What Is A Virtual Data Room (VDR) And How to Use It

Technology has fundamentally transformed the way businesses are run on a global scale. Virtual data rooms are a product of this technological revolution, and they have completely changed the way companies conduct business today. Virtual data rooms provide a reliable way to store and share your corporate documents.

Not only that, an electronic data room can save you from the panic of looking at your office desk and finding a dozen files heaped on top of each other, waiting to get arranged decently and securely.

So what is a data room? How does it help businesses? Keep on reading if you want to know more about virtual data rooms, their benefits and uses.

What is a virtual data room?

A virtual data room, also commonly known as VDR, is a secure online data repository designed for storing and sharing sensitive corporate files or documents. VDRs are cloud-based storages hosted by certified virtual data room vendors that help businesses to automate their data management systems.

Virtual data rooms ensure data safety through various security layers, including two-way authentication, data encryption, digital watermarking, customized document access, etc.

Key benefits of virtual data rooms


1. Safe data storage and sharing

A data breach of any kind could be disastrous for any enterprise. Modern VDRs help businesses securely store sensitive and secretive documents such as financial records, patents, prototypes, secret formulae, intangible assets, etc.

Moreover, online data room software allows users to share files in a safe environment. File encryption makes sure that only the destined user can access the file(s), while digital watermarking is useful for avoiding copyright issues.

2. Remote accessibility

Remote accessibility is another major benefit of data room software. Data room users can access data rooms from anywhere through mobiles, laptops, tablets, or desktops. Remote accessibility makes things easier for stakeholders and investors because they can keep track of things.

3. Better content presentation

A virtual data room allows organizations to present their business documents in an organized, appealing, and professional manner. This is useful when a business is presenting data to auditors, lawyers, or any other external party.

4. Platform integration

Modern data room services make it easy to integrate virtual data rooms into your current business operations and other platforms. The drag-and-drop and two-way synchronization make sure that the data room is up and running in minutes.

5. Ease of use

You may think that such high-end software will be difficult to learn and operate. However, the reality is exactly the opposite of this. Virtual data rooms are very easy to use, and if your employees are tech-savvy, then using data room software won’t be a problem. Besides, VDR vendors provide manuals, tutorials, and guides to make the learning process easier.

6. Smooth deal management

Virtual data rooms can speed up the deal process by providing a secure platform where all the parties can share business documents and communicate without any fear of data leaks. That is why data rooms are prevalent in M&A transactions.

Common uses of online data room software

Data room services are used in different industries worldwide, and here are some common examples.

  • Initial Public Offering (IPO). Going public means a company has to persuade investors or people to buy company stocks. That means the company is now bound to share corporate details with potential investors. In such cases, virtual data rooms allow corporations to make necessary business documents available for investors without fearing data leaks.
  • Mergers and Acquisitions. The M&A market is one of the biggest use-cases of virtual data rooms, largely because M&A transactions consist of heavy data sharing between the sellers and buyers. Bidders or potential buyers try to get as much information about the seller. Similarly, the sellers always fear data breaches. However, virtual data rooms make sure both parties get what they want without hiccups. For instance, sellers can give customized access to the potential buyer, set the “view only” feature on confidential files, etc.
  • Audits. Auditing is an integral element for any organization as it brings accountability. Whether it is an internal or external audit, auditors need to access important business documents such as financial statements, inventory records, revenue details, etc. Data room services can help businesses organize all the data in one secure place and then give access to auditors. Companies can monitor all the activities during the audits, while auditors can access all the required files at their ease. This not only keeps things transparent but quickens the process.
  • Fundraising. Online data room software has made fundraising more manageable for businesses. Fundraising means the corporation has to make its various documents available to potential investors, and this process may go on for weeks or even months.
    With virtual data rooms, fundraisers can preview financial, legal, or other documents needed for fundraising, and investors can access them whenever required. Apart from that, fundraisers can easily communicate with potential investors and answer all their queries ASAP. This promotes more transparency and helps win investors’ trust.

How to choose a virtual data room

Choosing the right virtual data room for your business is a long process, including the following steps;

  • Identify your needs, why you need a virtual data room
  • Determine the features you need in your data room software
  • Determine your budget
  • Make a comparison of different data room providers, read virtual data room reviews online, check out their websites, and talk to their customer support.
  • Ask for a free trial and see which data room vendor provides the right features for your business.

Final words

Virtual data rooms, the cloud-based repositories, are rapidly replacing the traditional document management systems. Businesses are moving from paper documentation to VDRs because they are safe, reliable, remotely accessible, cost-effective, and easy to use.

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