What are Virtual Data Rooms?

Data Rooms were created to ensure that sensitive corporate documents weren’t shared. They would be physical rooms, typically in a law office, where documents pertinent to a M&A deal would be kept, hence the term ‘Data Room’. People involved in the deal could review the documents in the room but they couldn’t be removed from the room.

Today in the digital world these Data “Rooms” are now virtual, hence the term Virtual Data Room. Although they are modernized they serve the same purpose, to secure sensitive documents. Products like Orangedox provide features to ensure that documents can be digitally delivered to room participants but can’t be shared with others.

Key Takeaways

1. Virtual data rooms serve as protected online hubs where multiple stakeholders can securely access and manage sensitive documents.
2. They're widely adopted for activities like mergers and acquisitions, audits, and collaborative business deals.
3. VDRs offer a more secure, efficient, and scalable alternative to traditional physical data rooms.
4. Built-in restrictions such as disabling downloads, forwarding, or printing help maintain confidentiality and prevent unauthorized sharing.

Understanding Virtual Data Rooms

1. VDRs have largely replaced physical data rooms due to globalization, cost-effectiveness, and enhanced accessibility.
2. Used by organizations needing secure collaboration, such as during funding rounds, IPOs, audits, and business partnerships.
3. As cybersecurity becomes more critical, VDRs continue to evolve with stronger protections and better collaboration tools.

Uses of Virtual Data Rooms

1. Due Diligence During Funding Round: Sharing of confidential data with potential investors when looking for funding.
2. Mergers and Acquisitions (M&A): Secure space for due diligence and sharing confidential data between buyers and sellers.
3. Partnerships and Joint Ventures: Central location to manage contracts and operational documents.
4. Auditing: Enables auditors, lawyers, and regulators to access documents efficiently and securely.
5. Initial Public Offerings (IPOs): Manage large volumes of sensitive documents with tiered access levels and audit trails.

What’s Included with a Virtual Data Room?

Virtual data rooms offer a secure and centralized location for document storage and sharing, typically equipped with robust features to ensure data integrity and access control:

Security

What truly protects your sensitive documents is ensuring only the intended recipient accesses them. Orangedox keeps your documents read-only and verifies each recipient using device-level security. This prevents people from forwarding the files to third parties, ensuring your documents get viewed by the right people.

Access Controls

Ensures that only authorized users can access the data room; admins can enable or revoke access at any time.

Auditing and Tracking

Logs every user action, including document views, downloads, and logins, helping maintain compliance and transparency.

Integration with Content Management Systems

Most companies typically employ a cloud CMS (content management system) to store their files, services like Google Drive, Dropbox etc. Virtual data room products typically will integrate with these services to help reduce document duplication and simplify the workflow when sharing documents using a virtual data room.

Customization

Virtual data rooms usually allow administrators to customize the look and feel of their data rooms, providing a level of professionalism and trust with their participants. This goes beyond just aesthetics as it's important in reinforcing brand identity and trust. A professionally branded data room, complete with your company’s logo, colors & the brand’s messaging gives your participants confidence that they’re dealing with a reputable & professional company. This is especially important in processes like due diligence, fundraising or M&A where the first impressions really matter.

Document Signing

Most data rooms are used to supply supporting confidential information about corporate transactions, M&A, private equity or venture capital transactions. Document signing is a key part of these transactions and is usually included with virtual data room products.

Real-time Notifications

Data rooms like Orangedox offer both in-app & email notifications whenever someone has accessed the shared files. This helps a lot to tailor your pitch as well as make smarter & faster decisions.

How do I pick the best secure data room?

If you're thinking about employing a virtual data room for your company, you should pick one that fits your requirements and budget. Here are a few things to think about while choosing a virtual data room:

1. Ensure that the platform you chose has robust security features such as device-level security which prevents forwarding to third parties and access controls after you’ve send the documents.
2. Consider the features and tools you require, such as audit logging, document tracking, integrations, document signing and custom branding.
3. Compare the prices of various virtual data room alternatives to discover one that works within your budget.
4. Look for a platform that is simple to use and navigate so that your team can access and exchange information quickly and efficiently.
5. Make sure that your virtual data room integrates with the tools that you currently use, like Google Drive or Dropbox

Conclusion

Virtual data rooms are an invaluable resource for businesses that need to securely store and share sensitive documents and information. Lots of data room providers have similar features, though pricing does vary wildly. Make sure to weigh the features you’re getting vs the cost of the platform.

Start your 14-day free trial of Orangedox Virtual Data Rooms and see what Orangedox can do for your business.