Venture Capital

VC cheat sheet: Protect your venture capital firm while fundraising

Since security and confidentiality are top of mind for every fund manager, NDAs are vital to keeping sensitive documents secure throughout the fundraising process.

When investment entities such as venture capital firms raise money for funds, they share a number of materials, such as pitch decks, spreadsheets, and other important files, with prospective investors. Because of this, venture capital firms frequently rely on non-disclosure agreements (NDAs) to keep their proprietary information safe from leaks.

But getting investors to sign NDAs, rather than negotiate over their terms, can feel easier said than done. Read on to learn why venture capital firms ask investors to sign NDAs, what the most common friction points are, and how DocSend can help remove these bottlenecks.

What’s an NDA and why do venture capital firms use them for fundraising?

An NDA is a legally binding contract between two or more parties used to protect their intellectual property (IP) and other sensitive information. It outlines proprietary information, knowledge, and material that one or more parties wishes to keep confidential. It requires signees to refrain from disclosing information to other parties or using it for their own gain.

It’s important to note that NDAs only protect specific types of information, such as proprietary or highly technical processes, lines of code, business plans, and other unique and important IP assets. If one party breaches the agreement, the other party can take legal action to recoup any damages and prevent another breach.

When it comes to traditional startup fundraising, rarely will venture capital firms sign NDAs before hearing a founder pitch. But during their own raises, VCs and fund managers almost always rely on NDAs to protect their own IP and assets. As to why, the biggest reason comes down to the notoriously competitive nature of private equity.
Venture capital firms need peace of mind that any confidential or sensitive material they share won’t spread to other investors in the space.

Bottom line? Because security and confidentiality are top of mind for every fund manager, NDAs are a necessity for successful fundraising.

Common friction points when using NDAs for fundraising

Even though deploying NDAs is standard practice for venture capital firms, they don’t come without friction. Most fund managers raising capital juggle multiple deals, with multiple stakeholders within those deals, at the same time. Sending, negotiating, and managing multiple NDAs–for deals with multiple stakeholders–eats up time that would be better spent sourcing deals and adding value to the portfolio.

A lot of the friction here boils down to the tools venture capital firms are using–tools that simply weren’t designed with the needs of private equity in mind. Ironically, the same investors handing out checks to founders pitching market-leading innovation rely on tools that are anything but. While some VCs may shy away from investing in the right tools due to costs, most are willing to spend money on time-saving tools, such as investor relations software, that let them do more with less.

Considering investor relations software? Here are four things to look for:  

When it comes to raising money for a fund, the right tools matter. The right investor relations software will help venture capital firms make the most out of every raise, helping them capture and keep LP interest and accelerate funding cycles. Simplified NDA signing flows are one of the top considerations.

Below are four key areas to evaluate before selecting the right investor relations software for your firm.

Protect your assets and minimize distractions with automated NDA flows

Nothing derails a productive discussion more than a redlined confidentiality agreement leading to never-ending, back-and-forth negotiations. When you’re stuck in the weeds negotiating NDA terms, you’ve not only lost sight of your deal, but your investor’s attention as well.

Investor relations software helps you sidestep these hurdles, giving you easy, automated NDA signing flows that focus attention on your pitch materials and off cherry-picking every term of your NDA. Today, three in 10 venture capital firms raise funds using DocSend, taking full advantage of simple, frictionless One-Click NDA flows to keep investor momentum moving steadily. Adding an NDA to a confidential document is as fast as it is easy: Once uploaded to DocSend, you can apply an NDA to any pitch deck or fundraising asset in just one click.

Get our done-for-you NDA template here

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Share confidential materials quickly and securely

Your NDA is only as good as the existing guardrails you have in place, and maintaining control over sensitive materials is next to impossible when sent as email attachments. Once your finger is off the “send” button, you’ve lost all visibility into who’s viewed your documents and more importantly, who they’ve been forwarded to.

Your investor relations tool should give you control over every aspect of your assets, even after you’ve shared them. With DocSend, you have full control over shared files at all times with customizable security settings that you can adjust any time you need. Set passcodes, verify via email, remove access, set expiration dates, and restrict downloads for every file.

A tool like DocSend also gives your investors a seamless viewing experience that’s always up to date. Not only can you share multiple links in just seconds, but every link updates automatically whenever the document or contents are updated.

Build tailored spaces to share fundraising materials

More often than not, interested investors will want to see more information than just your initial pitch. DocSend lets you design personalized viewing experiences for every investor, where they can easily find the most up-to-date content and receive email notifications whenever you add something new. For example, when you create a virtual data room in DocSend, you can upload all relevant fundraising assets, such as spreadsheets, web links, and other important files, to a dedicated space you can share with a specific investor. If things don’t work out or you notice their interest fading, you can remove their access the same way you remove access to DocSend links. See which documents you should (and shouldn’t) include in your data room.

Even better is how little time it takes to build data rooms for multiple deals and investors; you don’t have to reinvent the wheel just to maintain control over access. Juggling multiple interested investors at the same time? Simply duplicate an existing data room before personalizing the content you wish to share with them.

Use engagement insights to prioritize outreach and improve pitch materials

Another must-have for investor relations software is engagement analytics, which show you how exactly investors engage with the materials you’ve sent them. After all, nothing is more frustrating to fund managers than a vague response from an investor (or no response at all!). You can also use this data to prioritize your follow-ups and tailor future conversations.

Understanding who’s viewing your deck, sharing it with other colleagues, or hasn’t touched it is immediately visible with DocSend’s document analytics. With this data in hand, you can quickly discern which investors seem the most interested and which ones don’t look quite as hot. Investors returning to your deck more than once or twice and/or sharing it with other stakeholders signal you’ve caught their attention.

Likewise, you can also look to this insight to tweak your pitch or other fundraising materials. Because DocSend gives you x-ray vision into engagement activities, you can quickly pinpoint any common areas where investors are dropping off, even down to one or two specific slides in your fundraising deck. This helps you refine content where needed and course-correct faster without losing momentum.