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  • Posted on April 22nd, 2014 by Laura Fagundes
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You may be familiar with using virtual data rooms during the mergers and acquisitions process or for raising funds, but have you considered using a virtual data room as a communications tool for board members and investors? A virtual data room can provide the perfect, secure environment for both board and investor communications and deliver numerous benefits to everyone involved.

The Benefits of Using a Virtual Data Room for Investor and Board Communication

-A process you’re already familiar with – You’re already comfortable uploading and sharing documents to your virtual data room, so why reinvent the wheel? Whether sharing materials a few days before a board meeting or uploading the company’s annual report, you can quickly, easily, and securely share your documents without having to learn a new system or add yet another technology to your toolbox.

-Peace of mind – Communicating with investors and board members often requires the exchange of sensitive information. By using a virtual data room, you can fully control how this information is shared, who sees it, and how it is tracked.

-Insight – After sharing materials with the board, you can gain insight into which board members actually viewed those materials. As the meeting draws nearer, you may want to remind those who haven’t accessed the materials yet that time is ticking and you’d appreciate it if they’d review the materials before the meeting begins.

-Professional presentation – Your virtual data room tells a story about your professionalism and commitment to security. When board members and investors enter the virtual data room, they will immediate see a neatly organized, professional interface. Instill confidence, show that you’re serious about the company’s integrity, and provide easy access to the most relevant materials.

-Greater control over your documents –  Not all documents are meant to be downloaded and freely distributed, even to board members. Virtual data rooms have access controls, allowing you to prevent users from downloading, sharing, or printing your documents as well as a watermark, complete with the user’s identifying information, on each document, which further discourages unauthorized sharing.

-A communications workflow that simply works. Sending reports, disclosures, updates, and other information to the board and investors doesn’t have to be complicated. Simply upload your documents, set the appropriate security measures and permissions, let the system automatically notify board members and investors, and later view detailed activity reports to see who has logged in, what documents they viewed, and more.

Using a virtual data room, you have a communications tool you can trust for sharing documents with the board and investors.

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Biotech startups are increasingly turning to crowdfunding rather than venture capitalists – and it’s working. For example, according to an article published on SFGate.com, Exogen Biotechnology recently raised $50,000 in just ten days using Indiegogo. Startups love crowdfunding because they give up much less control (and equity), and they are able to raise substantial amounts of money in the process.

While the benefits of biotech fundraising are compelling, a few trends are driving its growth:

-Risk-adverse investors – The recession’s effects are still being felt, and investors have become reluctant to fund biotech startups due to uncertainty surrounding FDA approval.

-Limited access to capital – Whether investors are risk adverse or simply looking elsewhere, biotech VC funding has remained flat for several years. A survey by Fenwick & West suggests that VC funding will remain flat or decline further in the near-term. With fewer investors, biotech startups must get creative with their biotech fundraising. Sites such as Indiegogo, VentureHealth, MedStartr, AngelList, and RocketHub allow them to do just that.

-Citizens who want to “do something” - If a loved one suffers from a rare disease that tends to be ignored by researchers in favor of more common or deadlier diseases, wouldn’t you want to do something about it? Biotech fundraising via crowdfunding sites has its appeal to citizens who are touched by these diseases. By supporting a promising biotech startup, they are helping to find the cure. In this sense, biotech fundraising has the potential to be win-win-win.

Biotech Fundraising Challenges

Biotech fundraising has its challenges though. It’s not a simple matter of creating a crowdfunding campaign and watching the dollars flow in. Startups need to:

-Build a compelling pitch – Investors need a good reason to support any startup. This is true no matter how you approach fundraising.

-Establish credibility – You need to show that your startup has the expertise and systems in place to excel.

-Give something back in return – Will your campaign solicit donations only or will you offer some sort of incentive?

-Comply with applicable regulations – Biotech fundraising is subject to various securities regulations including the JOBS Act which eases some of them.

-Ensure confidentiality – Biotech fundraising often means sharing confidential information with investors. With crowdfunding, you generally have larger numbers of early investors than you would with traditional VC fundraising. For example, Exogen Biotechnology’s Indiegogo campaign raised $50,000 from 300 investors. Know what type of information you are requires to share with the masses and how you will protect the integrity of your information.

Biotech fundraising is a viable alternative to traditional fundraising, but it’s not without its challenges.

