Virtual Data Rooms: Your Ultimate Guide

A virtual data room, also known as a virtual deal room or electronic data room, is an online repository through which companies can securely store and distribute documents during an M&A (Mergers and Acquisitions) or a due diligence process.

Most businesses that utilize virtual data rooms have ongoing projects, merging processes, or new joint venture deals that encompass a large number of transactions.

Virtual data room services allow multiple parties to store and access documents securely from any location in the world. They’re much more secure and efficient than physical data rooms.

Many virtual data room reviews fail to address the key features that users really care about, and that’s exactly what we’re aiming to tackle here. In this guide, we’ll compare virtual data rooms in terms of document security, pricing, file sharing, and more.

Data room solutions comparison factors

There are various factors that you need to take into consideration when comparing virtual data room providers. These include:

Location

Some virtual data room solutions are available worldwide, while others are limited to a specific region or country. For example, there are a few virtual data room providers that offer their services only in the U.S, Europe, India, or other countries or locations.

Type

Generally speaking, there are two types of data rooms: virtual data rooms and cloud storage. A VDR is much more advanced and secure than a cloud storage solution.

A virtual data room is specifically designed to facilitate deal-making in various use cases that encompass Mergers and Acquisition (M&A) deals, Fundraising, IPO, and due diligence.

Here are some of the key differences between a virtual data room and cloud storage:

  • Security. One of the areas where virtual data rooms clearly have the upper hand over cloud storage solutions is security.
  • Bidder Tracking. The best virtual data room solutions allow you to track your bidders’ engagement with your documents so you can understand which of them is more interesting.
  • Control. Unlike cloud storage services, a virtual data room gives you a higher level of control for deals that involve lots of permission requirements for each individual user.
  • Q&A system. Many virtual data room solutions integrate a Q&A feature that enables you to import and assign questions, which isn’t available in cloud storage systems.
  • Document organization. Virtual data rooms are much more efficient than cloud storage solutions at organizing multiple files.
  • Ease of use. Both virtual data rooms and cloud storage systems are easy to use. However, most users are already familiar with cloud storage, so there’s no learning curve here. Nevertheless, the best virtual data rooms will probably have an intuitive interface that you can get up and running with quickly, even if you’ve never used a VDR before.

Industry

Many online data room providers specialize in very specific niches and industries to provide the best possible experience. For example, some virtual data room service providers specialize in providing services for law firms.

You should also take the size of your business into consideration. Some virtual data room vendors are best suited for small businesses, while others are targeted at medium and large businesses.

Pricing model

Data room service providers have different virtual data room pricing structures. Some are quote-based, while others charge a flat monthly or annual fee.

It’s also worth noting that some virtual data room providers offer a free trial that lets you get hands-on experience with the product before committing long-term.

Benefits of virtual data room providers for business

There are countless perks of utilizing a virtual data room provider for your business. These include:

Easy location-independent confidential data access

The most obvious problem with traditional data room providers is that they’re inconvenient. Unlike virtual data room solutions, traditional data rooms require parties to travel to a single location to be able to exchange sensitive documents securely.

Virtual data room solutions have the upper edge when it comes to ease of document sharing. Key people can conduct data exchange in virtual data rooms without being restricted to a particular location.

Secure file sharing

The best virtual data room allows you to exchange confidential documents without worrying about security. They also feature dynamic watermarking that protects the confidentiality of your corporate data.

What’s more, virtual data room services utilize advanced data encryption protocols that make data breaches impossible.

Efficient document management

Virtual data rooms automatically sort and organize your documents as you upload them.

When conducting a business deal, the huge amount of documents required for the due diligence process and other transactions can definitely slow things down.

With a virtual data room, you can share confidential documents, make bulk uploads, and keep audit logs in a streamlined way. This makes it easier for all parties involved to access the files conveniently.

Better access control

In a deal-making process, ensuring that confidential information is accessible by the right people only can be challenging. With a data room solution, you can restrict access to specific people, even if they have already opened any files.

Not to mention, you can control what each person can do with every single document (view only, view and edit, print, etc).

Minimization of costs

It’s so easy to waste precious resources in a deal management process. In any form of deal-making, things like unnecessary travel, document sharing, and printing services can all make your expenses rise dramatically.

By opting for an online data room provider, your deal will be secured much faster and more efficiently, resulting in reduced costs. Not to mention, an online data room allows you to archive the deal’s data once it’s secured.