A virtual data room is a secure online repository designed to store, edit, and share confidential information. At their core, virtual data rooms are the descendants of physical spaces where various documents related to a business or intended for a specific deal were stored.
Unlike their predecessors, virtual data rooms give their users flexibility and accessibility: users can work with documents 24/7/365 regardless of their location. Restrictions can be defined and set only by the admin of the data room.
Virtual data rooms also allow users to upload, view, edit, and comment on the files. Furthermore, the most popular providers offer additional options: an F.A.Q. section, work chat, integration with a calendar, and project management tools.
A data room typically follows a hierarchical structure, organized into categories, folders, and subfolders. This structured approach facilitates navigation and retrieval of documents, ensuring that users can easily find the information they need. Additionally, many data rooms offer advanced search functionality, enabling users to search for specific documents across the entire platform quickly.
Benefits of using virtual data room software
Virtual data rooms have many advantages over physical or traditional data rooms and other online platforms. The most important benefits are:
Management and control. Virtual data rooms allow precise and flexible control of users’ access to separate documents or chosen sections of data rooms. Moreover, advanced remote functions allow business admins to delete sensitive data, even if it was downloaded to the users’ devices.
Security and stability. Two-factor authentication, a log of actions with documents and user activities within the data room, and other security options and protocols ensure a secure data exchange and collaboration within the virtual data room.
Enhanced communication. Virtual data rooms facilitate communication among stakeholders through features such as discussion threads and Q&A sections. These communication tools improve collaboration, clarify information, and speed up decision-making processes.
Forecasting and predictability. Virtual data rooms allow businesses to reduce maintenance costs (businesses don’t need to maintain their own infrastructure and hire full-time programmers or administrators) and predict the expenses for months and years ahead.
Online data rooms vs. physical data rooms
Virtual and physical data rooms serve as repositories for confidential documents related to various processes like intellectual property management, fundraising, litigation, and business transactions such as M&A. However, while physical data rooms require expenses for rent, security, and maintenance, online data rooms offer a more convenient and cost-effective solution.
Additionally, online data rooms provide secure file sharing, user activity tracking, document search capabilities, and collaborative tools, ensuring efficient and secure data management from anywhere with an internet connection.
Data room functionality
Explore the key functionality that makes virtual data rooms essential for secure and efficient document management.
Essential features of virtual data rooms
Feature category
What’s included
Enterprise-level security
A limited viewing mode
Remote shred following downloading of the data
Dynamic watermarks
Built-in redaction
Access settings
Single or bulk invitations for users (separately or in groups)
Detailed user permissions
Customizable user notifications
Document management
Drag-n-drop
Bulk upload of files of any format
Automated index numbering
Full-text search
File merging
Ease of use
Single sign-on
Multilingual access
A mobile user interface
Native apps (iOS, Android)
Multi-project management
Analytics
Full audit trails
Data room activity dashboard
User-behavior tracking
Reports
Collaboration
Frequently asked question segments
Real-time discussion
Auto-assignment of questions to experts
Question status
Notifications
Comments and annotations
Customization
Customizable logo, theme colors, and company branding
Customizable headers and footers
Customizable watermarks
Best virtual data room providers comparison
To choose a virtual data room and its provider, businesses need to understand the major principles of virtual data room comparison. There are two areas to focus on as part of this process: the data room features and the reputation of data room providers.
The table below will help you structure all features properly. All data was collected from providers’ websites and interviews with direct providers’ customers and structured by in-house virtual data room experts.
To manage the second area — the reputation of a software provider — you can use the rating below as well: it includes virtual data room reviews collected from independent solution listings.
Now let’s compare virtual data room providers in terms of their expertise and advantages.
iDeals
iDeals virtual data room is widely recognized as the leading VDR solution. The company was established in 2008 and now has a global user base of over a million businesses.