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Data rooms are used to securely share confidential corporate documents during audits, acquisitions, financing rounds, and other financial events involving the exchange of sensitive documents. They are also used as the online document repository of choice for companies that recognize the risks involved in sharing and storing highly-sensitive company documents. Below are five ways to reduce risks with data rooms.

1. Ensure Business Continuity – What happens if a flood swamps your building or a fire wipes it out? Your company’s documentation could be completely destroyed. Data rooms ensure that should a disaster strike, your documentation remains safe and sound.

2. Survive Server Downtime or a Network Outage – Storing data on company servers means that anytime the server goes down – whether due to maintenance, a computer virus, or even a hacker – so does access to your documentation. If this happens during an audit, merger negotiations, or some other critical meeting, the entire meeting will come to a standstill. By using a data room, you can access your critical documents despite the load on your server.

3. Minimize IP Leaks – Whether deliberate or unintentional, IP leaks can quickly derail deals. By using a data room solution with audit trails and automatic watermarking, you can tackle IP leaks head-on. Audit trails make it possible to determine exactly who accessed what and when while automatic watermarks reduce risk by reminding users that the documents they are viewing are confidential and not to be shared or distributed. However, some data room solution providers take watermarking even further by watermarking the user’s name and email address prominently across the document. This provides a powerful incentive not to share as the user will know that the shared document can be traced back to him or her.

4. Prevent Unauthorized Access – Concerned about employees snooping around or stealing confidential information? Storing corporate documents, intellectual property, trade secrets, and financial information in a secure data room ensures that only those authorized to access that data can do so. Consider choosing a solution provider that uses two factor authentication which is even more secure. Two factor authentication ensures that only those who you have authorized will be able to access your data room. Two factor authentication is much more complex than password access (which can be compromised) because a second confirmation code is sent to the user’s cellphone via SMS.

5. Ensure Compliance – As a high ranking executive, you are responsible for compliance. Audit logs can help reveal exactly who accessed a given document, when they did so, and what actions they took.

Ensuring business continuity, surviving local network outages, minimizingIP leaks, preventing unauthorized access, and ensuring compliance are just a few of the many ways that you can reduce business risk with data rooms.

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If you want to improve your chances of getting funded, use market validation. Most entrepreneurs want to build the product first, sell it second. “Build the ark and they will come,” is the thinking. But if you unveil the ark when it isn’t raining, you won’t attract many customers.

Market validation flips the process on its head. Try making it rain and presenting your idea to customers before you build it. Get them to say, “Yes, I would like to get a ticket on your ark,” before you hammer one line of code. The benefits are that you may find clients that don’t need a luxury ark (reducing your building time by months) and, most importantly, are willing to buy a ticket as soon as you are done, giving you customers and a revenue stream.

Investors are inundated with good ideas. Companies with clients on board paying for a ticket are a much rarer animal that will attract their attention.

Sell the ark to your target market before you build the ark. Make it rain, then build it.

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Concerned customers have understandably been contacting us regarding possible security implications of running SecureDocs while the Heartbleed vulnerability is assessed and dealt with. The SecureDocs virtual data room application is unaffected by Heartbleed, there is no cause for concern, we do not utilize the version of the code that has been called in to question. If you have any further concerns or questions, please do not hesitate to contact us at 1.866.700.7975.
Will Reynolds
CEO | SecureDocs, Inc.

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For many people, becoming an entrepreneur is a dream come true. Realizing the dream, however, can be difficult. As many as eight out of every ten small businesses fail within the first 18 months, according to Forbes magazine. While a business can fail for a number of reasons, one of the most common reasons is failure to conduct market validation before committing to the proposed product or service.

What Is Market Validation?

If you are in business, or plan to be, then you must have a basic understanding of the economic principles of supply and demand. When the demand for a product is high and the supply is low the price goes up. Conversely, when demand is low and supply is high a product’s value plummets. Supply and demand economics can be used to explain the concept of market validation. Put in simple terms, market validation involves spending the time to interview hundreds of potential customers  to verify that a significant market exists for the product or service you plan to offer. In other words, can you prove that people will people actually commit to buying your product or service before you make plans execute on it?

How Is Market Validation Accomplished?

There are a variety of methods that can be used to accomplish market validation, all of which involve conducting some type of market research and then confirming this research by reaching out to actual potential customers. This differs from plain market research. While market research may be a first step in finding a target market, taking it a step further- validating that it is what the proposed customer wants- is what helps makes a successful business.

