Setting Up Your Virtual Data Room (VDR) for Due Diligence

Overview

A Virtual Data Room (VDR) is a secure, digital repository where startups store sensitive company information for potential investors to review during the Due Diligence process. At FounderFlow, our VDR tool is designed to help you stay organized so you can close your funding round faster.

1. Why Organization is Key

Investors view the state of your Data Room as a reflection of how you run your company. A messy or incomplete VDR can lead to:

• Delayed Funding: Missing documents create friction and slow down the legal review.

• Loss of Leverage: Disorganization can signal a lack of operational maturity.

• Increased Legal Fees: Lawyers spend more billable hours hunting for paperwork.

2. Essential Document Checklist

Your FounderFlow VDR should be organized into the following four primary folders:

Folder A: Corporate Governance

• Articles of Incorporation: Your company's primary legal filing.

• Bylaws: The internal rules governing your company's operations.

• Board Minutes: Records of all official board meetings and resolutions.

Folder B: Intellectual Property (IP)

• IP Assignment Agreements: Legal proof that all code and designs created by founders and employees belong to the company.

• Trademarks & Patents: Documentation for all registered brand assets and proprietary technology.

Folder C: Financials & Cap Table

• Capitalization Table: A detailed spreadsheet showing who owns what percentage of the company.

• Tax Returns: Usually the last 2-3 years of filings.

• Audited Financial Statements: Income statements, balance sheets, and cash flow statements.

Folder D: HR & Material Contracts

• Employee Contracts: Standard agreements for all current staff.

• Customer Contracts: Signed Service Level Agreements (SLAs) or Master Service Agreements (MSAs) from your top 10 clients.

3. Best Practices for VDR Management

1. Use Consistent Naming: Name files clearly (e.g., 2025_01_CapTable_v1.pdf instead of Untitled_123.pdf).

2. Regular Updates: Do not wait for a Term Sheet to start uploading. Update your VDR at the end of every quarter.

3. Permissions: Use FounderFlow’s granular access controls to ensure investors only see what they need to see.