iDeals is a customer-oriented virtual data room that stands out for:
Exceptional customer support with a 30-second chat-response time and an average 5-min case resolution
Easy-to-use interfaces, average 15-minute set-up, and sync with the desktop app
Top-notch security features like fence view, user access expiration, and eight granular access controls
Customizable workflow and Q&A roles
Intralinks
Intralinks is an inter-enterprise content management and collaboration solution founded in 1996. It’s positioned as a premium product and is more suitable for large businesses and enterprises. Its data room services offer several advantages:
AI-powered document analysis to facilitate the due diligence process
AI redaction to protect sensitive documents
Automatic compliance tools to track and maintain document history
M&A workflow tool for one-step document approval during an M&A transaction
Datasite
Another VDR provider, Datasite, was founded in 1968 with a mission to empower the dealmaking community to work smarter and faster. Here’s what it offers to its customers to fulfill that mission:
An integrated Q&A tool with advanced workflow features
Project, folder, or document-level permissions
Professional support available 24/7/365 in 20 languages
Mobile apps for iOS or Android
Ansarada
Ansarada is considered one of the best data rooms for M&A, dividing users into the buy- and sell-side categories. Here’s what this deal room offers:
Several data storage plans, convenient for any budget and project
Commenting, notifications, and role-based Q&A workflows, including Excel and email integrations
Mobile-friendly and easy-to-use interface, even for first-timers
Bulk AI-redaction to redact 500+ documents simultaneously
Firmex
Firmex is another virtual data room solution with more than 20,000 new rooms opened every year and 4,200+ customers in 110 countries. Here’s why users choose Firmex virtual data room:
Advanced security measures, encryption standards, and global compliance with major standards like SOC 2, HIPAA, and GDPR
Customizable reports for analytics
Award-winning in-house support team
Two-page mode for viewing PDFs
Onehub
Onehub is also among the virtual deal rooms trusted by over 1 million people. It’s a cloud solution for the storage and sharing of confidential data. Its key advantages are:
Intuitive and easy-to-navigate interface, requiring no training even for less experienced users
Real-time editing, commenting, and version control
A detailed audit trail
Integration capabilities with other business tools and applications
DealRoom
DealRoom is regarded as one of the best data room software for facilitating secure collaboration during complex business transactions. It stands out for:
BI reporting tool to create, convert, and share analytics with visuals
Personal and shared dashboards with filters
Security features like multi-factor authentication and customizable permissions
Ability to assign individual or group responsibilities and track progress on different workflows
SecureDocs
SecureDocs is one of the electronic data room providers which was launched in April 2012. Since then, it has helped to complete thousands of financial transactions worth billions of dollars. In 2022 the company was acquired by Onit, a leader of enterprise software and AI platforms. Its advantages are:
Unlimited data storage, users, and documents
E-signature integration
Transparent and flat-fee pricing plans
10-minute set-up and no complicated training
CapLinked
Over 250,000 users from over 75 countries and nearly half of the Fortune 1000 companies use the CapLinked secure data room. Here’s why:
World-class security, with SSAE16 Type II and ISO 27001 compliance, 256-bit advanced encryption standard, and premium-grade TLS protocol
FileProtect — digital rights management feature to revoke access to downloaded documents
Audit trail with a complete history of every event in the data room
No plugins to view PDFs, Microsoft Office files, images, and video directly from a browser
Citrix
Citrix, also known as ShareFile, has been offering its virtual data room services for about two decades. Since 2005, the provider has helped over 90,000 customers with secure data storage and sharing. Its key advantages over its competitors are:
Unlimited number of collaboration spaces
Task and reminder notifications
Desktop app for Windows and Mac
Integrated E-signature
How to choose a data room provider: main tips
To choose the most relevant provider for your business, we recommend you to do the following:
Determine your needs. Assess whether the data room provider has experience in your industry or specializes in deals relevant to your business. Ensure that the provider’s platform is tailored to meet your specific requirements.
Evaluate data security. Review the provider’s Service Level Agreement (SLA) to understand their commitment to data security and uptime. Look for clear and concise terms regarding data encryption, access controls, and system reliability to ensure the safety of your sensitive information.
Assess data room features. Use the above-mentioned list of features to evaluate the provider. Alternatively, you can check the comparison table of providers on our website.
Consider data room cost. Evaluate the cost structure of using the data room, considering both upfront fees and ongoing expenses. Calculate the potential return on investment (ROI) of implementing an online data room by analyzing its benefits in terms of time savings, efficiency, and risk mitigation.
Research user reviews. Read reviews from businesses in your industry or similar sectors to gain insights into their experiences with different data room providers. Pay attention to reviews that highlight specific strengths or weaknesses of the provider’s platform, support services, and overall user experience.
Assess support services. Evaluate the quality of the provider’s customer support by contacting their support team. Look for indicators of responsive and knowledgeable support, such as quick response times, helpful guidance, and proactive problem-solving.
