What is a data room/virtual data room?

For the reasons of cost, efficiency, and security — and due to the ongoing global pandemic — virtual data rooms have spread widely across different industries.

Unlike its predecessor, the data room as a physical space, a virtual data room doesn’t require its visitors to share the same physical location. However, it preserves the behavioral pattern: just like in the offline world, the owner of a digital data room shares access to selected visitors.

Storing documents in a secure data room

Managing and limiting access to stored documentation is a must in today’s world affected by a growing number of cyberattacks. A virtual data room is a feasible option to do that as it lets the company store and share valuable information with pre-approved users in a controlled manner. 

What’s more, a virtual data room is compliant with all formats and sizes of documents, which makes it a worthy option for companies of any size and industry — from tech startups to food startups, to online stores and marketplaces, to large corporations. 

It is a particularly good option for distributed teams which have become a new reality all over the world, especially in such areas as software development, marketing and sales, legal affairs, etc. With virtual data rooms, regardless of your current location, you can access and change stored data any time (it goes without saying that it is necessary to obtain permission to do that first).

Imagine a team the members of which work from London, New York, Tokyo and Melbourne to launch a well-thought-out media campaign. Not only they live in different cities, but they also live in completely different time zones, which makes even online communication a bit tiresome and inefficient, to say the least. Would you want to wake up at 3 am just to have a business call even with people you like? 

What adds insult to injury, this team has a tight deadline they can’t miss. What’s more, their campaign is being prepared in secret as it’s their chance to outrun their closest competition and finally grab that market share, which they committed to do at a quarterly meeting. 

A virtual data room is the right option for this team as it secures and arranges data and makes it possible to work with it from anywhere anytime. In addition to that, its interface is simple and pleasant. 

All of this begs for a question, though: what types of data do you exactly store in a virtual data room? Are there any restrictions? What shouldn’t you store in a VDR? Are there any guidelines?

documents for data room

What documents should be kept in a data room? 

We have grouped the documents that can be stored in the VDR into several categories that have to do with a variety of business areas and activities:

  1. Basic corporate documents are documents that play an essential role throughout the company’s existence.
  2. Capital stock and other securities are documents reflecting the number of common and preferred shares that the company is authorized to issue.
  3. Financial and tax matters are documents like audited and unaudited financial statements, monthly/quarterly financials, etc.
  4. Property and assets stand for documents on the owned and leased real property, related property amendments/consents, etc.
  5. Intellectual property are legal documents proving the intellectual property ownership or rights.
  6. Material agreements are any agreements which have a material effect on the business or assets.
  7. Customers, sales, and marketing have to do with product campaigns and launches (summary), list of customers and key metric information, form of sales agreement, and accounts receivable summary reports.
  8. Suppliers and manufacturers section includes documents for all key suppliers and manufacturers, signed agreements, etc.
  9. Customer and product support documents are onboarding docs, retention flow description, satisfaction surveys, etc.
  10. Regulatory matters are permits, notices and other relevant regulations.
  11. Litigation/disputes are documents related to any litigation, arbitration, or governmental complaints, fillings or actions.
  12. Insurance stands for documents with all insurance and liability policies and claims.
  13. HR/employees/consultants/contractors have to do with current employees, future hires, contractors, etc.
  14. Press and PR holds a directory of press releases, media articles, press kits, and independent reviews which a PR team uses to ensure the right brand perception of the company.
  15. Related party transactions is a set of documents on a pre-existing connection of parties before the current transactions.

It goes without saying that it is not necessary to store all the documents from this list in a secure data room. Every company adapts the list to its own needs and reality by eliminating or adding something to it. This list may also vary depending on the company’s size and industry.