Consequences of Not Using Market Validation

Failing to make market validation your first consideration as an entrepreneur can be, and usually is, fatal to your venture. By way of illustration, imagine that a real estate agent tried to sell you a home without ever speaking to you to find out your needs and wants in a home. The odds of making a sale are slim at best. The same concept applies to any business venture. If you fail to find out if there is a proven buyer for your product or service the odds of your success are slim to none. In addition to harming your business’s chance for success, failing to conduct market validation can also hurt when looking to raise funds. Investors are much more likely to invest in companies that have taken the time to validate their market, and, as the saying goes, have taken the time to “sell it before you build it.”

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Fundraising and startups often go hand-in-hand, but fundraising doesn’t always go smoothly. Watch any episode of the hit TV show Shark Tank and you’ll see your fair share of fundraising disasters. Some startups seek funds too early, before their products have proven themselves. Others wildly overvalue their companies, resulting in immediate disdain from investors. Others have compelling offers on the surface only to later reveal serious risks and liabilities. On the other hand, some startups bring the perfect combination of product-market fit, value, mitigated risk, and potential. In order to be successful, whether on Shark Tank or via traditional talks with investors, use the tips below to optimize your fundraising.

Understand your valuation and how it grows over time. Your product certainly has potential, but is it really worth $5 million right now? Why? Be prepared to  justify your valuation with solid facts. For example, if you’ve been issued a patent, that’s a fact worth mentioning. If someone like Bill Gates or Warren Buffet is part of your management team, that will factor into your valuation. If your company is profitable with a great product-market fit and minimal risks, you can justify a higher valuation. Not quite there? That’s okay as long as you value your company at the appropriate level for its current maturity. If you’re just starting out, be sure you’ve done your market validation- that you’ve actually sold your product to potential customers. Investors understand that your company has potential. That’s why they’re willing to risk their money right now: for the potential reward.

Determine if the time is right to raise funds. Many startups make the mistake of trying to raise funds before it’s really necessary. Does your company need the cash or can it become profitable through sweat equity and self-funding? Are you ready for the pressure to return a profit to your investors?

Identify and mitigate your risks. Risks take many forms. Forms of risk may include an overcrowded market, an unproven management team, an inherently dangerous product, market timing, or, as Mr. Wonderful likes to say, “There’s nothing proprietary about this.” By identifying your risks, you have the opportunity to mitigate them. This is similar to anticipating and overcoming objections in the sales process.

Choose your investors with care. Just as investors choose their investments wisely, you should do the same with your investors. While an investor may make an offer, consider whether it’s a good fit. Does the investor have experience in your industry? Contacts? Will the investor make your life miserable with constant demands? Will the investor come through or string you along?

Share confidential information with care. Sharing confidential information with potential investors is an essential part of the process, but you should do so wisely. Use non-disclosure agreements and a secure data room to ensure that your most confidential data is fully protected and accessible only to those you choose to share it with.

Startup fundraising requires a great deal of introspection. You need to know what your company is worth, whether it’s the right time to raise funds, what risks you face, and more. Once you’ve addressed and optimized these issues, you need to choose your investors wisely and protect your data.

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Checklist
By now, you’ve likely discovered that virtual data rooms are preferable to other online file sharing and storing services if you need to store confidential business and financial documents. However, as you’ve researched your corporate document sharing and storage options, you’ve likely found several virtual data room providers all vying for your business. What should you look for? Below are a few of the most important considerations.

 1) Strong security – While security is often thought of as a ‘given’ in a virtual data room, it’s worth mentioning again. After all, your corporate documents and financials are highly sensitive. You simply can’t risk placing them on the wrong platform. Basic security features to look for include 128 or 256b data encryption, audit logs, dynamic watermarks, two-factor authentication, data backups, SAS certification, tiered access levels, and the ability to set user permissions. Additionally, make sure that the virtual data room provider has the specific features that are important to you. For example, some data rooms charge extra for two-factor authentication, which is standard on many others.

 2) Ease of use – Complicated software impacts efficiency and can cause delays- not to mention frustration.  In the past, virtual data rooms have been clunky and hard to access. As the number of virtual data room providers has increased, so has the usability and overall ease of use.  Look for easy-to-use features such as drag-and-drop tools, bulk uploads, automatic logging, and web-based access. . Also consider the ease of the implementation process. How is the data room set up? How long will it take to get up and running? Better yet, try a free trial before you make a final decision. This allows you to get a realistic feel of just how easy (or difficult) a given virtual data room provider’s solution really is.

