The virtual data room market is growing at a CAGR of 15% and is projected to reach $5.5 billion by 2030. The thing is, traditional alternatives like physical data rooms or Google Drive no longer meet the demands for confidentiality and streamlined document management. That’s why virtual data rooms are taking over.
Let’s explore what advantages a virtual data room has and which VDR providers are best for specific use cases.
What is a virtual data room?
A virtual data room (VDR) is a secure online repository for storing and sharing sensitive data. It’s typically used during various business transactions like M&A or IPOs, where the secure exchange of confidential documents is crucial.
A virtual data room is also referred to as an electronic data room, a digital data room, an online data room, and a virtual deal room.
VDRs have substituted physical data rooms and there are two key reasons for that:
- Enhanced security. Threat actors are finding new ways to steal information. It has even been reported that some criminals resorted to old-fashioned dumpster diving and stole taxpayer data. Data breach risks are as high as never before and virtual data rooms, unlike physical data rooms, offer enough security features to protect sensitive data.
- Cost and time savings. Paper consumption grows by about 22% each year, meaning paper costs double every 3 years. Furthermore, the rental of physical document storage spaces, in-person meetings, courier services, and office supplies cost thousands of dollars a year. VDRs eliminate the need for all that, offering a more affordable solution.
Why do companies use data rooms?
Let’s explore some of the most important use cases for VDRs:
- M&A. An M&A deal is a complex and time-consuming process. To simplify it, meet all due dates, and successfully complete the transaction, businesses use data rooms.
- Due diligence. Mergers, acquisitions, and other financial transactions require a due diligence process that involves reviewing hundreds if not thousands of documents. A VDR’s features allow companies to complete this process with minimal effort, time, and cost.
- Fundraising. Attracting investors is a key aspect of a startup’s growth. Leveraging a VDR enhances this process by providing a secure platform for sharing financial information.
- IPOs. Companies going public are required to disclose sensitive information while sticking to strict regulatory compliance, which they can do confidentially with a data room.
- Bankruptcy and restructuring. In case of bankruptcy or corporate restructuring, VDRs provide a secure platform for stakeholders, such as creditors and legal advisors, to access sensitive financial and legal information.
- Strategic partnerships. VDRs help businesses seeking strategic partnerships by making collaboration and negotiation more efficient, enhancing communication, and building trust.
- Tendering procedures. In procurement and tendering processes, VDRs enable secure sharing of relevant documents, enhance transparency, and streamline a bidding process.
What are the main data room benefits?
Explore key data room benefits and discover which virtual data room providers excel in delivering these advantages.
1. Top-notch security
To ensure confidential information is strongly protected, data room providers offer document security features:
- Build-in redaction. The tool allows users to selectively hide sensitive information within documents. With redaction, organizations also ensure compliance with the General Data Protection Regulation (GDPR).
- Fence view. By implementing the feature, a user can only see a part of a document. The rest is hidden with a sliding barred screen. This prevents screenshot-taking and protects confidential data from unauthorized viewing.
- Dynamic watermarks. A watermark is a text overlaid on a document, indicating details about who accessed the file, when, and from where. This feature simplifies document tracing, enhances transparency, and mitigates security risks by providing a clear history of document access.
To address security concerns associated with confidential information access, VDRs offer the following features:
- Two-factor authentication. In addition to entering a password, users must undergo an extra verification step, typically involving a code sent to their mobile.
- Granular user permissions. The feature enables a data room administrator to define specific access levels, ensuring restricted access for individual users based on their roles or responsibilities.
- Time and IP access restrictions. Administrators can set time and IP-based access restrictions, specifying when and from which locations users can access information stored within a data room.
Recommended providers:
- iDeals — the leading provider in terms of data protection. It’s ISO27001 certified and SOC2 compliant, ensuring international security standards. Also, it ensures robust protection of data centers, employing biometric entry authentication and multiple layers of surveillance.
- Datasite — employs advanced encryption for data in transit and at rest, implements strict data privacy policies, and initiates a thorough purging process for project files 30 days after completion.
- Intralinks — the provider offers AI-assisted redaction, able to automatically identify sensitive content within files.
2. Real-time reporting
A report can provide you with a summary of what is happening within a data room. In particular, it shows document views, downloads, and user interactions. Having instant feedback on user engagement and document popularity is a great advantage as it helps:
- facilitate decision-making based on user behavior
- enhance security through detailed audit trails
- optimize document relevance
Recommended providers:
- iDeals — a leading provider with advanced reporting, offering full audit trails and an intuitive activity dashboard for real-time updates. Its color-coded reports and detailed tracking of user behavior ensure effective decision-making and compliance.
- Donnelley Venue — provides shareholder reporting software designed to produce annual, semi-annual, and ad hoc reports for investment companies.
- Sharevault — offers detailed information tracking, heat map visualizations, and scheduled reports.
