Top-10 Best Virtual Data Rooms for Your Business

What is a Virtual Data Room?

A virtual data room (VDR) is an online place for keeping and sharing confidential data. Usually, it is a cloud depository for the storage of sensitive or confidential information with an e-catalog. Organizations and entrepreneurs mostly utilize virtual data room services in such complex corporate processes as financial transactions, board meetings, communication with third parties, among others.

Online data rooms emerged less than twenty years ago when cloud and SaaS technologies began to develop progressively. They have come to replace offline data rooms — made redundant by business globalization and the recent online boom — which were used to deal with confidential or copyright data before.

Meanwhile, the Internet has given birth to one of the biggest issues of today — cybercrime. The statistics regarding data breaches is impressive: since 2005, the number of leaked records has grown almost ten times in the US and reached 178 million records last year. Luckily, with secure virtual data room software’s, businesses can benefit from staying connected globally while protecting their data.

Essentially, a deal room is not a regular file-sharing service. The market already offers various cloud-based options and document sharing services for working in groups which are convenient and suitable for everyday use. These are such popular tools as Dropbox or Google Drive giving users the opportunity to share and edit a document together.

However, unlike file-sharing services, virtual data room services let their users feel the value of confidentiality with integrity and availability as core principles of information security. Also, they significantly differ from file-sharing tools in functionality.

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How many GB do you plan to upload to the virtual data room?

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What do you need a data room for?

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Five Key Advantages of Virtual Data Rooms

Electronic data rooms have become a tool of choice for confidential communication in the new digital business environment. Its functional analysis allows highlighting five key advantages.

Security

Many, if not all, VDR providers track and follow all the updates regarding protocols, laws, regulations of information security globally. For example, modern data room companies comply with GDPR, HIPAA, and other personal data security standards. When using data room service, businesses enjoy a level of data protection similar to that of established banks or even governmental institutions. From a technical standpoint, deal room providers use key card access, AES document and transfer encryption, 256-bit password encryption, multi-factor authentication, dynamic watermarks, expiration intervals, set of firewalls, and more. Such a vast range of precautions ensures the highest level of security.

Availability

In short, anyone with an experience in utilizing any popular document sharing service will have no difficulty in operating any modern data room software. A deal room is easy to use thanks to friendly and intuitive user interfaces. The latter provide all the common and practical features like drag-and-drop of files, advanced search, document versioning, undo options, etc. Moreover, no specific technical equipment or an expert are required to install and run the solution. The rooms are available and easily accessible to all the participants who need to be involved in the process or transaction.

Management 

When operating VDRs, users get full control of documents, as well as of the roles and degrees of access of everyone involved in the interaction. A VDR is a tool managed by a person commonly known as an administrator. They are responsible for labeling documents and giving permission to other users or third parties.

Usually, modern electronic data room providers can be easily managed and are rather flexible when it comes to tailoring to the user’s needs. For example, an administrator can set roles for individual participants or create a group with the same regulations for each member. Regarding documents, users have the discretion to add watermarks or set a file expiration time. Each document can be labelled with attributes of editing, printing, copying, or viewing.

Active monitoring and tracking are an extremely valuable control characteristic of many deal rooms. Secure data room can allow administrators to track what each user is doing with a particular document at a specific point of time. It can be detected whether a file has been printed or copied. Additionally, an administrator has options to monitor users’ activities in real-time: what document they are viewing right now or how long they have been doing that. This feature is paramount for interactions with third sides.

Skeptics may say that datarooms emphasizing human-driven management have the risk of a human error. Without a doubt, human errors are among the worst enemies of any information technology. Luckily, many modern VDRs are equipped with built-in mechanisms minimizing such errors or even eliminating them completely: from API solutions to simple double-check alerts or ‘view as’ options (when the creator of the data or the room can track what any user sees and can do with the data).

Effectiveness

By employing virtual data rooms, businesses increase their efficiency and streamline their processes significantly. Companies obtain a safe option of dealing with all copyright information and sharing it securely as well. Besides, the implementation of VDRs is straightforward, and their management will not be a challenge. Except for these boosting factors of efficiency, VDRs are time- and cost-saving solutions.

Let us give you an example. An old-school approach to due diligence or similar procedures is usually time-consuming. To gather people in a physical location may be complicated. In addition, many specialists should be involved in collecting data (huge volumes of it, usually) that may be stored in different places while other factors can make the use of offline data rooms laborious. What’s more, physical deal rooms are costly. Businesses may need to hold meetings engaging international participants, allocate budget on business trips and collateral expenditure.

To overcome these issues, VDRs give companies instant access to huge amounts of gathered and categorized materials in one catalog, which parties can evaluate beforehand — it helps to hold more organized Q&A sessions.

