A virtual data room (VDR) is a secure online repository that lets users upload, track and share sensitive information with third-party users outside the firewalls within their own company. The data is accessible via the internet or a software at any time. Virtual data rooms are increasingly vital for many business processes and financial transactions. This article explores why this is the case and provides advice on selecting an appropriate provider.
When selecting a virtual data room, it’s essential to understand the requirements of your company’s use case. For example, if you’re planning to conduct an M&A deal, it’s essential that the platform allows due diligence and collaboration with both sellers and buyers. The platform must be able to monitor all activities and have custom permission profiles. This will ensure that only appropriate individuals have access to your personal files.
Another common use case for VDRs is sharing investment memos and market research with private equity and venture capital firms during the funding round. This can speed up the transaction process and ensure that investors get exact information about the company. Many VDR providers also permit businesses to set up public portals for sharing documents with potential partners and customers. This is especially beneficial in M&A situations in which it is important to build trust with potential investors.
It’s important to compare the costs of subscriptions versus one-time transactions when comparing VDRs. Many vendors offer an annual unlimited-use subscription that allows business users the ability to pause and start projects or make multiple data rooms “on standby” as required.
