Virtual Data Room, due diligence, document retention,Mergers & Acquisitions, Deal Management
As the name suggests, a virtual data room, or as it is more frequently called, a “VDR,” is an online database in which companies can store and share confidential information, usually used during a financial transaction. It may also be described as a type of electronic repository or document filing system. With the ubiquitous reliance on computers and specialized software to keep a business running smoothly, coupled with the fact that more and more companies are making the transition to a completely paperless office, many of the previously document-heavy operational practices have been shifted to the virtual realm.
What is in a Data Room?
VDRs are used by companies to securely store and share critical and sensitive corporate data and are most commonly used during deals. The information stored in a data room is generally private documentation that is typically considered to be of high value to the company or owner of the data room. Of course, in addition to traditional record keeping that is required for many financial, legal, and tax matters, a lot of companies have other important documents and information that they need to retain and would like to store safely to ensure that it remains confidential. For example, items relating to intellectual property, such as trade secrets and copyrighted works must be convenient to access but also stored in a highly secure location. Because of the growing importance of data and the ensuing increased demand to ensure that such data is adequately safeguarded, the virtual data room was born, and over the years, it has evolved into the kind of solution that it is today.
Why Use a Virtual Data Room?
For financial transactions, virtual data room software has become the norm, replacing the once-ubiquitous physical data rooms. Physical data rooms had their limitations and were time consuming and inconvenient for the parties involved. With the advancement of online security (which is of paramount importance to virtual data rooms), the physical data room became an outdated concept, being replace with a virtual deal room, where companies could share due diligence information securely and from anywhere in the world. The most common uses of VDRs are listed below:
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M&A
M&A due diligence is a common use case for a VDR. Merging with or acquiring other businesses involves a lot of research, and particularly the furnishing and review of volumes and volumes of documents. For companies merely entertaining a purchase offer, it can be daunting to hand over the sensitive data that will be requested. Thus, companies heavily engaged in M&A can still participate in negotiations and allow for the safe viewing of valuable, confidential data by relying on a purpose-built VDR. And, in the event that a deal does not close, access to the data room can simply be terminated.
Fundraising
For both startups and larger enterprises, engaging in various fundraising rounds is often key to growing a business. And, as many entrepreneurs know, convincing investors to fork over heaps of cash is not exactly an easy feat. In general, fundraising mandates a great deal of data and document sharing, especially during the due diligence investigation. During these fundraising phases, using a VDR can drastically facilitate the requisite exchange of sensitive information, and leadership teams on both sides of the deal should feel comfortable given that using a VDR will allow for better control and oversight.
IPO
IPOs can be particularly onerous transactions, as the decision to go public means that companies will be subjecting themselves to additional rules and regulations, often at the local, state, and federal level. In addition, this transition requires more transparency for the public and prospective shareholders. In order to go through all of the necessary steps to launch and survive an IPO, meticulous document retention and management will be key, which utilizing a VDR obviously allows.
Strategic Partnerships
Even if companies do not formally merge or acquire another business, it often makes sense to partner with other firms for the provision of some good or service or to engage in an entirely new venture. As with most partnerships, these sorts of arrangements will no doubt require a substantial amount of data sharing. This is once again a situation in which a VDR will prove invaluable, and it will ease the minds of the leaders involved in the partnership, as they can rest assured that all valuable data will be protected.
Audits
There are plenty of situations in which external parties will need to review a company’s data, although not necessarily in an adversarial or competitive nature. For example, when legal counsel, accountants, or auditors need to take a look at a company’s corporate records or other documentation, the leadership team will have to find a way to provide them with the information they need without allowing it to be compromised. This is just another example of how a VDR can be used to facilitate virtually every document sharing need a company may have.
IP Management
In some cases, companies may not be as concerned about sharing sensitive data with external parties, and yet still in need of a coherent data security strategy. This is particularly true for startups and other businesses whose growth and survival is highly dependent on safeguarding invaluable intellectual property (IP). For companies falling under this umbrella, establishing a VDR to store any and all IP-related documentation is an extremely wise decision, especially when maximum security standards are an absolute must have. Company leaders and their legal counsel will no doubt be pleased to know their invaluable IP will continue to be invaluable.
Board Communications
Sometimes board members insist on being heavily involved with a company’s leadership team and other facets of the operations. But, board members do not always reside nearby nor do they make frequent visits to the office headquarters. In these instances, when key personnel is scattered across the country, or even across the globe, it will be critical to have a system in place that allows for the instant yet secure sharing of information. One of the best ways to ensure that documents are shared quickly and safely is by storing them in a VDR and then granting access to others, including remotely located board members, as appropriate.