VDRs can be a great option as, usually, people are more flexible in scheduling e-meetings, which accelerates any procedure.

Relevance

We live in the digital era, with technology becoming critical to almost any process and is likely to cover even more areas in the nearest future. Denying technological progress is extremely detrimental to companies as it slows them down while everyone else is speeding up. It seems even more bizarre today as the COVID-19 pandemic that constrained a third of humanity to stay and work from homes making companies need any kind of tool which facilitates remote team and operations management. Thus, VDR data room is just the right solution for today’s business environment.

Popular Use Cases of Virtual Data Rooms

Historically, the use of VDRs has had dozens of purposes. Below are use cases demonstrating the outstanding applicability of VDRs.

1. M&A due diligence 

Online data rooms are a handy tool to use in these processes. In essence, due diligence in merging and acquisition is a complex process requiring data collection, thorough research, and review of materials. All these manipulations entail the assessment of sensitive records by all the involved parties, which slows down the procedure and makes it slow. Participants actively use VDRs to avoid turning the final phase of M&A transactions into an exhaustively protracted routine as well as to ensure security. Even if a deal is not closed, it is possible to terminate the data room access.

2. Audit

No matter what industry companies operate in, an audit is a standard practice of business assessment. Frequently, this procedure entails the involvement of third-party professionals, which typically means that outsiders are going to have access to financial documentation, corporate records, and other confidential information. By using a virtual data room, users can prepare and share all the needed folders, while knowing that every bit of information is secured and cannot be corrupted or stolen. What’s more, the whole workflow becomes more smooth and quick as auditors receive notifications about uploads and updates instantly; they can request, comment, and clarify everything needed.

3. Fundraising

Attracting and convincing investors is often a challenge. This process usually entails getting ready for many rounds of negotiations which need to be back-upped with different kinds of reports, financial statements and customer references, among hundreds of other documents. In other words, fundraisers will need to collect and streamline all the valuable and classified records that may positively affect the outcome of negotiations. Further, they may need to find and share new files during the session. Thanks to the existence of virtual data rooms, the whole process becomes less stressful and more productive. Besides, both sides of talks enjoy a required level of process control.

4. Regulatory compliance

Businesses must comply with various sets of industrial laws and policies, as well as meet international regulatory compliances. This helps governmental organizations, external firms and potential or current business partners understand how a company follows the rules. Usually, such documents as regulatory reports and checklists are used to check if the company is compliant with necessary standards and rules. VDRs help swimmingly import all critical information into checklists and fill regulatory reporting forms.

5. Litigation

Legal firms are regularly involved in processing and sharing large amounts of confidential records. Data rooms add convenience to that process. Litigation teams and clients can establish an applicable channel of communication there. Optionally, this channel can be expanded, and external experts or other third parties can enter the litigation process. The ability to process large amounts of documents and categorize them makes a VDR a beneficial tool for law firms.

6. Initial Public Offering (IPO)

When an enterprise decides to go public, it means exposing itself to new regulations. It also entails sharing a lot of specific information with shareholders and institutions. This translates into many steps and rounds of discussion in which many sensitive files may be used. To facilitate this process, businesses can employ virtual data rooms.

7. Procurement projects

Both public and private agencies may participate in procurement projects. Procurement managers often use request for proposal (RPF) templates as well as can request specific information (RFI). In this scenario, VDRs help to keep all the project materials such as bidding instructions and procurement protocols in one place and initiate a Q&A session for managers and bidders.

8. Strategic partnership

Today, such type of commercial relationships is a common phenomenon. Strategic partnerships are formalized, which implies the use of contracts and legal agreements. Before signing up documents, both sides need to be transparent regarding their corporate records by sharing all the needed data to ensure mutual trust and facilitate negotiations. In case a partnership falls short, access to the data room can be restricted immediately.

9. Reporting 

Reporting is a widespread and varied corporate activity. It naturally deals with statistics and other valuable increments. Among others, firms provide reports for limited partners and investors or share periodical company’s portfolios. Each of these cases requires a tailored level of transparency of confidential data. Users can gather necessary statistics for a report and set group or individual access for other VDR users without risking the exposure of confidential data. It’s possible to create a template as reports are required regularly.

10. Board meetings

As remote work is gaining momentum, board meetings involving members living in different cities, states or even countries have become a common phenomenon. This calls for a safe and modern solution like VDRs that can ensure secure and fast communication through classified meetings, as well as the regular receipt of updates of corporate records.

11. Intellectual property management

Intellectual property (IP) is essential for various organizations. For example, startups, research groups, and tech-offering firms, among dozens of other types of businesses, depend on their proprietary information entirely. Sadly, this information can be stolen in the process of negotiations. Hence, managing and keeping IP secured while licensing or presenting it to other parties is an indisputable must. This is a task that any modern dataroom software can handle.

