Investors look over a lot of investment opportunities each year. They have a lot of questions and require a place where they can look over documents and make quick decisions. Data rooms can make due diligence faster, reduce friction and be a win-win for both parties.
Investors can access important documents from anywhere in the world. This global accessibility increases the possibility of a purchase for the company, and can help negotiate an attractive price as opposed to if the company was only accessible to investors from one country or area.
In the majority of cases, when an private equity or investment banker firm is working on an important M&A transaction that involves multiple investors and other third parties, they will utilize a VDR. A VDR for investment banks can provide a greater level of supervision to ensure that everyone working on a project is on the same level and prevent duplication of effort.
Investment bankers can monitor activity in real-time to gain a better understanding of who is involved in which projects, where problems arise and if important data is missing. This all plays a major role in assisting companies to close M&A transactions faster and improve efficiency.
The startup world is divided over whether or whether an investor data room should be implemented. Some VCs, such as Mark Suster, argue that having an investor data room impedes the process since it’s an excuse for investors who want to hem and haw over the details, which can delay a decision.