Secure Document Sharing
Ultimately, in any scenario in which a company needs to securely share documents with service providers, prospective investors, any other external parties, or even amongst its own internal employees, having a strong VDR with stringent security measures already put in place will make this process a whole lot faster and easier. Perhaps best of all, those involved do not have to be as worried about information being stolen or misappropriated.
The bottom line is that a VDR can come in handy for C-level folks needing to share confidential files and data amongst themselves, HR departments responsible for maintaining employee records, project managers in charge of various aspects of business operations, and countless other scenarios. The utility and efficacy of a VDR simply cannot be overstated.
Who Uses Virtual Data Rooms?
It’s clear by now that businesses across industries have been turning to virtual data room providers, instead of physical data rooms, for decades, and for good reason. The evolution of the data room industry has changed the way people do business, and now serves as necessary tool for all parties involved in any business deal. They provide users 24/7 access to business information in a secure online location that can be accessed from anywhere, all while minimize the risk of human error that could potentially kill a deal. But, as previously addressed, a deal room goes beyond a diligence round during M&A. Virtual data room providers help many industries successfully complete all corporate events in a secure, controlled, and malleable way. Here are a few industries that commonly use VDRs:
Technology
Technology is an industry fueled with rapid innovation and growth. Companies are constantly raising funds, getting acquired, going public, and more. Having a secure, controlled way for corporate document sharing and storage is of paramount importance for tech. A data room for technology companies commonly facilitates the following financial transactions:
As the name suggests, a virtual data room, or as it is more frequently called, a “VDR,” is an online database in which companies can store and share confidential information, usually used during a financial transaction. It may also be described as a type of electronic repository or document filing system. With the ubiquitous reliance on computers and specialized software to keep a business running smoothly, coupled with the fact that more and more companies are making the transition to a completely paperless office, many of the previously document-heavy operational practices have been shifted to the virtual realm.
What is in a Data Room?
VDRs are used by companies to securely store and share critical and sensitive corporate data and are most commonly used during deals. The information stored in a data room is generally private documentation that is typically considered to be of high value to the company or owner of the data room. Of course, in addition to traditional record keeping that is required for many financial, legal, and tax matters, a lot of companies have other important documents and information that they need to retain and would like to store safely to ensure that it remains confidential. For example, items relating to intellectual property, such as trade secrets and copyrighted works must be convenient to access but also stored in a highly secure location. Because of the growing importance of data and the ensuing increased demand to ensure that such data is adequately safeguarded, the virtual data room was born, and over the years, it has evolved into the kind of solution that it is today.
Why Use a Virtual Data Room?
For financial transactions, virtual data room software has become the norm, replacing the once-ubiquitous physical data rooms. Physical data rooms had their limitations and were time consuming and inconvenient for the parties involved. With the advancement of online security (which is of paramount importance to virtual data rooms), the physical data room became an outdated concept, being replace with a virtual deal room, where companies could share due diligence information securely and from anywhere in the world. The most common uses of VDRs are listed below:
Find out why companies are switching to SecureDocs Virtual Data Room.
Click here to try it free.
M&A
M&A due diligence is a common use case for a VDR. Merging with or acquiring other businesses involves a lot of research, and particularly the furnishing and review of volumes and volumes of documents. For companies merely entertaining a purchase offer, it can be daunting to hand over the sensitive data that will be requested. Thus, companies heavily engaged in M&A can still participate in negotiations and allow for the safe viewing of valuable, confidential data by relying on a purpose-built VDR. And, in the event that a deal does not close, access to the data room can simply be terminated.
Fundraising
For both startups and larger enterprises, engaging in various fundraising rounds is often key to growing a business. And, as many entrepreneurs know, convincing investors to fork over heaps of cash is not exactly an easy feat. In general, fundraising mandates a great deal of data and document sharing, especially during the due diligence investigation. During these fundraising phases, using a VDR can drastically facilitate the requisite exchange of sensitive information, and leadership teams on both sides of the deal should feel comfortable given that using a VDR will allow for better control and oversight.
IPO
IPOs can be particularly onerous transactions, as the decision to go public means that companies will be subjecting themselves to additional rules and regulations, often at the local, state, and federal level. In addition, this transition requires more transparency for the public and prospective shareholders. In order to go through all of the necessary steps to launch and survive an IPO, meticulous document retention and management will be key, which utilizing a VDR obviously allows.