For example, a company can keep the following documents in the virtual data room:

  1. Basic corporate documents:
  • articles of incorporation,
  1. Capital stock and other securities:
  • voting agreements,
  • investor rights agreements,
  • capitalization table.
  1. Financial and tax matters:
  • PnL,
  • projections and assumptions.
  1. Property and assets:
  • financial agreements,
  1. Intellectual property:
  • software license agreements,
  • patents and patent applications,
  1. Material agreements:
  • maintenance agreement,
  • service agreement.
  1. Customers, sales, and marketing:
  • pitch deck,
  • brandbook,
  • studies,
  • competitor analysis,
  • sales process and pipeline.
  1. Suppliers and manufacturers:
  • quality assurance agreement,
  • delivery guide.
  1. Customer and product support;
  • onboarding docs,
  • retention flow.
  1. Regulatory matters;
  • consents,
  • authorization documents.
  1. Litigation, dispute;
  • letter to client giving overview of the litigation process,
  • permission to serve proceedings outside the jurisdiction.
  1. Insurance;
  • cover notes,
  • policies,
  1. HR/employees/consultants/contractors:
  • current employees,
  • future hires,
  1. Press and PR:
  • press releases,
  • media articles,
  • media kit,
  • brand kit,
  • PR strategy,
  1. Related party transactions:
  • agreements,
  • contracts
View all documents for data rooms

What documents should not be stored in a data room? 

Even though VDRs are completely secure, some documents should not be stored there for a number of different reasons. Mostly since the data is just too sensitive and simply should be accessible to just a limited number of employees. 

But how do you define which data sets are just too sensitive? It’s true that you will hardly find universal rules or laws that could apply to all cases — there’s no such thing as a “one-size-fits-all” library of rules that should be followed to the letter by everyone. There are always exceptions and possible changes, which is a good thing. 

Yet, we suggest that there are two types of data sets that should not be uploaded to any kind of cloud storage:

  • passwords,
  • source code of digital products.

How to set up a data room

Before setup, you need to choose a data room provider that suits your company best. We created this site specifically to make the process of providers’ comparison easier: we analyze VDR providers according to different criteria to give you the whole picture. You can get acquainted with the method we use for the detailed comparison below.

how to set up a data room info graphics

Once you’ve chosen a provider, you need to adjust your processes to follow a new flow: prepare the documents for uploading to the data room; create a list of participants to share documents with; build the process of updating the documents and remove access timely.

In general, to effectively start working with VDR, you need to follow a simple algorithm of actions and avoid several pitfalls.

To doPitfalls
●   Select a VDR provider
●   Get a fixed price from the VDR vendor and access to support
●   Prepare all the documents needed for uploading to the VDR
●   Share access with appropriate users
●  Constantly update the documents in the room, as well as shared permissions
●   Uploading documents that are not ready for it (they are unassigned, outdated, etc.)
● Failing to upload strategic documents (board minutes, patent docs, etc.)

Best Way To Online Secure Documents Sharing

The times when document sharing was time-consuming and irritating process are long gone. In the era of the Internet and pervasive dissemination of gadgets, the exchange of the files is extremely easy. Commonly, no one is interested in getting a hard copy of a document: its digital version is equally (or even more) convenient to work with. Indeed, it does not take any physical space, it can be viewed on diverse devices, and a user can store a large volume of information considering a deal or a project in his pocket.

Paid virtual data rooms are utilized for secure business data sharing. These services allow businessmen to upload any types of documents containing information on their performance and to share them with selected stakeholders. Virtual data rooms proved to be useful for deal-makers regardless their aims and industries of operation: M&A deals, clinical studies, biotech licensing, fundraising, investment banking, real estate, and numerous other spheres currently benefit from the exploitation of VDRs.

Solutions
Mergers & Acquisitions

Virtual Data Rooms seem to be the most helpful in a course of M&A transactions. A decent data room simplifies the entire process of interaction between a buyer and a seller and allows both sides to feel safe. Data Rooms prove to be especially useful when it comes to due diligence process. When all the necessary data is uploaded to a virtual data room the potential buyers get an access to it and may take their time examining documents. Moreover, in a contrast to any land-based deal room, a virtual data room allows multiple visitors to work with the files simultaneously. Hence, with the help of Virtual Data Rooms, a seller has a chance to maintain a productive and smooth dialogue with several bidders concurrently and to remain sure that no files would leak, that the process would not be interrupted, and that the deal would bring maximum profit.

