What Is a Virtual Data Room?

Sharing sensitive data with other parties is an important part of business. In the past, companies stored documents in physical data rooms. Due to technological advancements, we can now do that digitally using Virtual Data Rooms (VDRs).

What is a data room?

Virtual data rooms are online file repositories that hold sensitive data for interested parties. Companies can store their confidential data and give or revoke access to those documents to users. This simplifies deals between companies, as the process of data investigation is faster and easier. 

Viewing and working with these files is effortless due to access from any device. This leads to better teamwork and optimized cooperation. There are many features of virtual data rooms that improve workflow.

What are the benefits of using virtual data rooms?

Virtual data rooms evolved from physical data rooms. Big file cabinets and stacks of documents were the reason for virtual data room invention. As physical data takes up physical space, the virtual space is much more convenient for sensitive data storage, especially when the data is stored in virtual data rooms. 

Physical documents were also more difficult to handle, as the search for data could not be accomplished by a keyboard shortcut. Data rooms in the digital form save time and money on both sides of any deal they are involved in. It is a platform that provides safe transparency. 

These data spaces are vital in the due diligence process and M&A deals. Through direct access to documents, both sides know what they are dealing with. Many industries use virtual data rooms for the following:

  • Legal (confidential data exchanged between parties)
  • Accounting (statements, monetary assessments are all part of accounting)
  • Private banking (dealing with a client’s money should always be transparent)
  • Private equity (proof of transaction made with assets)
  • Fundraising (transparency provided to the interested parties)
  • IPO (transparency of company’s operations)
what is a virtual data room

Security and support of virtual data rooms 

Sensitive document handling requires special security systems. 

  • Bullet-proof data security. Unlike the usual data-sharing sites like Dropbox or Google Drive, virtual data rooms provide users with multi-level encryption and security in the virtual space while uploading and downloading files. 
  • Convenient access management. Access to files can be monitored. Some features enable watermarking data, disabling access after an established timeframe, or granular permission settings. Using virtual data rooms helps in monitoring who and when has access to confidential data. 
  • Ongoing customer support. If there is an issue with the use of a virtual data room, 24/7 technical support will help you. The safety of your documents in the digital space is their number one priority. They will do everything to help you with any problems you might encounter. This kind of service is not commonly found in file-sharing platforms. 

In the past, data rooms that stored confidential documents were a commonality. Using the technology of today, we can create digital spaces that are more secure than their physical counterparts. 

This is probably the reason various industries today — from Accounting to Private Equity — use virtual data rooms in their operations. Those spaces provide safety and accessibility making any business transaction easier and more secure than ever before.