The difference between data room software and cloud storage
Among the important decisions you have to make when selecting online data room software is the choice between a boxed and cloud-based solution.
In general, the selection of features behind both approaches is similar: they store documents securely while providing flexible access control and collaboration tools, etc. However, there are differences as well.
First difference: maintenance cost
With a software (server) solution, you will need to pay for the server, hire a support team and programmers to maintain it. With a cloud (software-as-a-service or SaaS) solution, there won’t be such a need.
Second difference: the drawbacks of human factor
A software solution works the same way as a SaaS solution in terms of user access, control of users’ rights to view, edit, copy or download documents in an electronic data room; it provides the same collaboration tools as SaaS.
Yet, the boxed solution has one significant drawback: the influence of the human factor. Most hacker attacks that occur in the corporate environment today are performed not by using programmers’ skills, but employing social engineering.
Therefore, if someone gains physical access to your server (s) storing sensitive data, these people will have full access to downloading any information, bypassing even the most advanced digital security protocols.
Virtual data room use cases
VDRs are mostly used by companies that need to work with a significant number of documents, control the level of access to each document, and ensure uninterrupted and secure collaboration.
That is why the main areas of the VDR use are:
Mergers and acquisitions (M&A) and due diligence process. For incorporation documents; corporate bylaws; stock option agreements and plans; recapitalization or restructuring documents; income, sales, and other tax returns filed in the last five years; tax sharing and transfer pricing agreements; patents; copyrights; trademarks; licenses and licensing agreements.
Fundraising. For CVs of each founder and any key members; business description; pitch deck; information deck; business model deck; financial model (P&L, business plan, funding, exit strategy); marketing plan; warranties; due diligence documents; etc.
Initial public offering (IPO). For listing application forms; approved prospectus; audited annual reports and financial statements; certificate of incorporation; memorandum and articles of association; and due diligence documents.
Real estate deals. For income details documents; mortgage discharge authority form; certificate of title; closing disclosure; additional documents for refinancing, first home buyers, investors, construction loan, and homeowners.
Life science documents. For case report forms (CRFs); informed consent forms; patient diaries, recruitment materials, reported outcome measures, source documents; pharmacological studies and protocols; medical devices documents; and regulatory affairs.
Legal processes. For documents related to legal cases, court filings, evidence, expert reports, and settlement agreements; contracts, agreements, and legal documents requiring review, negotiation, and approval.
Financial transactions. For documents related to the sale or purchase of assets such as equipment, real estate, or intellectual property; loan agreements, debt schedules, financial statements; shareholder agreements, subscription agreements, and investment term sheets.
Intellectual property management. For patent applications, patents granted, licensing agreements, and patent litigation; registration certificates, trademark agreements, copyright assignments, and infringement notices.
Strategic partnerships and joint ventures. For documents outlining the terms and conditions of strategic partnerships, joint ventures, or collaborations; contracts and agreements related to licensing intellectual property, distribution rights, or technology.
FAQ
What is a virtual data room?
A virtual data room (VDR) is an online repository used to store and share sensitive documents securely during business transactions. It allows authorized users to access, view, and manage documents remotely, eliminating the need for physical data storage.
Where are virtual data rooms used?
Data rooms are used during various business transactions and processes, including mergers and acquisitions, due diligence, fundraising, legal proceedings, regulatory compliance, and strategic partnerships.
Are virtual data rooms secure?
Yes, data room vendors prioritize security and employ advanced encryption methods and security measures to ensure data is protected from unauthorized access and data breaches. Additionally, VDRs often undergo regular security audits and compliance certifications to ensure adherence to industry standards and regulations.
What are the disadvantages of virtual data rooms?
While implementing a virtual data room offers numerous benefits, it may also have some drawbacks. This includes potential complexities in setup, dependence on the internet for access, ongoing subscription costs, and the need for user training. Additionally, some users may find it challenging to navigate the platform’s functionality.
What is the difference between file sharing and data room?
File sharing typically refers to the sharing of individual files between users or groups, often through cloud storage platforms like Google Drive or Dropbox. In contrast, virtual data rooms offer a more comprehensive and secure solution for managing business data, including features for communication and collaboration.
Is Dropbox a data room?
No. While Dropbox provides basic file-sharing functionality, it lacks the advanced security features, access controls, audit trails, and collaboration functionality, typically found in virtual data room solutions. Therefore, Dropbox may not be suitable for handling sensitive documents in business transactions.
