automatically match them to the corresponding directories. After uploading, check each file name one by one (it is recommended to use the naming format “Type + Time + Content”, such as “Audit Report – 2023 – Annual”) to ensure that investors can understand it at a glance when viewing.
Information security is one of the core values of the virtual data room. Beginners need to set differentiated permissions for different users according to the “minimum permission principle”. Users in financing scenarios mainly include internal teams (founders, finance, legal affairs, etc.) and external investors (analysts, risk control, decision-makers, etc.).
- For the internal team, founders can be granted “full permissions” (view, upload, modify, delete), while financial personnel are only allowed to edit the “Financial Statements” directory;
- For external investors, institutions in initial contact are only granted permission to “view” basic materials, and institutions entering the due diligence stage can be given additional permissions such as “download” and “annotate”, but access to core technical materials needs to be restricted.
Attention should be paid to “dynamic adjustment” when setting permissions. As financing progresses, higher permissions can be gradually opened. For example, after an investor passes the initial screening, their permission can be upgraded from “only viewing company profiles” to “viewing financial data + annotating legal documents”, which not only meets the investigation needs but also prevents premature information leakage.
After setting permissions, it is necessary to send invitations to internal members and investors to join the virtual data room. The virtual data room supports invitations via email or links. When inviting, it is necessary to specify the name of the financing project, the access period (such as “October 1, 2024 – October 31, 2024”), and the initial login password (it is recommended to remind users to change the password after the first login).
To reduce the threshold for investors to use the platform, an “operation guide” can be placed on the homepage of the virtual data room, including instructions on directory navigation, search function usage, annotation and message methods, etc. For example, mark “Click the magnifying glass in the upper right corner to search for keywords” and “Right-click selected text to add annotations” to help beginners quickly get familiar with the operation and reduce communication costs.
After users join, it is necessary to track the platform usage through the “dynamic monitoring” function of the virtual data room. The system will display real-time data such as user login records (login time, IP address), file access tracks (viewing duration, download times), and annotation and message content.
- If it is found that an investor frequently views a certain file (such as accessing “User Growth Data” for 3 consecutive days), it is necessary to predict their concerns and take the initiative to supplement relevant explanations (such as adding an attachment of “User Retention Rate Analysis”);
- When receiving an investor’s annotation question (such as “2023 revenue data is inconsistent with the quarterly report”), it is necessary to reply within 24 hours, and the reply content should be directly attached to the corresponding file location to ensure that communication is recorded.
The internal team needs to check “pending reminders” daily and promptly handle matters such as document review and permission applications to avoid delaying the financing progress due to delayed responses.
Materials need to be continuously updated during financing (such as adding monthly financial data and supplementing the latest contracts). When updating, the “version control” rules must be strictly followed. When uploading a new version of a file, the system will automatically generate a version number (such as V1.0, V2.0) and retain historical versions for review.
After the update, relevant users should be reminded through the “notification function”. For example, after updating the Q3 2024 data in the “Financial Statements” directory, a message can be sent to investors: “The latest quarterly financial data has been uploaded, version number V3.0, please note to check”. At the same time, outdated or incorrect files (such as obsolete old business plans) need to be deleted to prevent investors from misinterpreting old information.
After financing is completed or terminated, it is necessary to promptly carry out follow-up work.
- For projects that have completed financing, investors’ access permissions need to be recovered (users can be removed in batches), leaving only the viewing permission for the internal team;
- For terminated projects, sensitive information (such as core technical parameters) needs to be deleted, and all materials need to be exported and backed up to the local server.
When archiving, materials should be classified and stored according to “financing stage + file type”. For example, create a folder “2024 – Series A Financing – Legal Documents” to uniformly store materials such as equity agreements and due diligence checklists, providing a historical basis for subsequent financing or audits.
By mastering the above 7-step process, beginners can quickly realize the standardized use of the virtual data room. In actual operation, it is necessary to flexibly adjust according to the specific needs of the financing scenario and make full use of the virtual data room’s functions such as permission management, version control, and dynamic monitoring to make information sharing more efficient and secure, laying a foundation for financing success.
