Virtual Data Room: Don't Worry About Data During Deals

Data is paramount for modern businesses.

It fuels decision-making in various corporate settings and is a critical component of processes like mergers and acquisitions, fundraisers, and almost every strategic business deal.

Because of the critical aspect, you need to keep your data safe and share it with authorized parties to prevent it from becoming a liability. A virtual data room can be a go-to solution for storing and sharing data in a secure and controlled environment.

Generally, a virtual data room is used in a company’s financial, corporate, or legal affairs. Information stored in a VDR is critical to the business or owner of the VDR. It can range from traditional business records to highly valuable confidential information, like financial transactions in funding rounds or a company’s trade secrets. It also facilitates the due diligence process during a merger or acquisition (M&A), private equity or venture capital transaction, or loan syndication.

In a nutshell, a virtual data room provides a secure space to organizations in need of storing high-value data and accessing it securely during deals and transactions. Virtual data room software reduce the geographical limitations that once made the process of negotiating and communicating across borders extremely laborious.

With the globalization of businesses, a VDR has now replaced the physical data room once used to store and share data. Modern enterprises need robust security measures and access controls to safeguard their critical information, and virtual data rooms serve their purpose while also preventing data breaches.

Understanding the need for a virtual data room

A virtual data room is an on-demand solution for storing, organizing, and sharing data securely, i.e., you can use it for what you want and when you need it. A VDR provides cost-effective and efficient data storage and allows sharing of information between employees of the same company or between different organizations.

A VDR provides a less costly and highly reliable data storage and sharing software solution than the traditional data room predecessors. The use of VDRs cuts the need for physical documents, which in turn reduces the costs associated with printing, filing, and storing documents. A large cost that is reduced or often completely eliminated with VDRs is traveling for the sole purpose of viewing corporate documents.

Due to its cost-effectiveness, efficiency, and convenience, virtual data room software is a preferred solution for companies who want to securely share M&A due diligence research, financial transactions, or other data.

Who uses a virtual data room?

Many businesses use a virtual data room solution in different industries that see secure data storage and sharing as a prominent business-enabling functionality. Although its adoption is carried out in many sectors, a few particular businesses use VDR effectively. 

Different businesses leverage VDR for secure data storage and sharing.

• Private equity and venture capital firms use a virtual data room to store and share data among several stakeholders during buyouts, equity investments, partner or investor communications, exits, or raising capital.
• Legal and regulatory authorities utilize a virtual data room for sharing confidential information between different parties during strategic partnerships, litigations, fundraisers, mergers, and acquisitions.
• Technology businesses need a secure way to store and share sensitive information amid raising funds, going public, getting acquired, and so on, for which they leverage virtual data room capabilities.
• Biotechnology and pharmaceutical (or life sciences) businesses use VDRs to protect their intellectual property during clinical trials, licensing intellectual property, partnerships, fundraising, mergers, and acquisitions.
• Investment bankers find VDR usage in streamlining the deal lifecycle by providing efficient due diligence in episodes of mergers and acquisitions, initial public offerings (IPO), partnerships, and capital raising.

How a virtual data room safeguards data and information

A virtual data room is sometimes called a secure data room because of the level of security it provides to stored data and information. It has a wide array of security defenses set in place for protecting information from unauthorized access.

Here are a few security layers through which a VDR keeps data and information safe:

• Physical data security ensures continuous data backup and availability above 99.9%. 
• Infrastructure security allows 256-bit AES encryption and protects data stored in remote data centers.
• Application security implements robust encryption protocols, multi-factor authentication and facilitates data siloing in private cloud servers.
• Audit and compliance help analyze activity logs provided by VDR and prove compliance to relevant regulatory standards. 

A virtual data room is like a physical room full of filing cabinets guarded by a gatekeeper. The gatekeeper knows who can access different types of documents stored in folders and regulates access controls accordingly. Gatekeepers are well aware of the files that can be accessed and files that should be kept hidden from people until privileged access permissions are granted. 

Therefore, while implementing an online data room, the first step is to identify user roles and responsibilities and establish controls to govern their access permissions.

Popular uses of a virtual data room

A virtual data room addresses several business needs by providing secure data sharing and storage options, making it a popular solution across the length and breadth of different industries.

