August 3, 2021

Sign in

Sign up

Data Room

What Is A Virtual Data Room?

By on February 25, 2021 0 367 Views

In today’s business world, much of the “new normal” includes employees working remotely. More often than not, even onsite team members keep within the communication loop virtually as part of their daily routine. With this modern standard in place, the importance of a secure information repository has become necessary in keeping group workflow consistent. This has given rise to the popularity of “virtual data room.” Here, we will look at how this new industry standard works, and how it can benefit you and your company’s secure productivity.

What is a virtual data room?

Simply put, a virtual data room (also known as an “online data room” or “VDR”) is an online database used for storing and sharing information. Most companies utilize one or more VDRs among their many departments and divisions, usually as a place for confidential information to be accessed only by authorized personnel. Due to the sometimes delicate nature of the stored data, VDRs are almost always encrypted by an administrative figure, and only specific employees within the company are granted access at a time. In recent years, the ease of use associated with the virtual data room practice has become standard for large corporations and startups alike.

Virtual data rooms are often used by smaller groups within one or more companies for only a short amount of time, then, in an effort to further ensure the security of the information exchange, abandoned. In a real-world analogy, imagine two major companies (venture capital industrialists or high-profile investment bankers more than likely) renting an executive hotel suite to act as a dealroom for a private meeting. Consider this the “physical data room,” and both parties are given a set of keys. With representatives from their respective law firms present, the group then discusses the details of a highly-profitable deal or company merger. Confidentiality agreements are signed by everyone, a security guard is posted outside the door and, once all the sensitive information is shared, both interested parties exit and split the bill for the suite.

Now imagine all of this takes place on a secure platform in cyberspace, and you have the convenient beauty of the virtual data room solution.

How do virtual data rooms work?

Virtual data rooms are most commonly used as a collaboration tool for sharing valuable data. For example, a VDR can help financial institutions enact transactions, including mergers, fundraising, and IPOs. The secure access of a VDR can function are a temporary location where numerous parties can both observe individual documents or download documents for future assessments in a controlled environment. Commonly, legal firms and accountants can obtain such information as a company’s financial statements after a company’s administrative body uploads the data for such consultancy. Not all VDRs are used for such transactions, however, and the reliable security is also convenient for any other corporate board communications where complete control over confidential data is required across a wide range of industries.

Spreadsheet folders of vendor lists, marketing concepts pertaining to valuable intellectual property, and even transcribed minutes of past meetings can all be exchanged between the VDR users provided with viewer access. Having virtual data room access can also make the due diligence process of a deal or merger more streamlined and, ultimately, save time.

Unlike free cloud-based data rooms, such as basic-level accounts through Dropbox or Google Drive, an industrial virtual data room software is licensed through a third party VDR provider, one specifically designed with numerous security protocols and encryption.

Aside from the convenience of sharing confidential files remotely, a virtual data room service is also significantly more affordable than a traditional physical data room due to both the logistics of having each party meet in-person, as well as the cost-efficiency of saving money on space rental and security staffers.

Most virtual data room providers also offer tier-based functions that allow more than exchanges between diverse parties, but also internal communications within the same company (such as interdepartmental dialogues that could merely reference sensitive documents, such as payroll, employment records, or project-based product and marketing concepts). In this instance, the data room provider often suggests a free trial period for the company to test the integrity and convenience of the virtual data room software, but without the premium features (for example, dynamic watermarks or a limited cap on downloads).

However, since most modern virtual data room software is designed for multiple admins, projects, and updates the necessary security features on a rolling basis, the VDR practice has become more popular as the business world itself continues to evolve.

Leave a comment