Private investment in startups is becoming more accessible to both founders and investors. This has led to a rise in the number of private capital firms and a host of new technology that makes investing in startups easier for everyone involved. These new tools have also made it possible for investors and founders to work together much sooner than before, which helps both parties avoid wasting time on ventures that won’t go anywhere. Whether you’re an investor or a founder looking to bring your company to the next level, here are five ways private technology is helping startups succeed.
1. Better Due Diligence
One of the biggest benefits of using private investment technology is that it makes the due diligence process more thorough and accurate. This is particularly true when it comes to financial data. Traditionally, financial data is reported in PDF format, making it hard to analyze. When data is presented in this manner, the risk of data inaccuracy is heightened. This means you may invest in a startup that isn’t as far along as you thought. That’s why most private investment technology tools allow investors and founders to view financial data more user-friendly format. For example, many platforms offer conversion tools for financial data. This allows you to upload a PDF file and convert it into an easy-to-read table or graph.
2. Real-Time Data and Reporters
Another key feature of private technology is that it lets investors and founders see each other’s progress in real-time. This is especially helpful when it comes to milestones and reporting. Although milestones can be added manually to investment contracts, it’s unlikely that everyone will remember to do so on time. That’s why most private investment technology tools automatically allow investors and founders to set milestones. This allows both parties to check in on milestones and progress at any time. If there’s a delay in progress, you’re much more likely to catch it early than you would if milestones were reported only once a quarter. In addition to milestones, private investment technology allows you to track progress on a granular level. With tools like connected automated workflows, it’s easy to see who has done what and when. This means there’s no confusion over who is supposed to do what when executing the business plan.
3. Electronic Contracting
Contracts are an essential part of any business relationship. However, negotiating and drafting contracts can be time-consuming. And if you’re dealing with a third-party service provider, getting the terms you want may be difficult. With most private investment technology tools, you can create contract templates that allow you to quickly get the terms and conditions of your relationship in place. This makes it easy to create tailored contracts to fit your specific business relationships. This helps you avoid starting from scratch every time you enter into a new partnership. Electronic contracting also makes it easier to track the state of individual contracts. This allows you to see how far each contract has progressed. This can help you avoid being caught in “no man’s land” between contracts.
4. Efficient Communication
A streamlined communication process allows investors and founders to spend more time working toward their common goal. This makes it much more likely that everyone will be satisfied with the outcome. When communication is slow and unorganized, it’s easy for misunderstandings to occur. This can lead to frustration and wasted time. With private technology, you can optimize your communication process from the start. This means you can put your best foot forward to begin working with each other as soon as possible. With many platforms, you can create a communication hub. This allows you to centralize communication between investors and founders in one place. This makes it easy to follow up on communication, view communication history, and collaborate with other team members.
5. Equity Transparency
Equity transparency is another feature that makes it easier for investors and founders to work together. With equity transparency, you can create a public record of all equity ownership. This makes it easy to track ownership and make sure everyone is on the same page. It also allows investors and founders to track progress toward a liquidity event. Equity transparency is especially helpful when it comes to equity-backed investments. With these types of investments, investors receive a portion of company equity in return for funding.
While private investment in startups has always been an essential part of entrepreneurship, the technology that has arisen alongside it has made it even easier to tap into this resource. With better due diligence, real-time reporting, more efficient communication, and a focus on equity transparency, it’s never been easier to launch a successful fundraising campaign.