Although use cases of VDRs aren’t limited, you can see its widespread adoption in these areas:

• Mergers and acquisitions: Businesses use a virtual data room to perform adequate due diligence in M&A transactions where several documents are studied to reach a decision. In such cases, purpose-built VDRs are used where access is provided till the decision is made, and after that, access is restricted.
• Initial public offerings: When companies go public, they need to comply with several additional regulations based on location, types of business, etc.  In this workflow, document retention and management becomes paramount for companies to survive an IPO, making virtual data room a go-to solution.
• Intellectual property (IP) management: Startups or businesses that depend on their intellectual property for growth rely on a virtual data room. VDRs provide adequate information security to safeguard their IP-related assets and ensure maximum security standards.
• Fundraising: During due diligence investigations, fundraising involves a massive amount of data and document sharing. A virtual data room ensures that sensitive data is securely shared between the leadership teams and ensures appropriate controls are in place.
• Strategic partnerships: Businesses often partner with other businesses to grow. This process entails file sharing to work up a fair deal for both parties. VDRs comfort business leaders by assuring that their data is safe and inaccessible to unauthorized entities.
• Remote communications: Business decision-making involves approval from many stakeholders in the process. It’s less likely that all stakeholders (leadership teams, board members, etc.)  are present in the same place at the same time e. In such cases, teams use a virtual data room to share confidential information securely and get approval from remote stakeholders.

A virtual data room solves pressing business problems by securely sharing and storing data. It helps audit teams get the documentation they need without the risk of a compromise. Moreover, not just audit teams benefit from VDRs, but every team that relies on secure file sharing reaps the advantage of having a virtual data room.

Top 5 virtual data room software

Virtual data room software allows companies to store their confidential data or proprietary information and share it remotely. It utilizes several security mechanisms like two-factor authentication (2FA), encryption, single sign-on, and more, enabling the hosting of confidential information under robust access permissions. 

A virtual data room limits a viewer’s ability to copy, print, or forward documents and assures that information is accessible to authorized users only. During the due diligence process for mergers and acquisitions and private equity and venture capital transactions, digital rights management becomes a critical aspect, and VDR serves it seamlessly.

To qualify for inclusion in the virtual data room software list, a product must:

• Store and distribute content, data, or documents in a controlled and secure manner
• Equip security measures such as 2FA, encryption, and single sign-on controls.
• Provide customizable permissions structures
• Implement digital rights management and control files remotely
• Verify, track, and enforce access permission of documents
• Guarantee zero overlaps of interaction between individual projects through compartmentalization of data

*Below are the five leading virtual data room software from G2's Spring 2021 Grid® Report. Some reviews may be edited for clarity.

1. iDeals Virtual Data Room

iDeals Virtual Data Room offers a sophisticated and trusted virtual data room that doesn’t require any training beforehand and offers remarkable ease of use. You can quickly deploy the software and use it on any computer, browser, or mobile device without installing any additional plugins. 

It supports several document formats so documents can be securely stored and shared without document preparation. iDeals comes equipped with intuitive document management capabilities that make it easier to configure files and their viewing, printing or downloading permissions.

With iDeals Virtual Data Room, you can protect documents with watermarking, 2-step verification, and restrict user access based on time limit and IP address. 

What users like:

“Very user-friendly - I have created several data rooms now. It’s easy to create different groups with different access levels. It is also easy to mass download, to see which files have been uploaded that are new, and to create a folder structure in the data room.”

- IDeals Virtual Data Room Review, Rachael W.

What users dislike:

“An area for improvement could be a more detailed review of the usage for the individual users. This is not the biggest issue, though, as there are reports, but you need to do a bit of manual work sometimes.”

- IDeals Virtual Data Room Review, Tommy M.

2. DocSend

DocSend offers an easy-to-use modern virtual data room that streamlines secure document sharing to drive business outcomes. It allows users to share multiple documents in a single link, enabling viewers to have all the information they need in one place. 

DocSend’s virtual data room allows users to manage individual document access and use passcode protection to add an extra layer of security and control. Users can set security preferences from each stakeholder, receive notifications when someone views files, and analyze content performance on a page-by-page basis by leveraging DocSend’s robust link-based systems. It provides a secure space to store and share digital documents and provides a personalized viewing experience with a customizable logo and banner image.

What users like:

“The best thing about DocSend is the simplicity and the ability to track potential investors. As an Executive Assistant, it takes seconds to let our team know who has opened the document and the time they spent.

