The Best Virtual Data Room Providers

Virtual Data Room: A Must-Have Tool for Secure Online Document Sharing

Virtual data rooms are becoming an increasingly recognized tool for safe digital organizational management. After the COVID-19 crisis, now more than ever, it has become vital to invest in digital infrastructure and take care of data security. With their extensive, easy-to-use security features and collaboration tools, virtual data rooms become important for maintaining productivity, order, and security in 2021. Let’s take a closer look at what makes VDRs irreplaceable in 2021.

Security: The most important feature in data rooms

How you look after sensitive data, such as employee personal information, intellectual property, and company financials, is essential for business success and employee safety. Overlooking data security can lead to legal issues, reputation damage, and unexpected costs. For example, General Data Protection Regulation (GDPR) fines rose by nearly 40%, and penalties totaled around €150 million ($190 million) in 2020.

Virtual data rooms provide specific security features to keep your data protected. The best VDRs comply with international security standards such as GDPR, ISO  27001, SOC2, HIPAA. Important security functions include:

• Data encryption for files and messages
• Customizable user permissions
• Two-factor authentication
• Revoking access after download (remote shred)

VDRs are also designed with features minimizing the risk of human error when handling documents, for example:

• Option to disable print/download/forward/modify functions for certain users
• Option to set document access expiration
• Access to complete audit trails on user activity
• Option to customize elements like dynamic watermarks, NDAs, and terms of use

At a time when data is considered the most valuable resource in the world, such precautions ensuring the security of sensitive data are more of a necessity than an option — and luckily, those precautions are provided by VDRs.

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Who uses virtual data rooms?

Virtual data rooms first originated in the financial sector. Subsequently, they are still most commonly used for managing financial transactions like Mergers & Acquisitions, IPOs, fundraising, and real estate deals. 

However, as more and more industries are transitioning to the virtual space, online data rooms are increasingly gaining popularity within other business sectors. Data rooms are increasingly used across the healthcare industry, for example, for clinical research, to keep patient records secure. 

Today, many start-ups, non-profit organizations, and associations dealing with sensitive data management use virtual data rooms to protect their client information and run processes more effectively.  

The most common use cases of virtual data rooms 

M&A Due Diligence

As M&A due diligence is a highly demanding and time-consuming process, an online deal room can help run the process more smoothly, reduce administrative costs while keeping sensitive documents in a central, controlled environment. Permission-based access can prevent unwanted downloads or copies, or restrict access to certain documents completely.  

Fundraising

Virtual data rooms provide a platform for an easy and structured way to present all necessary materials for potential investors and sponsors. Extensive search functions save time and allow authorized users to quickly find any document or file — rather than searching for and reviewing multiple emails. 

Audit

Typically auditors have to inspect nearly every aspect of the business or organization. Providing auditors with well-structured, secure data storage accessibility without requiring travel benefits both parties, especially if regular auditing is an automated process within a data room.

Regulatory compliance

Ensuring regulatory compliance is very important in every business sector. Complying with regulatory requirements not only safeguards one’s business but also protects it from unexpected expenses, penalties, and even lawsuits. VDRs can ensure transparency and create a platform for working with outsourced specialists or share information with regulatory bodies to minimize the risks of unintentionally breaking the law.

Litigation

Virtual data rooms can help streamline the litigation process, providing a central, secure space for collaboration during pre-discovery, and a secure way to share documents with opposing counsel or other parties. 

Initial Public Offering (IPO)

Structuring and coordinating an IPO is a complex, time-consuming, and stressful process. Inevitably the IPO process leads to stakeholders scrutinizing the company’s financials. A virtual data room ensures data security while third parties are constantly, and sometimes disorderly, requesting, reviewing, and analyzing files. A well-structured data room also proves your professionalism and transparency to regulators and potential shareholders. 

Procurement projects

VDRs allow procurement specialists to safely communicate and collaborate with contractors, legal counsel, and other third parties without having to schedule physical meetings. A VDR makes the process of collecting requests for proposals and evaluating bids easier, thus resulting in a more competitive price for desired products or services.

Strategic partnership

A lot of partnerships involve heavy document sharing. A VDR can assist in making communication and collaboration more cost-effective and transparent. A strategic partnership could be, for example, between real estate developers and subcontractors, product owners and manufacturers, etc., working with heavy file formats, sensitive information, and intellectual property. 

Reporting

Most VDR software generates automatic reports and extensive analytics. Automating the reporting process saves time and can be helpful for any business. 

Board meetings

The board of directors holds a lot of responsibility for the organization’s future and employee well-being. A VDR provides a safe platform to collaborate effortlessly, to view documents, have internal discussions, and invite external parties such as lawyers, accountants or regulators, when needed. 