Corporate Document Sharing

The larger a company is – the more complex internal communication flow becomes. Virtual data rooms seem to become a solution that may simplify collaboration of employees and that may ensure data security. When the demand for the exchange of certain files arises several options might be applied. However, traditional emails proved to be too vulnerable and too easy to be attacked. In a contrast to a virtual data room, such free services as DropBox and Google Drive cannot guarantee the required level of documents protection. In addition, these vendors have no chance to offer enough customization options to ensure convenience for all the participants of the communication and data exchange process. A virtual data room may play the role of a highly protected venue where all the corporate files can be store and the exploitation of a virtual data room for document sharing guarantees information security. Hence, VDRs become a choice of numerous global corporations and small private enterprise

Legal Extranets

Law firms face similar problems as other industries do: data security and uninterrupted flow of communication are among their primary concerns. However, they deal with one more dimension of problems as the storage and exchange of information have to meet all the legal standards in order not to compromise the clients. Obviously, it is possible to build an extranet but the opening of a secure data room seems to be cheaper and more efficient. The key advantage of any virtual dataroom is secure access to data and an agile customization: the data room can be adjusted to the needs of a certain client or case. Moreover, virtual data rooms allow law firms to impose different levels of data disclosure and to maintain contacts with multiple parties within one room. With the help of a VDR, it is easy to keep all the files connected to particular cases well-organized and accessible in a short time.

Other common uses

The spheres mentioned above give a brief insight into the list of industries interested in the exploitation of virtual data rooms. And this list seems to be non-exhaustive as almost any deal-maker may find something helpful and beneficial in the use of virtual data rooms. Hence, representatives of fundraising, IPOs, real estate, biotechnological licensing, litigation, clinical studies, investment banking and many other spheres tend to pay attention to VDRs.

Who uses virtual data rooms?

Virtual data rooms may come in handy for everyone who wants to keep the data in a highly protected environment for any deal. However, there are certain industries and spheres which are more interested in secure document sharing than others. For example: investment banks, law firms, startups, etc. need to guarantee the safety of the information, eliminate risks of leakage and misuse.

  • Investment bank
  • Law firms
  • Startups
  • Life Science Projects
  • Goverment Agencies
  • Accounting
  • Consulting
  • Commercial Banking
Speed

Electronic data room can be set up in a few minutes and it would not take you long time to upload all the necessary Microsoft Office files and other documents. After this stage is complete, you may share your files with anyone you want and it would take a person a few seconds to access the file even if thousands of miles separate you. Moreover, VDRs allow you to work on several projects simultaneously and you have a chance to save a considerable amount of time.

Safety

The best providers encrypt both the repository and data transfer ways with the strongest 256-bit encryption to keep hackers away. There is two-factor authentication for users to prevent unauthorized access to the files. Also, most of data room software offers safety features like fence view for discreet reviewing, different levels of access to control the activity of users, data shredder to destroy files instantly, dynamic watermarking for documents, Antivirus Protection, customizable Document Permissions, and many other useful functions that help to share data securely during any deals.

Convenience

The data room service allows you to work with the documents whenever and wherever you want. In fact, free services provide you with the same possibility but there is a noticeable difference between VDRs and free software in terms of functionality and security level. Virtual data room software gives you more freedom of actions and facilitate your work with diverse tools such as advanced search instruments, convenient word processors, etc.

The need in secure online file sharing instrument is undeniable. The question is which one to choose. The answer depends on the needs, goals, and abilities of a potential user. After all, each type of software has its own peculiarities, advantages, and audience.

The Due Diligent Types

Legal due diligence focuses on the legal basis of an M&A transaction. It is one of the safety measures that prevent lawsuits after completing the M&A deal.

Financial due diligence (FDD) focuses on ensuring that the target business will stay on the same level or will perform better than before the deal.

Commercial due diligence focuses on the market and helps to plan the business integration following after the acquisition.

How to Find the Best Virtual Data Room Provider

Today, virtual data rooms do not belong to the luxurious services rarely used by deal-makers. Initially, VDRs were utilized by a limited group of business but, during the last decades, the situation has changed. The importance of data protection becomes more and more evident as new threats for information security emerge. However, the exploitation of data room providers is aimed not exclusively at secure data storage: these services provide users with diverse instruments that simplify the information exchange, internal and external communication.

The evident advantages immanent to secure data room services make big companies and businessmen explore the VDR industry and search for the appealing vendors. As plenty of data room service providers offer their services, such a task proves to be rather challenging. Anyway, our comprehensible algorithm of virtual data room comparison should simplify the selection of a virtual data room provider.

