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Scanning of transferring files.
Are you seeking outside investment for your startup? Are you considering a variety of term sheets from potential investors? Before you picture yourself throwing fistfuls of cash in the air, you might want to first consider whether your company will make it through due diligence investigations. There are a number of questions investors are going to want answered. You’ll want to prepare for those eventual questions by stacking the deck in your favor. Be prepared for due diligence file sharing by answering the following questions in advance:

Patented Technology

If your company is bringing a new product or service to market, potential investors are going to want to know you have secure patents in place. Be prepared to offer secure files on both your utility and design patents. If you have not applied for/been granted patents, your investors are going to want to know how you plan to protect their investment.

Product/Market Fit

Investors are going to want hard data on any marketing research and market validation your company has conducted. A database of users made up of friends and family is not going to suffice. Real dollars demand real customers; you better be prepared to show traction numbers and not just social media hot air.

Cost of Acquisition

In combination with your product/market fit information, investors are going to want you to provide data on your cost of acquisition numbers for new customers. While getting ‘crunched’ in TechCrunch is good for a short-term increase in users, those numbers will not last. You’re going to need to provide hard data on how you plan to acquire new customers and exactly how much you think those acquisitions are going to cost. Having that data readily accessible will make for a much smoother due diligence process.

Competition Analysis

Knowing the strengths (and weaknesses) of your competition is almost as important as understanding your own product. Be prepared to share files with investors regarding your competitor’s products and services. Forewarned is definitely forearmed when it comes to competition analysis.

Valuation Analysis

If you’ve ever watched the television show Shark Tank, you understand that valuations can be a huge stumbling block for investors. If you don’t want investors thinking you pulled your valuation numbers out of a hat, be prepared to share documents detailing why you think your proposed value is accurate.

These are just some of the files potential investors are going to want to have access to as they investigate your company. Utilizing the services of a secure data room for your due diligence file sharing can not only potentially speed up the process, but can act as an indicator to investors that you value their time and potential mentorship. Is your startup ready to have investors peek under the hood?

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Cloud computing upload and download icons
Dropbox was initially released in September 2008 as an online file sharing system. As of November 2013, Dropbox had reached the 200 million user mark. Dropbox currently integrates with various mobile operating systems and Web-based apps, making it possible for your files to be just a tap away no matter where you are or what device you may be using. No doubt, Dropbox is a popular service and does what it was designed to do well. Accessing files from multiple devices and allowing multiple viewers to see documents quickly has never been easier.  So, why would you want to consider alternatives to Dropbox for file sharing?

What Dropbox is Great For: Anytime, Anywhere Access

Dropbox is great for syncing your files across devices, automatically uploading your camera roll, and bypassing Internet service providers’ file size limits for email. If you want to share large documents with many people, access the ad you were just working on from your phone for brainstorming, or send your graphic designer new videos for your website, Dropbox is perfect. Dropbox is also a convenient way to index everyday work documents that aren’t of a critical nature that need to be accessed by several people. Dropbox for teams makes team collaboration easy. The list goes on and on. No doubt, Dropbox is a great service.

What Dropbox May Not Be Great For: Robust Document Security

However, Dropbox is not so great when it comes to securely sharing your company’s most confidential data. Dropbox has struggled to overcome concerns about security and privacy. For example, Edward Snowden, the former NSA contractor and security whistleblower, has said that Dropbox is “hostile to privacy” due to policies and methods that allow user data to be surrendered to government agencies. Dropbox has also been hacked on several occasions and has had its fair share of public criticism and privacy and security complaints. While this may not be of immediate concern to you, how your documents are accessed in the system probably is.

Keep in mind Dropbox’s original purpose: it was designed for stashing your personal files in the cloud so that you could retrieve them from a different computer or device. Though it’s evolved over time, Dropbox isn’t designed for more complex file sharing arrangement such as requiring signed non-disclosure agreements before allowing a user to access a shared link. If your information requires an NDA, it probably shouldn’t be in Dropbox.

Choosing Alternatives to Dropbox Based on Purpose

When evaluating any type of software, the primary question you must answer is what do you need the software to do? Do you need collaboration? Or, on the opposite end of the spectrum, would you prefer to restrict access so that a user can only view a document, in-browser, no download? Do you want your document watermarked or is that an unnecessary precaution? Again, how sensitive is your information? If you are going through due diligence and sharing all of your company’s intellectual property, security is probably a concern. If you’re collaborating on a white paper, it probably isn’t.

Here at SecureDocs, we love Dropbox, and use it for certain things. But all of our critical company documentation lives in a dedicated data room.

What does your company do?