Strategic Partnerships
Even if companies do not formally merge or acquire another business, it often makes sense to partner with other firms for the provision of some good or service or to engage in an entirely new venture. As with most partnerships, these sorts of arrangements will no doubt require a substantial amount of data sharing. This is once again a situation in which a VDR will prove invaluable, and it will ease the minds of the leaders involved in the partnership, as they can rest assured that all valuable data will be protected.
Audits
There are plenty of situations in which external parties will need to review a company’s data, although not necessarily in an adversarial or competitive nature. For example, when legal counsel, accountants, or auditors need to take a look at a company’s corporate records or other documentation, the leadership team will have to find a way to provide them with the information they need without allowing it to be compromised. This is just another example of how a VDR can be used to facilitate virtually every document sharing need a company may have.
IP Management
In some cases, companies may not be as concerned about sharing sensitive data with external parties, and yet still in need of a coherent data security strategy. This is particularly true for startups and other businesses whose growth and survival is highly dependent on safeguarding invaluable intellectual property (IP). For companies falling under this umbrella, establishing a VDR to store any and all IP-related documentation is an extremely wise decision, especially when maximum security standards are an absolute must have. Company leaders and their legal counsel will no doubt be pleased to know their invaluable IP will continue to be invaluable.
Board Communications
Sometimes board members insist on being heavily involved with a company’s leadership team and other facets of the operations. But, board members do not always reside nearby nor do they make frequent visits to the office headquarters. In these instances, when key personnel is scattered across the country, or even across the globe, it will be critical to have a system in place that allows for the instant yet secure sharing of information. One of the best ways to ensure that documents are shared quickly and safely is by storing them in a VDR and then granting access to others, including remotely located board members, as appropriate.
Secure Document Sharing
Ultimately, in any scenario in which a company needs to securely share documents with service providers, prospective investors, any other external parties, or even amongst its own internal employees, having a strong VDR with stringent security measures already put in place will make this process a whole lot faster and easier. Perhaps best of all, those involved do not have to be as worried about information being stolen or misappropriated.
The bottom line is that a VDR can come in handy for C-level folks needing to share confidential files and data amongst themselves, HR departments responsible for maintaining employee records, project managers in charge of various aspects of business operations, and countless other scenarios. The utility and efficacy of a VDR simply cannot be overstated.
Who Uses Virtual Data Rooms?
It’s clear by now that businesses across industries have been turning to virtual data room providers, instead of physical data rooms, for decades, and for good reason. The evolution of the data room industry has changed the way people do business, and now serves as necessary tool for all parties involved in any business deal. They provide users 24/7 access to business information in a secure online location that can be accessed from anywhere, all while minimize the risk of human error that could potentially kill a deal. But, as previously addressed, a deal room goes beyond a diligence round during M&A. Virtual data room providers help many industries successfully complete all corporate events in a secure, controlled, and malleable way. Here are a few industries that commonly use VDRs:
Technology
Technology is an industry fueled with rapid innovation and growth. Companies are constantly raising funds, getting acquired, going public, and more. Having a secure, controlled way for corporate document sharing and storage is of paramount importance for tech. A data room for technology companies commonly facilitates the following financial transactions:
- Raising venture capital
- M&A
- Corporate document storage
- Audits & compliance
- IPO
- HR files
The life sciences industry, commonly comprised of biotech, medical devices, and pharma companies, have a lot of intellectual property to protect. Companies in the life sciences industry frequently partner with other companies, license IP, raise funds, and have the need to protect an intellectual property portfolio. A data room for life science companies commonly facilitates the following:
- Fundraising
- Clinical trials
- Licensing IP
- HIPAA regulations compliance
- Strategic partnerships
- M&A
Investment Banking
Investment bankers look for a reliable virtual data room solution that streamlines the deal process. The world of M&A is complex and simple, secure, and fast due diligence is critical. Investment bankers are frequent users of online deal rooms and typically use them for:
Investment bankers look for a reliable virtual data room solution that streamlines the deal process. The world of M&A is complex and simple, secure, and fast due diligence is critical. Investment bankers are frequent users of online deal rooms and typically use them for:
- Buy-side M&A
- Sell-side M&A
- Capital Raising
- Rights issues
- Strategic partnerships
- IPO
Legal Firms
Legal firms need to securely share confidential information with clients, staff, and other parties of interest. Virtual data rooms provide a streamlined solution that allows them to do this simply and quickly, as time is key. Legal firms use online data rooms for:
Legal firms need to securely share confidential information with clients, staff, and other parties of interest. Virtual data rooms provide a streamlined solution that allows them to do this simply and quickly, as time is key. Legal firms use online data rooms for:
- M&A
- Fundraising
- Strategic partnerships
- Litigation
- Bankruptcy
Private Equity & Venture Capital
Private equity and venture capital firms conduct many types of business transactions, all which require sharing data with numerous parties. These companies are dealing with many complex financial transactions and must do so securely and quickly. Private equity and venture capital use data rooms for:
Private equity and venture capital firms conduct many types of business transactions, all which require sharing data with numerous parties. These companies are dealing with many complex financial transactions and must do so securely and quickly. Private equity and venture capital use data rooms for:
- Equity investments
- Buy outs
- Exits
- Raising a fund
- Partner communication
- Investor communication
Compare Virtual Data Room Providers
Regardless of industry it’s important that companies seek out the type of VDR provider that best suits their unique needs, and what many find, after careful assessment, is that those needs change over time. Commonly, companies will look for providers with specific feature sets, price points, security implementations, and usability which they can test during a free trial - offered by most providers in the industry. Below are three main types of solutions that companies tend to vet when looking for a VDR- traditional deal room providers, modern virtual data room providers, and collaboration tools with a comparison of virtual data room pricing, security, usability and features.