3) Pricing Structure - Look for a pricing structure that makes sense for your business. Make sure to be aware of any additional fees such as for extra storage, features, or users. Look beyond the monthly fee and find out your total price all said and done. In addition, find out what the ongoing fess are should you keep the data room once the initial contract expires.

 4) Technical support - What type of support does the provider offer? Are you able to speak with an actual person? Does it cost extra for unlimited support? These are all important considerations when selecting a provider. Since you are securing your most valuable information in the data room, it only makes sense that you would need to be able to reach somebody quickly should you have a question. Additionally, look for instructional videos, FAQs, and understand what kind of training is included with your data room.

5) Happy Clients – While any reputable virtual data room will display a list of satisfied clients on their website, what else do they have to stand on? What is their reputation? Are they expensive, easy-t0-use, how is there customer service? More and more websites are offering unbiased comparisons- find out what users have to say on there. And when you move forward to the purchasing phase, don’t be afraid to ask your virtual data room provider for references before you sign.

Not all virtual data rooms are built equally and each virtual data room provider has its own set of priorities. Do your own due diligence by carefully researching your options, taking advantage of free trials, and finding the best possible fit for your needs.

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Join us Wednesday, March 26th, 2014  for a powerful event by WFS in Silicon Valley ,”Growth and Exit Strategies for Software and IT Companies.” The conference brings together executives and investors in software, IT, Internet, mobile, and related technology companies. You’ll hear from major buyers, private equity investors, venture capitalists, angel investors, analysts and CEOs who have recently sold, plus have an opportunity to interact with some of the top names in Silicon Valley’s tech and finance communities. Our very own VP of Market Development, Albert Oaten, will be speaking on the power of “Selling it Before You Build It.”

The symposiums are held four times a year in Silicon Valley, Seattle, New York, and London. Since its inception, this conference has received unanimous praise for both the quality of content and speakers. World Financial Symposiums’ main priority is to coordinate the top speakers to present the most up-to-date, valuable information in a timely manner so as to effectively educate business leaders.

This year’s Silicon Valley Symposium will be held at Perkins Coie LLP. SecureDocs Virtual Data Room is proud to be a sponsor of the WFS Growth and Exit Strategies event. More information and registration is available here.

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The New York Stock Exchange officially turns 197 in March. Originally called the New York Stock & Exchange Board, its first constitution was signed on March 8, 1817. It’s roots go even further back, however. The rules for buying and selling shares of companies were agreed upon back in May 1792 by a group of 24 stockbrokers. This agreement was known as the Buttonwood Agreement.

Over the course of two centuries, a lot has changed. Today’s companies considering going public have much to consider as well as technology that was unimaginable back then.

Going Public on the NYSE

Going public is a major decision that will change the way the company does business. While you may be accustomed to doing your own thing while running a private business, going public brings new requirements, accountability, and obligations. Before deciding to go public, owners and CEOs of private companies should carefully consider their reasons. For example, do you want to go public to diversify, provide liquidity for shareholders, raise capital and expand, or to boost your company’s status? While there’s no right or wrong reason, you should be clear about why you want to go public.

Another consideration involves whether your company is ready to go public. For example, does your company have a successful track record, consistent strong growth, or big enough draw to attract investors? What about your leadership team? Does your team have the experience and credibility to inspire confidence? Even if you feel that going public is the right move, your company still may not be ready as the New York Stock Exchange has specific entry requirements.

Can You Handle the Paperwork Requirements of Going Public?

Back in 1817, there was no Sarbanes-Oxley Act to complicate the process. Today, this legislation along with a myriad of other requirements make preparing for an IPO extremely complicated. The Sarbanes-Oxley Act of 2002 specifies numerous pre-IPO requirements along with the publication of reports that evaluate the effectiveness of the company’s internal control over financial reporting. Each year, an external auditor must report on this as well.

Another area of concern when going public involves sharing confidential data to the right people, and only to the right people. In the year or so leading up to an IPO, your management team will need to share sensitive financial documents with internal and external parties such as lawyers, accountants, investment bankers, and auditors.

Sending these documents using email or a shared folder is risky, and you have no way of controlling what happens to those documents once you hit the “send” button.  Virtual data rooms are crucial for any company preparing to go public. A virtual data room ensures that only authorized individuals have access to your sensitive files. Even then, built-in NDAs, watermarks, and audit logs provide additional control over your corporate documents. You can even prevent files from being printed or copied.

If you’re thinking of celebrating Wall Street’s birthday by going public, you have a big job ahead of you. In the meantime, happy birthday NYSE!

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