 

 

 

 

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Laptop with red ring binders

Whether you’ve decided that it’s time to get your business documentation up-to-date and ready for due diligence, or you’ve just heard that building a corporate repository is a new best practice, it begs to ask: What is a corporate repository? And how is that different than the filing cabinet most businesses have been using for years?

Let’s start first by exploring what a repository is. According to Merriam-Webster, a repository is defined as:

A place where a large amount of something is stored; a person who possesses a lot of information, wisdom, etc.

In the case of a corporate repository, the term extends to a corporation’s documents. A corporate repository is a place where a large amount of a corporation’s information is stored, typically for the long term. Corporate repositories are not made public. Only users with specific roles and permissions granted may access documents in a typical corporate repository.

Think of a corporate repository as a virtual version of a CFO’s filing cabinet. This repository replaces that cabinet and contains all critical company documentation. Modern corporate repositories are hosted in the cloud on a virtual data room, where they are accessible as needed, but only by authorized users, as well as routinely backed up. Should a water main break and flood the CFO’s office, you can rest easy knowing that all of your corporate documents are safely stored in the cloud.

Corporate repositories also have the added benefit of being neatly organized, indexed, and searchable. This translates into less prep work should you go through a financial audit or enter into due diligence for fundraising or M&A.

In addition to restricting access to authorized users, corporate repositories generate detailed audit logs. This allows you to see exactly who accessed what and when. This information can be useful to gauge investor interest as well as for compliance or for  legal purposes should a dispute or IP infringement occur.

Now that you know what a corporate repository is, start your search for the right virtual data room to store it on at SecureDocs.

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Intellectual Property

Whether you’ve developed a new biotech product or want to incorporate another company’s intellectual property into one of your own technology products, you’ll soon find yourself navigating the complex world of IP licensing. Even with a qualified intellectual property attorney guiding you through the process, you should become familiar with IP licensing basics. Here’s what you need to know to before you start.

What are Intellectual Property (IP) Rights?

IP rights refers to the ownership rights of intellectual property such as a patent, trademark, or copyright. As the owner of intellectual property, you control how your intellectual property is used by others.

What is IP Licensing?

IP rights can be “licensed” to others in exchange for an agreed upon fee often called a royalty. For example, if you own the copyright to a book you authored, a movie studio cannot produce a movie version of your book without first entering into an agreement with you. The same is true if you hold IP rights to a vaccine, operating system, algorithm, or anything else for that matter.

What is a Licensing Agreement?

When you and another party reach an agreement, you will need to create a formal legal document. These agreements are generally referred to as IP licensing agreements, technology license agreements, copyright license agreements, or trademark licensing agreements. In many cases, multiple IP licensing agreements will need to be signed as multiple rights may be involved.

Why Enter into an IP Licensing Agreement?

If you are an IP rights owner, licensing rights to your property can bring in additional revenue as well as allow your company to grow. If you are a licensee, licensing another company’s technology allows you to create and sell products and services you wouldn’t have been able to do without access to that technology. In addition, if your company is involved in a merger or acquisition, you may need to sign multiple IP licensing agreements as part of the deal.

Entering into an IP Licensing Agreement

You’ve approached another party and both would like to enter into an agreement, now what?

-Start by getting an IP attorney.
-Gather documents such as product sheets, specifications, patent abstracts, protocols, and other relevant information and place them in a secure virtual data room.
-Require non-disclosure agreements before sharing sensitive information.
-Conduct due diligence. For example, does anyone else own the underlying technology? Is the intellectual property protected in other countries?
-Determine what rights will be exchanged and whether they will be exclusive or not.
-Determine and negotiate a fair fee.

Finally, have your IP attorney review, revise, and ultimately approve all IP licensing agreements and contracts before you sign anything.

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Investigate and analyze.

Going through due diligence during a possible merger and acquisition can be stressful. Many important items can get overlooked until the moment that they seem absolutely necessary- causing additional stress. Avoid these mistakes with this list of what NOT to do during sell-side M&A due diligence:

Do NOT skip your own due diligence. While it’s smart for businesses to perform due diligence when considering acquiring or merging with another company, it’s also smart for the seller. After all, you want the transaction to be as successful as possible, right? Start by investigating the buyer, its management team, its culture, and its previous acquisitions. Doing so could help to ensure a good cultural fit as well as gauge how prepared the buyer is to take your business to the next level. For example, if you are passionate about your business’s culture but find out that a buyer has a history of buying companies and implementing serious cultural changes, then you may want to find another buyer.

