21, March 2021

5 Steps for a Secure and Easy Virtual Data Room Setup

Whether you are fundraising or looking into mergers and acquisitions opportunities, a virtual deal room is the ultimate solution for quick and safe confidential document sharing. Below you will find practical advice and advanced tips on effective data room setup.

Prepare your files and documents

Before you begin to structure a virtual deal room, make sure that all necessary documents and files are in order. In most cases, you will be dealing with both physical and electronic items and they must be handled properly.

Below are a few best practices for working with both.

Physical filesElectronic documents
1. Create scanned copies of all documents. Avoid altering the paper in any way with things such as staples or page dividers. Keep documents as intact as possible to get the best image results.1. Arrange documents in a well-organized folder structure to make the navigation between them smooth and intuitive.
2. When scanning the documents aim for 200 DPI resolution. Try to keep the files at the smallest available size by using a digital compressor if needed.2. Decide on the level of confidentiality for each item. Some documents might be restricted for the top-tier stakeholders, while others are more flexible in terms of access.

You will also make your life a lot easier if you arrange the necessary documentation by two principles:

  • the degree of non-disclosure
  • the order in which it will be required

Deciding on the sequence and the confidentiality early on will save you time and energy once you get to the data room setup.

Once everything is in place for the virtual deal room configuration, you can complete the task in just five simple steps.

5 steps to set up a virtual data room

5 steps to set up a virtual data room

Step 1: Choose the data room software

The modern abundance of virtual data room providers is both a gift and a curse. On the one hand, you have plenty of options in terms of functionality, pricing, usage terms, and so on. On the other hand, however, finding the right fit can take up a great deal of your valuable time.

Ideally, you would want to settle on data room software that offers sufficient instrument versatility and a user-friendly interface. The more tools that are included, the better. As long as you don’t need to consider any additional third-party services to control access, watermark documents, monitor expiration dates and ensure copy protection, you’ve got yourself a solid virtual data room software solution.

Advanced tip: Ensure your data room of choice grants access to detailed reporting on all participants’ activity. These reports feature precise information on who accessed each file, when, and for how long. You can use this data to both track the status of document sharing and evaluate the engagement levels of everyone involved.

Step 2: Create and organize the virtual deal room

Once you pick the appropriate data room software, it is time to structure the data room. It might help to picture a physical space. Imagine a conference room where everyone is assigned a specific seat at the table. Think about which documents you will place at each seat. Some individuals will have access to certain documents that others will not have access to. From this perspective, you will consider the order of all documents and the access restrictions for each one.

Take some time to ensure every item in the room has the correct name, and then categorize items according to the established order. An indexing feature will come in extra handy during this stage.

Advanced tip: After you have an index for every file, make sure to transfer the correlating codes, if there are any, to the physical documents.

Step 3: Calibrate the virtual data room security settings

The best virtual data rooms will always feature all the tools you need to ensure top-notch confidentiality. In this regard, user management is probably the most important aspect to consider, as it helps you grant appropriate access permissions to each member.

Take full advantage of the watermarking tool, as it will allow you to remain in control of the documents if they are downloaded. You will also have an option to restrict screenshots, downloads and printing altogether if, for example, the data you shared is intellectual property.

Advanced tip: Consider combining a physical NDA with the virtual access agreements. This way, every participant will be reminded to retrieve data with caution.

Remember that you can always adjust the security setup if needed. In fact, it can be a good idea to grant access gradually, in alignment with each new stage of the due diligence process.

Step 4: Upload the files into the virtual data room

You’ve nearly finished the data room setup process. The next thing you will need to do is upload the documents into the layout you created. Considering you thoroughly completed the first three steps, this process is entirely technical.

Advanced tip: Notify the necessary data room members each time you upload an additional document or make amendments to an existing one. Staying in-the-know will help them feel more confident about your venture as well as save everyone time.

Step 5: Invite the other data room participants

The final stage of the data room setup is adding everyone who is supposed to take part in the document exchange. Depending on the details of the transaction, you might allow different groups of members into separate sections of one deal space or direct them to independent rooms.

Advanced tip: Make a habit of regularly checking in with the reporting feature and continue clear communication with everyone involved. It is essential to maintain topmost transparency at every stage of document exchange.

You can also establish access expiration dates on specific documents or entire room segments if, for example, there is a schedule to follow.

Before you start actively using the virtual data room software

Just before you dive into your virtual deal room setup, here are three final tips on getting the most out of the process.

Before you start actively using the virtual data room software
  • Avoid using mainstream cloud storage solutions. While most cloud storage is secure enough to hold sensitive data, it might lack the tool versatility required for fast and effective file sharing. Focus on finding specialized data room software for the best result.
  • Test everything before you implement. When you are ready to invite all the members required, use the View As instrument to ensure you granted access permissions properly. The same tool can also help you evaluate the effectiveness of the layout from another angle.
  • Find the right balance between security and simplicity. While your instinct might be to apply extreme safety measures to each item in the room, it can significantly slow down the process and tire out other participants. Put yourself in the shoes of the people in charge of due diligence and make it simple for them to navigate the room, while still keeping sensitive data protected.

The virtual data room setup checklist

In just a few short steps, your virtual deal room is ready to go. As a review, here is a brief summary of all the things to keep in mind.

  • Assemble and organize all the documents and files in advance
  • Find the virtual data room software that meets your requirements
  • Evaluate virtual data room providers by the security and functionality of their platforms
  • Organize the data room as if it was an actual physical space, keeping accessibility and data safety in mind
  • Set appropriate access levels and permissions in security settings
  • Upload the documents, adding watermarks wherever needed
  • Invite all required data room software users
  • Remain in control by adjusting the access settings and retracting the documents when necessary
  • Combine physical NDAs with virtual access agreements upon data room entry
  • Rely on the reporting feature to track user engagement and overall progress