Intellectual property management

Online data rooms are perfect for exchanging sensitive documents for joint ventures involving intellectual property (IP) such as trademarks, copyrights, patents, even trade secrets. They minimize the risk of third parties profiting from leaked information and keep records of everything related to your IP.

When it comes to choosing the best online data room vendor for your use case, look for a vendor specializing in your industry. That way, you can rest assured that they already know what your needs will be and are ready to accommodate you.  

Physical data rooms vs virtual data rooms

A physical data room is a space (conference room, office room, or other designated area), at the company office where authorized users can access and review sensitive files and information. It can also be an off-site rented space. Regardless of the location, it has to be under constant surveillance to control who enters the room. In this case, people have to schedule an appointment and physically travel to the data room to do their job. It makes the process more time-consuming, costly, and inconvenient. 

When a virtual data room is set up, the process becomes more flexible without losing the layer of security. Files are stored digitally and are not tied to a physical office space. Since the information can be accessed 24/7 from anywhere, involved parties get the work done much faster. 

Compared to physical data rooms, virtual data rooms make the process more efficient and can reduce costs. Multiple user groups can work or review the same files simultaneously and ask questions on the platform. A VDR makes it possible to view an audit trail and analytics on user interaction with your documents, something a physical data room is not capable of. A VDR lets you track who has viewed which files, for how long, when, and exactly which pages. 

Virtual file-sharing services vs virtual data rooms

Virtual file-sharing services such as Google Drive, are cloud-based file storage providers that allow users to share files across devices. To some extent, virtual file-sharing services are similar to virtual data rooms. They both provide online storage space for sharing, reviewing, and storing data, however, VDR’s offer many more security layers, functionality, and customization.

Virtual file-sharing services offer free storage for users with minimal storage needs. For example, Google Drive offers the first 15GB for free. Premium storage packages are available and provide customized additional space for an added monthly/annual fee. At the same time, top-rated data room service providers offer unlimited storage, extensive roles and group management, and automatic data labeling as you upload files. A VDR free trial (most often) comes with full functionality, security certification, detailed audit trails and reports, customizable interface, multiple language interface, 24/7 customer service help, and many other features. 

Depending on the sensitivity of the documents, needed functionality, and access permissions, a VDR can make a project run smoother. However, if you are working on a small-scale project, intend to co-create documents, or do not require extra layers of security, a file-sharing service might be a simpler solution.

How to compare and choose the right virtual data room

Looking for the right VDR provider for your business can seem like a daunting task. However, once you know what to look for, you can easily narrow it down to the best data room providers for your specific needs. Follow these steps to find the most suitable electronic data room provider for your business:

• Look for expertise in your industry. A lot of VDR service providers tailor their software to a specific industry or use case, such as M&A due diligence, auditing, legal operations, etc.
  
• Check provider compliance with data security certifications. Check whether the VDR service provider has been audited by ISO/IEC 27001:2013 Certified Data Centers or SOC 1 or SOC2 (Type I, Type II) Certified Data Centers, is GDPR compliant, or has received HIPAA compliance.
  
• Compare provider ratings and reviews. User experiences are the best way to evaluate a data room, but keep in mind that the most trustworthy reviews come from your peers, business partners, or people you trust. Some companies list their biggest clients on their websites. It can be a good indicator of what type of industry leaders have chosen their data room solutions.
  
• Evaluate offers based on price vs. needed features. A lot of data room services provide different levels or packages depending on the size and duration of your project and desired features. Determine what the most needed features are, how many users you will have, how much storage space you will need, etc. Once you’ve decided on specific parameters, compare vendors to find the best deal and fit for your specific needs.

5 Tips for maximizing the value of your VDR

Although a virtual data room can help you reduce costs and operate more efficiently without a well-designed structure, it can easily turn into a nightmare. These five tips will help you keep your virtual data room in order and ensure effective business operations:

1. Create and follow a specific file naming system. Everyone using the platform must be able to find what they need easily. To make that happen, set rules for regulating and structuring your VDR and make sure everyone who uploads documents follows those policies.
   
2. Take advantage of role-based access. Setting up granular user permission before inviting everyone to the platform can save a lot of worries beforehand. To create custom user groups and configure their access, first estimate how many users you will have and what type of roles and access you want to provide. Then either set up access for each group or each member — it will save a lot of time in the future.
   
3. Customize your Virtual Data Room. Make the VDR an extension of your company’s brand. Add your logo, company’s colors, a welcome message, and a personalized invitation to access the platform.
   
4. Find the right person to lead the transition.  Choosing a technically savvy and enthusiastic person to lead the transition can save you a lot of frustration. A confident, experienced virtual data room manager can answer employee questions easily and provide the encouragement needed in turbulent times.
   
5. Do not overlook analytics. Remember to take advantage of data insights generated by your VDR software. You can track macro-level engagement by document, user, or role. You can save Q&A transcripts for future training purposes, and you can export automatically generated reports for your board meetings, etc.

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