Do NOT skip getting organized in advance. The buyer’s team will need a great deal of information from you including cash flow statements, sales and marketing data, intellectual property documents, legal documents, employee bios and HR records, contracts, litigation documents, and more. The better organized you are, the smoother this part of the process will go. If you take the time to organize your assets in advance, you will eliminate a lot of time, pressure, and money going through corporate clean up. An even better idea is to maintain your records ongoing, so that you will not have to worry when the time comes.

Do NOT share highly confidential data haphazardly. Much of the information that you must share with buyers is highly sensitive, making it important to determine: who should see it, at which point in the process, and  how to securely share that information. You want to be sure you’ve protected your assets should the deal fall through. In order to ensure confidentiality throughout the process, get your legal team involved to make sure that each request is reasonable, appropriate, and sufficiently protected with non-disclosure agreements. While you’re at it, take a “minimum necessary” approach. For example, a buyer may want assurances that one of your inventions is patented, but is it really necessary to divulge trade secrets or share detailed design drawings and spec sheets?

Do NOT fail to use due-diligence specific technology to protect your interests. M&A data rooms are readily available to protect your interests. For example, uploading due diligence documents into a data room allows you to enforce NDAs, add identifying watermarks to documents, specify who can access documents, restrict printing, mark documents as “view only,” and monitor all activity in the data room with an audit log. This is helpful not only from a security standpoint, but also for gauging buyer interest. General file sharing solutions like Dropbox do not have these diligence-specific features, which prove invaluable during the M&A process.

If you’re on the sell-side of a merger or acquisition, you will be under pressure during due diligence. By avoiding the mistakes above, you’ll make your life that much easier.

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Online security written in search bar

New technology has allowed companies to expand and to make money in ways that would not have been possible before. Unfortunately, 24-hour Internet access, the proliferation of smartphones and electronic banking have also given rise to a new type of crime: cyber attacks. Cyber attacks occur when an unauthorized person accesses a computer system and steals information or causes problems. While preventing an online security breach may seem like a problem for a company’s IT department, today’s CFOs should care about cybersecurity and must become involved in protecting their companies from any online security threats. Below are three reasons why preventing an online security breach has become a responsibility of the CFO.

Security Breaches Negatively Impact the Bottom Line

The number of cyber attacks related to stealing customers’ personal information and financial data is on the rise. Last Christmas, Target made news when hackers stole more than 100 million customer credit card numbers stored in Target’s computer databases. Close to a year later, Target has spent approximately $148 million to correct the breach, provide affected customers with free credit screening, and update its security. As a result, the megastore expects a large drop in profits as it approaches the next holiday season and customers may be loathe to shop there this year.

Target’s case is not an isolated incident; in general, organizations experience 122 successful cyber attacks per week, and many of these may be related to stealing customers’ financial data and/or personal information.

Controlling Online Risk Reassures Investors

Online security risks represent a large potential loss for both consumers and businesses. For this reason, if a business doesn’t have adequate security measures in place, investors may become nervous about backing the business. Investors don’t want to put money into a business that may experience huge losses or close altogether because of a security breach. Thus, the CFO has a vested interest in cybersecurity.  Greater security combined with cybersecurity insurance and a clean up plan should a breach occur puts investors’ minds at ease.

The CFO Prioritizes Company Expenditure for Software

In order to protect a business from cyber attacks and potential losses resulting from such attacks, security policies must be followed across the company and put into place by the leadership team: the CEO, CFO, etc. The CFO has a particularly important role to play because he or she is responsible for making financial decisions involving the purchase of software. When making these decisions, the CFO must take online security into account so that he or she can accurately determine whether decisions are in the company’s long-term financial interests.

Cybersecurity is not just an IT problem; it is a company-wide concern. For CFOs, cybersecurity is of particular interest because breaches can wreak havoc on a company’s finances. CFOs should work closely with the IT department to understand security risks and take those risks into account when making financial decisions on the company’s behalf.

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iStock_000010201194Small

It happens to all business, regardless of size. Important business documents pile up so you put them into files, and files pile up so you put them into a file cabinet, and as the business grows, you need another file cabinet and the cycle repeats itself.  There are other solutions. Virtual data rooms are often used as online filing cabinet- a corporate repository of a company’s most important documents. Implementing this can help move towards a ‘paperless’ office.

What is a paperless office?

The word “paperless” is a bit misleading, because every business of any size will still have at least some work that is done via paper. Tax forms, snail mail, and incoming paperwork from clients are just a few examples. The difference in a paperless office is that you most often develop, keep, and transmit documents electronically.