Who Uses Virtual Data Rooms?

Virtual data rooms are helpful for any technology-based industry or company role. But there are six fields of activity in which deal rooms are already essential.

Corporate

Corporations are common users of VDR service providers. Commercial players obtain a large number of financial records, departmental files, employee information, in other words, the intellectual property that must be protected. Enterprise representatives (from CEO to HR specialists) are often involved in various activities related to sharing classified information with others. 

Thanks to datarooms, corporations can:

• accelerate fundraising or IPO
• establish Q&A sessions during financial audits 
• protect information in M&A due diligence
• streamline various procurement stages

Besides, the data room may be a tool of choice to keep all the confidential data for inner-company use.

Investment Banking 

Investment bankers usually utilize online deal rooms for M&A activities, IPOs, strategic partnerships as these rooms ensure stable and safe transactions and are easy to use. 

Private Equity

Online deal rooms have become a useful solution for private equity and venture capital firms. This has happened thanks to the fact that VDRs ensure most of numerous transactions, meetings, and negotiations that occur in the routine of PE firms. With the help of deal rooms, PE associates and principals participate in:

• buyout or exit negotiations 
• sell-side due diligence 
• investor communication and reporting 
• partners arrangement 
• limited partnership reporting 
• fundraising activities

Legal Segment

To satisfy clients’ needs, law firms should meet their responsiveness and accessibility requirements. Virtual deal rooms can help lawyers meet both of these requirements. Modern data room companies allow for the constant review and exchange of data with immediate upload notifications. Besides, they provide 24/7 support. VDRs have a client’s portal in which all versions of materials with commentaries are available for reviewing by experts. In the legal field, the data rooms are used for M&A, IPO, RPFs, RPIs, and bankruptcy.

Life Sciences

The life science industry is rapidly developing and becoming more innovative, which means that firms obtain a lot of proprietary information. Besides, biotech companies, medical device producers, and pharmaceutical firms often collaborate with enterprises. That is why researchers, engineers, and executives use deal rooms to protect shared intellectual property during fundraising, licensing, or discussing clinical trials with contract research organizations.

Energy Industry

The industry faces communication challenges since many remote parties need to be connected. The set of typical implementation includes:

• fundraising and financing negotiations
• joint ventures and other strategic partnerships
• RFPs and bidding
• tax equity investing
• environmental audits
• company’s portfolio reporting 
• monitoring activities

Therefore, anyone from senior engineers to founders may be involved in safe communication. For sensitive data transactions and discussions, representatives of energy segments utilize online data rooms.

Successful Launching of Virtual Data Rooms 

Before the implementation and exploitation of VDRs, every new user must follow two fundamental rules:

Choose a trusted VDR provider 

Among many providers, those who stay transparent in terms of offers and pricing are preferable. Before partnering with a provider, it’s essential to evaluate all its offerings. For example, many companies have annual subscriptions, free trials, fees for the number of files uploaded, or other options. Another crucial point is the presence of a 24/7 responsive customer support or customer care team. 

A credible virtual data room provider has a website with contacts, ‘About us’ page, partners’ feedback, and all the software features explained. It’s better to check independent reviews and comments about the product available on peer-to-peer review websites.

Plan and prepare 

The plain fact of purchasing an online room does not mean it’s entirely ready to be used. Users will need to set up all the features they need on their own. The good news is that doing it is a piece of cake. 

Bearing in mind the risk of human errors is a necessary aspect of launching a VDR. To get the best possible experience, an administrator must always plan a meeting and prepare the room. It’s essential  to start with the categorization of files and customization of permission to folders. The next step would be to determine who will get access to the deal room and to what files particularly. Setting roles and responsibilities clearly is a must, too: each member of the process must know what they can and cannot do. 

When everything is completed, an administrator should double-check everything. One of the ways to do it would be using the ‘view as’ function to see what every user can do. To maximize the security of VDRs, it is normal to ask for signed agreements like NDAs before entering the room. 

Final Highlights

Virtual data rooms have become a valuable tool for confidential business communication. Over the past fifteen years, the concept of an online deal room has evolved substantially making it a must-have tool for multinational or global companies.

VDRs are convenient, time- and cost-saving alternatives to physical data rooms. While modern deal rooms may have various sets of options and structures, their biggest advantages still lie in their security and availability. Experts of different levels and from different industries choose VDRs to manage and share copyright data, intellectual property, and other types of secure files with trusted partners. 

When choosing a VDR provider, it’s crucial to be very careful. Checking the provider’s offerings and pricing, as well as third-party reviews may be a good step towards making the right choice. Also, virtual data room users should focus on the minimization of human errors — they should be a responsible gatekeeper at the entrance to a data room. Once everything is set up, VDRs become an indispensable tool for secure and fast communication.