Regardless of industry it’s important that companies seek out the type of VDR provider that best suits their unique needs, and what many find, after careful assessment, is that those needs change over time. Commonly, companies will look for providers with specific feature sets, price points, security implementations, and usability which they can test during a free trial - offered by most providers in the industry. Below are three main types of solutions that companies tend to vet when looking for a VDR- traditional deal room providers, modern virtual data room providers, and collaboration tools with a comparison of virtual data room pricing, security, usability and features.
Traditional Virtual Data Room Providers
- Merrill Datasite
- RR Donnelley
- Intralinks
In general, the traditional data room category is comprised of three data room providers: Merrill Datasite, RR Donnelley, and Intralinks. These companies have a long history in the M&A space and a highlight is that their products tend to be feature-heavy and secure, specifically for M&A. Many of them allow for relatively significant data uploads and storage, but in general, these data rooms are also heavy on price. It is important to highlight that many of the traditional data rooms were initially designed with the M&A process specifically in mind, as the due diligence process for M&A has always mandated voluminous data sharing and document scrutiny. But, because this heavily influenced their creation, their pricing models tend to reflect this history- per page upload fees, fees for extra users, etc. This is the most expensive category of data room. The word on the street is that the traditional VDRs, due to the fact that they have been around so long, can be cumbersome to use.
Modern Virtual Data Rooms
- SecureDocs Virtual Data Room
- V-Rooms
- Ansarada
In recent years, a number of modern virtual data rooms have popped up and there are several players in this modern virtual data room space. Three that stand out are SecureDocs, V-Rooms, and Ansarada. In contrast to the traditional solutions, modern VDRs tend to be easy to use, quick to set up, and relatively inexpensive to maintain. Prices vary greatly from provider to provider, but all things considered, this category is significantly cheaper than the traditional virtual data room category. In addition to having data room-specific features, modern VDRs prioritize data security and ease of use. VDRs may all seem the same, but they each have distinct nuances that will make one more desirable or useful than the other, depending of course, on a company’s preferences and needs.
As previously stated, modern VDRs really concentrate on data security, which means that they integrate sophisticated security measures, including advanced encryption both in transit and at rest, multi-level authentication procedures, and discrete data room access and revocation procedures. In addition to these system level designs, there are document-specific security features as well, including watermarking, disabled printing, and blind view. Although security is one of the most important facets of all VDRs (both traditional and modern), modern VDRs are distinguishable from their traditional counterparts in many other ways that are rather important. Generally speaking, modern VDRs are more cost-effective, easier to implement and support, and have more modern user interfaces.
As previously stated, modern VDRs really concentrate on data security, which means that they integrate sophisticated security measures, including advanced encryption both in transit and at rest, multi-level authentication procedures, and discrete data room access and revocation procedures. In addition to these system level designs, there are document-specific security features as well, including watermarking, disabled printing, and blind view. Although security is one of the most important facets of all VDRs (both traditional and modern), modern VDRs are distinguishable from their traditional counterparts in many other ways that are rather important. Generally speaking, modern VDRs are more cost-effective, easier to implement and support, and have more modern user interfaces.
Find out why companies are switching to SecureDocs Virtual Data Room.
Click here to try it free.