It also helps decide which appointments to schedule based on interest. In fact, the ability to determine which meetings to schedule has saved our CEO, Financial Analyst, and executives time, leading to not wasting resources. At the end of the day, DocSend not only has met our needs but is the reason we keep using it deal after deal.”

- DocSend Review, Mariana B.

What users dislike:

“Some features are hard to implement and manage, it could be easier, especially on the signature part. The management of custom branding is also not easy and could be better tailored to each company's look and feel.

The controls and tracking could also be more accurate. Some of the emails received were not accurate enough in measuring how much time one spends on the presentation, which slides were eventually not useful, and which ones are the most accessed. Some of this information could be easily shared by email in a daily or weekly brief from the platform. Other than that I think the platform is handy and would definitely recommend it.”

- DocSend Review, Daniel I.

3. Sync.com

Sync.com makes it easy to store, share and access your information from anywhere and protects your privacy with end-to-end encryption. It safeguards your confidential documents from unauthorized access and allows you to quickly share files with parties even when they don’t have a Sync account.

It provides features such as file requests, password protection, notification, expiry dates, and permission to assure VDR owners that they’re in control of the stored information.

What users like:

“The first thing that comes to mind is the word "ease," and it’s that everything is quite easy to do with this program, from installation and configuration to document storage management, they become pretty simple tasks to perform. It’s hardly necessary for us to be present because everything is done automatically.

The document loading speed is quite good, so I do not waste so much time waiting for light files to load in the system. The fact that the information is in the cloud allows me to access from any device to consult or download the information that is in my account.”

- Sync.com Review, Martin W.

What users dislike:

“ Sync.com is an excellent program for managing information based on the web and has very good features. What can be considered negative of this program is when we compare it with similar services, can be its pricing, other services offer unlimited storage for lower costs.”

- Sync.com Review, Andreina Del valle S.

4. SecureDocs Virtual Data Room

SecureDocs provides a secure virtual data room with an intuitive and user-friendly interface. It allows users to store, manage, and share corporate documents easily. 

SecureDocs Virtual Data Room presents valuable insights into the activity in your data room, with features such as audit trail reporting, activity alerts, dashboards, and grants you the visibility you need to gauge buyer or investor interest. SecureDocs VDR comes with purpose-built security features that include 2FA, encryption, permission-based user roles, customizable non-disclosure agreements, and more.

What users like:

“SecureDocs is an easy to use and convenient data storage room facility we have ever used. Tabs are self-explanatory, and it’s easy creating and uploading folders. User management, creating and assigning roles, granting permission, etc., are understandable for anyone. Above all, the price is affordable.”

- SecureDocs Virtual Data Room Review, Mohammed S.

What users dislike:

“Not much to dislike about this product. Based on the way I set up many user profiles, I would like an additional way to do mass updates to user profiles.”

- SecureDocs Virtual Data Room Review, Patrick T.

5. ShareVault

ShareVault provides virtual data rooms with robust security even on devices that are outside your IT department’s control. ShareVault makes it easier to share confidential information with external parties and offers granular features that give you control over stored information while ensuring exceptional document protection and monitoring.

ShareVault’s VDR offers document sharing analytics that gives you real-time insights into user engagement down to the page level. Sharing analytics makes it easier for you to know who’s accessing your documents and when. It comes with many features such as audit trails with interactive reporting, IP address tracking, heat maps, and more, enabling you to be more strategic in your deals.

What users like:

“I love the flexibility with creating users and groups and being able to specify the roles for each. We have many instances where certain users are set up to be contributors while others are only set up to be reviewers. This is important since not all staff levels should have the same access to the system. In addition, our firm and especially our clients greatly appreciate the enhanced security that ShareVault offers. Cybersecurity is of utmost importance in our industry, so it is pivotal that our data and our clients' data remain safe and can be shared safely.”

- ShareVault Review, Adam W.

What users dislike:

“Not much. It’s a great product and very user-friendly. It's been one of our best small investments in this start-up phase.”

- ShareVault Review, Damian M.

Store and share, but be aware

Use a virtual data room to store and share your confidential or sensitive documents during business transactions, and be assured that it’s accessible only to authorized parties. 

Exploring multiple data storage options? Learn more about cloud storage and how to choose one for your business.