Virtual data rooms: what they are, when to use them, and how to choose the right one

What are virtual data rooms

Virtual data rooms are digital repositories for safe data management, storage, distribution, and sharing. In addition to that, the platform also provides tools for data analysis, reporting, deal management, and digital communication.

It’s important to note that digital data rooms are not like those common online data storage platforms. They are fully-equipped business suits that come with hundreds of unique features for cybersecurity, document management, dealmaking, communication, reporting, analytics, and much more.

Importance of virtual data rooms in business

• Data management
• Digital communication
• Internal and external transactions

Above all that, security is one of the most important reasons why virtual data rooms exist in the first place. Truth be told, data room technology is arguably one of the safest for digital data protection. A secure virtual data room has features like multi-step verification, remote device purging, document access permissions, granular access, dynamic digital watermarks, and immediate document and data room access revocation.

Additionally, data rooms are also important for compliance purposes. Virtual data room providers now offer services to specific industries and comply with industry-relevant regulations. For instance, data room vendors operating in the financial sector in the USA have to be FINRA-compliant. That also means businesses can use the services of these vendors to tackle their regulatory issues.

It’s highly recommended to check whether your vendor complies with standards set by the institute regulating the industry.

When to use virtual data room services

One of the biggest positives about data room technology is that they are suitable for any kind of business, such as firms, LLCs, partnerships, retailers, sole proprietors, dealmakers, etc. Also, the nature of their usage varies from industry to industry. Here are some global uses of virtual data room technology.

Private equity acquisitions and M&As

Private equities and dealmakers are amongst the biggest users of online data rooms. They use them to digitally manage transactions like strategic partnerships, mergers, consolidations, acquisitions, acquisitions, joint ventures, divestitures, etc.

Fundraising and Initial Public Offerings (IPOs)

Fundraisers and companies prefer fundraising and IPOs using virtual data rooms. For starters, the technology allows fundraisers to easily reach and collaborate with international investors. The process can easily go on for months while data rooms protect sensitive corporate information shared during fundraising or IPOs.

Litigation and legal affairs

The legal industry has been a major consumer of data room software for years. The technology facilitates lawyers in different processes like client communication, internal collaboration between attorneys, coordinating with corporate clients, and intermediating financial transactions like M&As.

Board communications

Virtual data rooms have revolutionized board meetings exceptionally well. Companies can now rely on one single tool for document and meeting management. From scheduling meetings to videoconferencing to document sharing, a virtual data room can help board management at every step.

Data storage and management

Virtual data room software is a reliable document repository that any business can use for the long term. Hundreds and thousands of companies are already using data rooms as their virtual workspaces where they store, manage, and distribute documents and streamline internal and external communication. 

Other common uses of virtual data rooms include due diligence, licensing, clinical trials, R&D, risk management, asset lifecycle management, etc. Banks, Telecom companies, law firms, insurance companies, pharmaceutical companies, service providers, investment banks, and the oil and energy sector.

How to choose the best virtual data room software

The virtual data room selection process is not to be taken lightly. Always consider the following aspects when choosing a virtual data room software.

• Is the data room at least ISO-certified.
• Does it have at least basic security features like digital watermarks, two-step verification, granular access, audit logs, and document access permissions.
• Does the data room support your operating system, such as Windows, Mac, Linux, etc.
• Is it easy to use.
• How good and responsive is the customer support service
• Does the vendor offer trials.

You can also consider service providers like DealRoom, iDeals, Merrill, Firmex, and Caplinked. These data rooms have some of the highest levels of customer service and satisfaction in the industry. Still, conducting your own data room review and research is a must before making any decision.

Conclusion

If you’re looking for a way to improve your cybersecurity and protect your data management from cyber attacks, then incorporating virtual data rooms into the system may be the perfect solution. In this comprehensive guide, you have everything you need to know about how this technology works and why these rooms are important in the business.