Collaboration Tools & File Sharing Services
- Dropbox
- Box
- Google Docs
First things first- these solutions are not virtual data rooms. It is important to note the distinction between a deal room and another document sharing service that is usually called a collaboration tool or a file sharing service. On the surface, the two may seem like similar solutions, but their differences are very significant. Which in some ways makes it hard to include them in a true virtual data room comparison. Collaboration tools are exactly what they sound like. These tools allow users to share collaborate with others on a file or document. They will have collaboration features that most VDRs lack, but will lack some important features that VDRs have. Some notable examples of players in this space are Dropbox, Box, and Google Docs. Tons of people rely on these solutions, both personally and professionally, to collaborate with others on various kinds of projects and tasks and to share everyday files and documents.
Although these collaboration tools can be quick and cheap to set up, their primary limitation is their lack of security and secure file sharing measures as related to document control and auditing capabilities. In many cases, it is actually free to use one of these collaboration tools on a limited basis. Of course, as a company’s needs grow and more features are desired, the cost to use the service will also begin to increase. Granted, there are certainly times when a collaboration tool may be appropriate to use. However, for companies looking to share valuable, confidential, or highly sensitive data, relying on this type of solution is a mistake. These tools aren’t set up with the same level of permission settings, auditing capabilities, watermarking, and other features critical when sharing confidential business information. And while excellent tools for everyday file sharing use, they lack the professional first impression that a dedicated data room has- something that a company would not want to risk when trying to sell a company or raise funds.
Tips for Implementing a Virtual Data Room
Once a company makes the decision to invest in a VDR, it may be overwhelming deciding which solution will not break the bank and will actually provide the most bang for a buck. The days of secret pricing, hidden fees, and surprise charges are, or at least should be, long gone. A reputable, trustworthy VDR provider will clearly display its pricing scheme, data usage allowances, security standards, and other relevant features. If this precise information is not easy to discern on the provider website, it may be best to shift the search for a VDR elsewhere. There is plenty of competition in the space, but that does not mean that all VDRs will be a worthwhile investment.
Ultimately, companies really need to consider their needs, both existing and future, to ensure that they select a VDR solution that will grow with them as they grow. Of course, in addition to the initial and monthly or annual costs, rapid adoption, immediate implementation, ease of use, and ongoing technical support will undoubtedly be top priorities. One thing that companies should consider is requesting a free trial, so that they can see whether a particular solution is the right fit.
Recap
Data management and security have come a long way, especially in the last five or so years. It is now easier than ever to invest in and set up a highly secure data storage solution, with the modern VDR being the service of choice. SecureDocs has been and continues to be a pioneer in the VDR space, priding itself on transparent pricing, practical features and tools that businesses actually want and will use, and a user-friendly, intuitive interface.
Although these collaboration tools can be quick and cheap to set up, their primary limitation is their lack of security and secure file sharing measures as related to document control and auditing capabilities. In many cases, it is actually free to use one of these collaboration tools on a limited basis. Of course, as a company’s needs grow and more features are desired, the cost to use the service will also begin to increase. Granted, there are certainly times when a collaboration tool may be appropriate to use. However, for companies looking to share valuable, confidential, or highly sensitive data, relying on this type of solution is a mistake. These tools aren’t set up with the same level of permission settings, auditing capabilities, watermarking, and other features critical when sharing confidential business information. And while excellent tools for everyday file sharing use, they lack the professional first impression that a dedicated data room has- something that a company would not want to risk when trying to sell a company or raise funds.
Tips for Implementing a Virtual Data Room
Once a company makes the decision to invest in a VDR, it may be overwhelming deciding which solution will not break the bank and will actually provide the most bang for a buck. The days of secret pricing, hidden fees, and surprise charges are, or at least should be, long gone. A reputable, trustworthy VDR provider will clearly display its pricing scheme, data usage allowances, security standards, and other relevant features. If this precise information is not easy to discern on the provider website, it may be best to shift the search for a VDR elsewhere. There is plenty of competition in the space, but that does not mean that all VDRs will be a worthwhile investment.
Ultimately, companies really need to consider their needs, both existing and future, to ensure that they select a VDR solution that will grow with them as they grow. Of course, in addition to the initial and monthly or annual costs, rapid adoption, immediate implementation, ease of use, and ongoing technical support will undoubtedly be top priorities. One thing that companies should consider is requesting a free trial, so that they can see whether a particular solution is the right fit.
Recap
Data management and security have come a long way, especially in the last five or so years. It is now easier than ever to invest in and set up a highly secure data storage solution, with the modern VDR being the service of choice. SecureDocs has been and continues to be a pioneer in the VDR space, priding itself on transparent pricing, practical features and tools that businesses actually want and will use, and a user-friendly, intuitive interface.
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Virtual Data Rooms