How to safely manage corporate data has become a major concern for the business world. The growing rate of cybercrimes has forced companies to move to the safest possible options.
Data says that more than 5 billion records were compromised globally in 2023, which is a massive element of concern for the business fraternity. The problem intensifies when organizations have to share their confidential information with external bodies during M&As, IPOs, fundraising, and similar transactions.
One of the safest ways to minimize data security concerns is to employ virtual data room software. This online data management platform not only prevents data breaches but also minimizes internal security threats.
Read on to learn about data room software, its importance, and application, and get to know about top data room providers.
What is Virtual Dataroom Software?
Virtual data rooms are online document storage platforms with advanced data management and collaboration tools. Broadly explained, data rooms are used to safely store, share, and manage large data volumes during different types of business transactions.
Virtual data rooms are not just simple online cloud storage platforms, they are complete deal management solutions with primitive security features. Here are a few factors that make data rooms a better option than cloud storage.
| Virtual data rooms | Other cloud storage platforms |
| High-level security features like watermarking, document shredding, fence-view mode, 256-bit AES encryption, etc. | Basic data encryption and security features. |
| Businesses use virtual data rooms for mergers and acquisitions, initial public offerings, fundraising, and other data-sensitive transactions. | Suitable for personal or basic business-level usage. |
| Designed to comply with industry standards like GDPR, FINRA, HIPAA, SOC2, etc.) | Traditional cloud storage platforms may not be compliant with industry-relevant standards. |
Key Virtual Data Room Features and Functionalities
Traditional cloud storage may offer versions, but with the above-mentioned features, it is safe to say that the virtual data room price can be easily justified. Here are some other notable features offered by modern-day virtual data room vendors.
Document Management
- Authorized users or administration can upload multiple documents in one go through the bulk upload feature.
- AI-powered virtual data rooms categorize documents automatically, which saves time.
- OCR makes scanned documents easily searchable, which is helpful when using data rooms for due diligence.
Document Protection
- Virtual data rooms allow you to disable taking document screenshots or file downloads.
- Watermarking in data rooms allows users to embed user-specific details to prevent unauthorized sharing.
- VDR administration can retract document access even if it is downloaded to the user’s device.
- 256-bit AES data encryption protects file data during sharing and at rest.
Data Room Security
- Multi-factor authorization prevents unauthorized entries in the data room software.
- An online data room allows you to detect IP addresses and geographic locations to prevent unauthorized access.
Why Use Virtual Data Rooms?
Security is one of the biggest benefits of using virtual data rooms. Modern-day virtual data room providers offer primitive security features (as mentioned above) that protect sensitive corporate information in different ways. These features minimize the chances of data breaches, which can cost millions of dollars.
Here are some other benefits of using data room technology.
1. Efficiency
Virtual data rooms make financial transactions more efficient. Here is how:
- Seamless collaboration between multiple parties involved in the transaction. They can use different collaboration tools like Q&A sections, instant messaging, and discussion boards. Data rooms also allow third-party app integration, which makes it easy to organize videoconferencing within the VDR.
- Remote access to virtual data rooms allows users to perform their tasks from anywhere in the world. They can access, share, and upload documents from their smartphones and desktops over a simple internet connection.Data organization becomes simpler with virtual data rooms. VDR vendors provide detailed due diligence checklists which help categorize documents with ease.
2. Compliance
Virtual data rooms are industry-compliant data management solutions. They not only ensure international compliance but also help businesses address local regulatory requirements.
A FINRA-compliant data room means any firm or company in the US financial sector can readily use it for data-sharing purposes. GDPR-compliant virtual data room vendors are well-known in European countries.
3. Cost-effectiveness
Data room technology is a cost-efficient alternative to traditional paper documentation systems for different reasons. Here is how:
- Virtual data rooms replace traditional document management systems, which means you don’t have to bear expenses for logistics, paper and printing costs, and storage space rent.
- Online data rooms also save buy-side expenses as they don’t have to travel to examine documents during due diligence. This is more beneficial in cross-border deals.
- Last but most importantly, virtual data rooms save time by streamlining the due diligence phase. Time is one of the most expensive commodities in the modern-day business world,
Common Use Cases of Virtual Data Rooms
Virtual data rooms are globally employed in different industries, including:
- Mergers and acquisitions
- Real estate
- Healthcare
- Legal industry
- Oil and gas
- IT sector
Virtual Data Room Software—Choose the Right Vendor
The selection of a virtual data room is crucial to get the maximum out of this technology. Here are a few things to consider:
- Virtual data room security and compliance
- Prior experience in a specific industry
- Integration capabilities
- Ease of use
- Customer support service
- Free trials
- Fair pricing structure
Some of the best virtual data room solutions include Ideals, Ansarada, DocSend, and Merrill Datasite.