Many business functions can easily be done without paper. You can send and receive faxes, communicate with clients and vendors, share documents with investors, conduct banking and financial activities, or invoice clients and accept their payments – all electronically, and all without the clutter of paper.

What are the advantages of a paperless office?

Working in a paperless office takes some adjustment, but the benefits realized are well worth the effort.

Thirty years ago, only the largest organizations could afford to go paperless because it was expensive to make the change. The equipment was expensive, the technology was in its infancy, and the conversion process for old records was cumbersome at best. In today’s world, though, going paperless is affordable for businesses of all shapes and sizes thanks to affordable equipment, dramatic improvements in technology, and streamlined conversion processes for old records.

Some advantages of going paperless include:

-Lower costs for paper and printer supplies
-Less space requirements for filing cabinets and physical document storage
-Increased efficiency and productivity
-Easy to reference and access electronic records
-Efficient and controlled sharing of documents, especially with other offices or outside parties
-Greater continuation in the event of a disaster
-Environmentally friendly

Isn’t it hard to make the change?

Yes and no. It is relatively easy to go paperless on a “moving forward” basis by using your computer and and setting up an online repository to keep your company’s documents. The challenge for many business owners is to find the time to convert old records to electronic form.

You might choose to purchase your own scanner and work through your records a little at a time. A better option for many people, though, is to use a self-serve high-speed scanning or printing center. Using a high-speed scanner is easy, convenient, and dramatically speeds up the process of converting old records.

Important precautions

There are a important precautions necessary to ensure the safety and security of electronic files. Make sure archive your documents using a secure solution.  A virtual data room is a secure option as a place to start building your corporate repository. Most VDR solutions provide robust security and strict permissions for access and sharing.

With a little bit of planning and discipline you can easily take the necessary precautions and move forward with your paperless office.

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With the media coverage of security breaches, some people are confused about privacy, the cloud and what it means when sensitive information is stored in the cloud. By carefully evaluating any solution you choose to store your information in, you will be taking steps to safeguard your data. Using certain techniques, you can protect your data from hackers and identity thieves. While the information below is meant for businesses storing sensitive information, the same advice can be applied to any individual storing and sharing confidential information in the cloud.

Always Use SSL

Secured sockets layer (SSL) is a form of encryption used to pass sensitive data from your web browser to a web server. When you order product, submit private information, or enter payment details, always look for “https” in the browser’s address bar to ensure that the site is using SSL. SSL is the standard for passing sensitive data to a web server, and SSL is a part of security audits for online companies. Every website that asks for private data should incorporate SSL on the web server. If the web server does not have SSL, you should not enter private data and find another provider.

Use a Reputable Cloud Provider

You have several cloud providers available, but not all cloud providers are created equal. Before you choose a cloud provider, do your research and make sure the provider has support and security. The cloud provider must offer security to protect your data. A reputable cloud provider will have technical support and monitoring every hour of the day for seven days a week. Take references and look at their security procedures to ensure they are taking precautions to safeguard your business’sdata.

Encrypt Stored Data

For extremely sensitive data, you should encrypt it while at rest. The advantage of encrypting stored data is that the data is useless to hackers if they manage to break the cloud host’s security.

Use Two-Factor Authentication

Choose a cloud storage provider that has two-factor authentication- and be sure you and your employees turn it on. Two-factor authentication requires a second form of identity verification, most often a text code sent to a cell phone, before access is granted. With two-factor authentication active, even if passwords are compromised, access to your information will be denied.

Understand Sharing Permissions

Often, you will need to share these critical business documents with other users.  When considering sharing information, be sure you understand your chosen provider’s different levels of permissions and access. This is extremely important and will ensure only intended recipients can view the data. When vetting solutions to store your data, verify that they offer the level of permissions you need to control access to your data.

Cloud storage is a safe and convenient way to maintain corporate archives. Before you choose a provider, do your research and understand how cloud security works to avoid being a victim a cybersecurity breach or even an unitentional breach caused by accidental sharing. A data room is a popular way to store critical business documents with absolute security and controlled sharing. Doing research and taking the proper precautions can go a long way in protecting your sensitive information.

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Whether investing in a startup, buying a business, or merging with another business, interested parties typically perform an investigative process known as due diligence. After all, they absolutely need to know what they are getting into before making a decision to invest, buy, or merge. The due diligence process is an obligation that all serious contenders should take seriously.

What is Due Diligence?