3. Simultaneous access for multiple parties
Unlike physical data rooms that require participants to be in the same location, a virtual data room provides simultaneous access to multiple parties regardless of where they are. Thus, investors, legal teams, financial specialists, and other stakeholders can review and collaborate on documents concurrently, which significantly saves time.
Moreover, many providers offer mobile apps that give even more flexibility and allow users to stay up-to-date on project matters even on the go.
Recommended providers:
- iDeals — access the data room from any device and platform, including Windows, Apple iOS, and Android. You can even synchronize the content of your desktop with your data room, which gives even more flexibility and accessibility.
- Ansarada — known for its user-friendly platform that users can easily and securely access from any device.
4. Ability to upload large data volumes
Complex transactions, like M&A, involve processing large volumes of financial records, legal documents, and due diligence materials. Virtual data rooms not only enable the secure storage and sharing of gigabytes of data but also offer flexible storage options tailored to different needs, ranging from 1 or 5 GB to 1 TB or unlimited storage.
Moreover, tools like bulk upload or a drag-and-drop feature significantly simplify the uploading possess.
Recommended providers:
- iDeals — offers various storage options. There’s also an ability to distribute storage allotment between active data rooms.
- OneHub — offers from 1 TB to unlimited storage.
- Securedocs — offers unlimited storage for all packages.
5. Customization
Companies can tailor the platform’s appearance to align with their brand identity. In particular, users can upload logos, adjust theme colors, and personalize invitation emails, creating a workspace that feels familiar.
Users can also tailor Q&A sections, customizing the communication flow and automatically assigning questions to the right users.
Recommended providers:
- iDeals — offers extensive customization options, allowing companies to personalize the platform’s appearance, watermarks, language settings, terms of access, NDA, and confidentiality agreements.
- OneHub — offers a fully white-labeled client portal that can be tailored with your logo and brand colors.
6. User-friendliness
The majority of virtual data room solutions are user-friendly and have an intuitive interface, ensuring accessibility for users of all technical backgrounds. Besides, providers have educational centers with guidance on how to use and benefit from a data room.
To improve user experience, providers offer tools such as viewing documents in their native format without plugins. Additionally, a scroll-view feature allows users to seamlessly navigate to the next document within a folder directly from the document they are currently reviewing.
Recommended providers:
- iDeals — no plugins or Java requirements for viewing documents, single sign-on to access all projects with one login and password, mobile user interface, and multilingual access in 14 languages.
- Dealroom — offers a straightforward and intuitive solution that even less tech-savvy users can easily adopt.
7. Premium support
With a virtual data room, users get top-notch, personalized assistance. Whether it’s help navigating the platform, resolving issues, or answering questions, users have dedicated support at their fingertips.
This level of service ensures a smooth experience, saving time and reducing frustration. No data room alternative offers this kind of support, making VDRs a more user-friendly and reliable choice.
Recommended providers:
- iDeals — a 30-day free trial period, live training with a dedicated expert, a Help Center with guides, and exceptional 24/7 client support with a 25-second phone and 30-second chat response time.
- Donnelley Venue — 24/7 technical support functioning worldwide and offering services via email, phone, and chat.
What the the VDRs benefits comparing to the other tools and software?
Let’s compare how a virtual data room is different from Google Drive and physical data storage.
| Virtual data rooms | Google Drive | Physical data room | |
| Exceptional security | Yes ✅ | Questionable ❓ | No ❌ |
| Real-time reporting | Yes ✅ | No ❌ | No ❌ |
| Access to multiple parties | Yes ✅ | Yes ✅ | Limited ❌ |
| Large volumes of data | Yes ✅ | Limited ❌ | Limited ❌ |
| Customization | Yes ✅ | Limited ❌ | No ❌ |
| Mobile devices support | Yes ✅ | Yes ✅ | No ❌ |
| 24/7 support | Yes ✅ | Limited ❌ | No ❌ |
Considering the limited functionality provided by Google Drive, it’s only recommended for individual users seeking to store and share personal, not confidential, data. Meanwhile, physical data rooms, with their geographical limitations and higher costs, have become not practical and can hardly be used today.
Consequently, virtual data rooms have become the most cost-effective and efficient solution for modern businesses completing transactions.
Let’s summarize:
- A virtual data room is a secure online platform used for the storage and exchange of sensitive documents during business transactions.
- Key benefits of a data room include advanced security, real-time reporting, simultaneous access, efficient handling of large data volumes, customization, user-friendliness, and premium support.
- Unlike Google Drive’s limited functionality and physical data rooms’ impracticality, VDRs serve as the cost-effective and efficient choice for businesses completing transactions today.
To select the optimal VDR provider, begin by evaluating your specific business requirements and establishing a budget. Shortlist 2-5 providers that align with your needs, book demos, and utilize trial periods to thoroughly test each platform.