1. Check out what the market can offer you

Make a market research and look through the existing virtual data rooms. First of all, you should evaluate the reputation of the data room services. Expert virtual data room reviews and feedback could help you understand if certain online data room meets your demands and expectations. It is always advisable to cooperate with those providers who have an excellent reputation. For sure, it does not give you 100% guarantee that your data would not be compromised somehow but the chances to experience leakage or breach are miserable.

2. Look through the safety guarantees and tools offered by data rooms

The functionality is a dimension defining the reliability of virtual data room services. Certain industry standards exist and a set of selected functions is expected to be present in the VDR you use. Document security options are among the trait to be evaluated first. You should make sure the protection of files is guaranteed on numerous levels owing to diverse instruments such as encryption, virus scanning, two-step user verification, watermarks, etc. If you suspect the protection system to be of not the highest quality then you should better reconsider your choice and look for a different room.

Also, pay attention to other functions offered by a data room provider. For instance, you might need flexible access settings and an efficient Q&A section for communication with your employees, partners, and customers. Or you might plan to exploit the data room for multiple projects: permission groups option would come in handy. Regular activity tracking would help you monitor what the users do inside virtual data room. Advanced search tools and multiple filters would simplify the work process and let you deal with files quicker. A convenient design and the ability to customize it should be provided. Hence, you should look through the features inherent to certain VDRs, evaluate your own needs, and choose the room that satisfies your requirements.

3. Make comparison

Before purchasing a subscription you should better test the service on your own. Usually, trial versions of VDRs are available for free. It means you’ve got a chance to check out the functionality and convenience of the VDR. You are not supposed to test the entire list services you found as it would be enough to select 3-5 most appealing platforms. After a few days of exploitation, you should be ready to name your favorite service. Also, pay attention to prices as two equally equipped and convenient venues may vary in their cost.

More reasons to use virtual data rooms:

Businesses around the world have to keep up with rapidly changing times. Within only one generation, companies had to adopt utterly new marketing channels and approaches, figure out and implement technologies and compete with the whole globe. That’s something business owners didn’t have to worry about even a couple of decades ago.

And companies in the United States face even more specific and unique challenges. But fortunately, they can be solved with the help of virtual data room software.

It’s hard to predict the future

In the US, things continuously change for businesses. And it is tough to predict anything from market trends to customer needs as the economic climate changes quickly. Electronic data room providers give companies a chance to adapt to changes almost instantly making the corporate data easy to access.

The management of finances

Small and medium businesses have to handle an enormous number of finance-related processes like reducing costs, financing, profit margins, cash flow, and so on. Of course, all these activities generate numerous documents and sometimes require a third-party specialist to join the processes. With virtual data room solutions, it’s not an issue. Simply upload the files to the repository and invite the financial consultant to the workspace.

The monitoring of the performance

Since the US economic climate changes all the time, it is vital to control how well does the company adapt to new conditions. The best virtual data rooms offer detailed analytics that will help business owners to control the performance of their companies in the real-time mode. Also, reports will give useful insights that improve decision-making.

Shifting regulations

As the market shifts and technologies evolve, regulations follow the changes. And a company needs to update its documentation accordingly. It is way easier to do with the help of online data room providers. Once your corporate data is online, you can access and edit it whenever it is needed.

Hiring new specialists

Modern US businesses need to have way more extensive staff than a couple of decades ago. But each new employee requires someone to introduce them to the processes and documentation. Using virtual data room service providers, you can simply give new specialist access to the repository and let them study everything on their own.

The age of big data

The virtual data room pricing is affordable, even for small businesses. And the costs you invest in this software will be worth it because the VDR provider will keep all your numerous documents safe and organized. Therefore, you will never experience a data leak that demands a lot of money or any other predicament that happens due to poorly managed data.

24/7 service

All the best virtual data rooms offer round-the-clock support. And that’s a much-needed service because sometimes you need help immediately, especially if you’re in the middle of the deal. If you compare virtual data rooms, you will notice that most of them are US-based. Thus, you won’t have any issues with the support team – they will know all the nuances the US business might face.