The dictionary defines due diligence as:

-Reasonable steps taken by a person in order to satisfy a legal requirement, especially in buying or selling something

-A comprehensive appraisal of a business undertaken by a prospective buyer, especially to establish its assets and liabilities and evaluate its commercial potential

When investing in or acquiring a company, potential buyers need to gather a large amount of data to make an informed decision on the process. For example, they would need to know about the company’s:

-Business plan and model
-Reputation
-Market Valuation
-Profits and losses
-Debt position
-Status of accounts receivable
-Past performance
-Management team
-Employees
-Risks and liabilities
-Assets
-Patents
-Contracts
-Competition
-Insurance
-Ongoing expenses
-Recurring revenues
-And much more…

It is the seller’s responsibility to provide investors, buyers, and potential business partners with the information needed to make an informed decision. Yes, it means turning over extremely sensitive corporate documents such as profit and loss statements, business plans, payroll records, patent applications, proprietary design files, and so on.

Streamlining the Due Diligence Process

Sellers recognize that buyers and investors need this sensitive information in order to make an informed decision, yet they also need to take measures to ensure that their data is properly protected.  As an example, you may show your proprietary information to a dozen potential investors. In the end, only a few will invest. You need to have taken proper measures to safeguard your information.

Because of the high-level of sensitivity of documents shared during the due diligence practice, it is preferable to manage it in a in a secure data room, as opposed to a collaboration solution like Dropbox. While these types of solutions are very easy to use and convenient, they don’t have the added security features needed to protect your sensitive data or features to asses buyer or investor interest. Access to the virtual data room is granted only to those who have a legitimate interest. Even then, access is usually restricted to the bare minimum required. Documents are often displayed as “view only” so that they never leave the company’s control. Non-disclosure agreements are standard in many virtual data rooms and required upon firts login- and these can also be used to hold each participant legally accountable for maintaining confidentiality.

The due diligence process is a must, but it’s inherently filled with conflict. Using a secure virtual data room can both streamline the process and ensure that both sides get what they need without undue risk.

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Saving the Money

Are you a founder wondering whether allowing angel investment into your startup is a good idea? Or weighing the pros and cons of raising a Series A round via a venture capital investment? Deciding on the appropriate funding route for your company is not as easy as it might seem. With multiple options like equity crowdfunding, angel investment, and venture capital as possible funding options, choosing the right path for the long-term future of your company is not a decision that should be rushed. Fortunately, there are a number of extremely helpful blogs where you can discover tremendous amounts of fundraising advice.

Seeking funding wisdom from a variety of sources can help you avoid potential pitfalls as you decide on the appropriate course of action for your company. Discovering specific characteristics that venture capital firms look for in a founder, or rookie mistakes that turn off angel investors, are just some of the truths you can uncover when you read top blogs from fundraising experts. But how do you know which blogs to read? How do you know who to trust and who is just huffing and puffing in an attempt to make themselves appear to be a more seasoned investor than they actually are?

Here at SecureDocs, we’ve rounded up our top ten (and a couple more for good measure) blogs for funding wisdom. Some of our favorites may be blogs you already follow. Others may be fresh discoveries. Each of our favorites offers an incredible wealth of information for those considering their funding options. As you check out these blogs, you’ll find a virtual goldmine of fund-raising advice if you use the search function on each site. Mine previous posts for search terms like fundraising, raising, funding, warning signs, investment, and strategy. If you dig into the archives on each of these sites, you’ll find answers to fundraising questions you didn’t even know to ask. Without further ado, here’s our top ten must-read blogs for fund raising wisdom:

Paul Graham’s ‘Paul Graham’
paulgraham.com

 Mark Suster’s ‘Both Sides of the Table’
bothsidesofthetable.com

Fred Wilson’s ‘AVC’
avc.com

Naval Ravikant & Babak Nivi’s ‘Venture Hacks’
venturehacks.com

Openview Partners’ ‘Labs’
labs.openviewpartners.com

Brad Feld’s ‘Feld Thoughts’
feld.com

CB Insights
cbinsights.com/blog

Sean Ellis’ ‘Startup Marketing’
startup-marketing.com

Dharmesh Shah’s ‘On Startups’
onstartups.com

Nic Brisbourne’s ‘The Equity Kicker’
theequitykicker.com

In addition to the above-listed must-read blogs, Medium (medium.com/search) and SlideShare (slideshare.net) are also valuable sources of fundraising information. Search for terms like startup lessons, lessons learned, pitch deck, and fundraising in order to uncover the enormous resources on both Medium and SlideShare.

Whether you are considering seed funding for your early-stage startup, pondering a Series A round, or questioning whether closing a later round is a viable option, the above-listed sites can be extremely helpful. Dig into each of these blogs, follow the authors on Twitter, and immerse yourself in the funding knowledge at your disposal. We think you’ll understand why these blogs made our top ten list.

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