An investor data room is where startups can store due diligence documents for investors who are interested in investing in a round of funding or for acquirers in an M&A transaction. These are all the documents that aren’t able to fit into an pitch deck or slideshare presentation, and that prospective financial backers need to examine prior to investing or sign off on terms sheets.

Investors are eager to review these documents since they can help them make a choice quicker and with less effort, reducing the time that investment managers are spending on the deal. They also allow them to feel like they’re part of the startup’s team, which increases trust and results in more informed feedback.

The most effective investor data rooms give startups the ability to see who’s accessing what information, which helps ensure that sensitive documents aren’t in the improper hands. This transparency also enables startups to tailor their conversations with investors, which can increase the success of a transaction.

In a pinch the shared folder can serve as an investor information space for angel or seed investors, however, purpose-built software is a better alternative, particularly for Series A rounds and beyond. A professional-grade virtual dataroom solution is more cost-effective than consumer-grade software, and also comes with advanced security features, a robust search features, and other features. Some even provide digital rights management (DRM), which protects files by encrypting them so that they cannot be copied, edited, or printed by anyone other than the platform. CapLinked’s investor data room offers this feature as well as other.