Virtual data rooms were sort of underrated business solutions for about a decade, but the business fraternity has finally realized the unparalleled importance of dataroom software. What was considered a facilitation tool for mergers and acquisitions is now a primary choice for data management in almost every business sector.
If you have not heard about this cost-cutting, high-end technology, then this guide is tailor-made for you. You will explore what is a data room, what it is used for, and what its benefits are.
What is virtual data room software?
Virtual data rooms are cloud-based business solutions used for storing, sharing, and managing confidential or regular-use business documents. Businesses use it as a deal room for undertaking complex transactions like M&As, auditing, fundraising, and initial public offerings.
What’s more, data rooms also act as an online workplace where business teams, freelancers, service providers, and independent contractors can collaborate and communicate safely.
Why are virtual data rooms different from other data storage platforms?
There are hundreds of free online data storage platforms available, but data rooms stand out. Here is why:
1. Security
Virtual data rooms are cloud repositories hosted by certified dataroom providers. These vendors employ numerous layers of security at different levels in the VDR. Most importantly, a certified vendor complies with basic-to-advanced security standards like SOC2, GDPR, and ISO-27001.
2. Easy data access
An electronic data room simplifies the data access process. If you have used free file sharing too, you would have experienced difficulties like downloading a ".exe" file, installing a program, and then using the same desktop/computer to access it. Virtual data rooms give you the freedom of accessing your data from anywhere, using any device, such as a laptop, smartphone, tablet, etc.
3. No third-party involvement
Free data storage platforms often work in collaboration with third parties, which increases the chances of data leaks. However, virtual data rooms make sure your data is accessible only to you or authorized users.
What is a virtual data room used for?
A virtual data room is a business solution for all types of industries. Here are some common use cases when businesses employ online data room services.
1. Centralized data storage
Businesses from different industries use digital data rooms as primary data storage options. Virtual data rooms give you the luxury of storing your business data on a centralized platform. That means you don't have to protect your business data on multiple fronts.
2. M&A Due diligence
Mergers and acquisitions are the most common use cases of virtual data rooms. Corporations and enterprises use a data room due diligence for sharing and managing huge volumes of data in M&A transactions. VDRs help connect sellers and buyers on a secure platform.
3. Consultancy
Consultants use virtual data rooms to maintain confidentiality and privacy during their services. Clients trust consultants with their confidential data, and data rooms help protect that data from any sort of threats.
4. Secure file sharing
A digital data room makes data sharing easy and secure. Project management teams and professionals share business data such as files, documents, presentations, audio, and videos through virtual data rooms.
5. Board communications
Data rooms are immensely used as secure communication channels for board communications as well. Data room management can add and remove members in VDR temporarily. Virtual data rooms have built-in communication tools like private messaging, videoconferencing, group discussions, Q&A tools, etc.
6. Strategic partnerships
Businesses can use virtual data rooms for file sharing and secure communication during strategic partnerships and joint ventures. Data rooms give you complete control over your business files, and you get to choose who can access your data and to what extent.
7. Fundraising
Fundraising is one of the riskiest business operations because a firm or corporation invites investors and presents its highly confidential data (which can be misused) to them. Data rooms make sure that fundraisers can protect their trade secrets and important business files during such transactions.
8. Initial public offerings (IPO)
Companies going public for fundraising are legally obligated to make all their necessary documents public. Data room software helps present data in a secure and organized form, and companies can answer investors' queries in live Q&A sessions or through direct messaging.
What are the benefits of using virtual data rooms?
Data rooms streamline data sharing and management and provide secure communication channels. Here are some top benefits of virtual data rooms:
* Maximum data protection against internal and external threats
* Secure communication
* Centralized data storage and document management
* Remote and easy access to business data
* Secure platforms for financial and business transactions
* Safe data sharing with multiple parties simultaneously
* Complete control over data access and sharing
* Reduction in administrative expenses
Virtual data room pricing models
Data room vendors charge differently for their services. Here are some common data room pricing models:
* Per-user pricing model charges based on every user added to the VDR.
* Per-page pricing model charges based on the total number of pages uploaded in the data room.
* Flat monthly pricing model charges a fixed amount for a predefined number of users, projects, and storage limit.
* Storage-based pricing model charges based on how much storage is used.
Final words
Virtual data rooms are safe, remotely accessible data repositories and virtual workspaces used by businesses and professionals from different industries. Data rooms are useful in consultancy services, fundraising, IPOs, mergers, acquisitions, board communications, joint ventures, and strategic partnerships. They are easy to use, cost-effective, and highly reliable platforms.
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