Ideals logo

Overall rating:

The score is calculated as an average, derived from evaluations and the number of reviews on external review platforms.

4.9/5

Excellent

Industry-leading customer support and advanced data management tools
Key features:
  • Project setup in less than 15 minutes
  • Storage-based pricing for clear project budgeting
  • In-app live chat support 24/7, including holidays and weekends
securedocs data room

Overall rating:

The score is calculated as an average, derived from evaluations and the number of reviews on external review platforms.

4.8/5

Excellent

Securedocs

Free trial: 14 days

Unlimited users, documents, and storage for all packages
Key features:
  • Built-in electronic signatures and templates
  • Granular user permissions and activity logs
  • Q&A workflows with Excel export
onehub data room

Overall rating:

The score is calculated as an average, derived from evaluations and the number of reviews on external review platforms.

4.5/5

Good

Onehub

Free trial: 30 days

Easy-to-use solution with straightforward pricing
Key features:
  • FTP getaway for mass uploads
  • Document previews supporting popular file formats
  • Comments and tasks for collaboration
highq data room

Overall rating:

The score is calculated as an average, derived from evaluations and the number of reviews on external review platforms.

4.4/5

Good

HighQ

Free trial: Yes

Time-saving features to automate workflow and data management
Key features:
  • Q&A workflows for bidder interaction
  • Custom data room audits
  • Custom user invitation letters
venue data room

Overall rating:

The score is calculated as an average, derived from evaluations and the number of reviews on external review platforms.

4.7/5

Excellent

DFIN

Free trial: 14 days

Insightful analytics on buyer behavior to close deals fast
Key features:
  • AI contract analysis for due diligence
  • Automatic PII redaction in uploaded documents
  • Multi-deal management and project reporting

In 2024, the global average cost of a data breach reached $4.88 million, a 10% increase from the previous year and the highest ever recorded, according to IBM. This highlights how important secure data storage has become. 

As cyberattacks continue to rise, businesses are increasingly looking for reliable ways to protect sensitive information. In response, virtual data rooms (VDRs) were created to provide a secure solution for high-risk transactions. But how are they different from other file sharing services like Google Drive or Dropbox? 

In this article, we’ll explore the key differences between cloud storage solutions, helping you determine which is best for securing sensitive data.

Understanding virtual data rooms

A virtual data room (VDR) is a secure online platform used for storing and sharing sensitive documents, typically in high-stakes transactions. VDRs offer advanced security features such as data encryption, watermarks, and granular access controls to protect confidential information.

VDRs are widely used in cases where secure data sharing is essential. For example:

  • Legal sector. Law firms store case files, contracts, and confidential client information while ensuring regulatory compliance and security.
  • Financial institutions. Banks and investment firms use VDRs for audits, fundraising, and secure file sharing during transactions.
  • Private equity and venture capital. Firms use VDRs to evaluate investment opportunities and securely exchange financial reports with stakeholders.

What is file sharing?

File sharing solutions enable users to securely store, access, and share digital files over the internet. These range from traditional methods like email attachments and FTP (file transfer protocol) to modern cloud-based platforms such as Google Drive, Dropbox, and OneDrive. 

While traditional methods are commonly used, cloud storage services provide more secure and efficient ways to manage and share data, especially for businesses with advanced needs.

Cloud-based solutions are user-friendly, cost-effective, and widely adopted, allowing teams to collaborate in real time from different locations. They simplify file management and reduce the learning curve for users, making them ideal for both personal and business use.

Common modes of file sharing are:

  • File transfer protocol (FTP). Transfers files between systems within a network.
  • Peer-to-peer (P2P) networks. Enables direct file sharing between users.
  • Removable storage media. Uses physical devices like USB drives to transfer files.
  • Online file sharing platforms. Cloud platforms like Google Drive, Dropbox, and OneDrive for remote file storage and sharing.

Key differences between data rooms and different file sharing solutions

Here’s a comparison of data rooms and file-sharing solutions to highlight their key features and advantages.

FeaturesVirtual data roomsFile sharing solutions
PurposeSecure document sharing for sensitive information, often in mergers, acquisitions, or legal processes.General document sharing for everyday use.
Data securityEnhanced security features, like high-level encryption, multi-factor authentication, and strict user access control for sensitive documents.Basic encryption and limited security features, often lacking advanced protections like encryption at rest.
User management and permissionsGranular control over who can view, edit, or download files, allowing precise access management.Simple user access controls, typically offering broader permissions without detailed restrictions.
File managementPowerful tools for organizing, categorizing, and indexing files, making it easy to manage large volumes of documents.Simple file organization with fewer tools for managing a large number of files efficiently.
CollaborationSecure collaboration tools with features like commenting, shared workspaces, and Q&A functionalities.Basic collaboration tools that may not offer the same level of security or real-time collaboration.
Audit trails and reportingComprehensive audit trails to track who accessed files, what actions were taken, and when.Limited or no audit trail features, lacking detailed user activity tracking.
Compliance featuresComplies with industry standards like GDPR, SOC 2, and HIPAA.Compliance varies, may not meet strict standards for sensitive data.
Storage capacityLarge storage space options tailored for handling extensive data securely, often with customizable tiers.Varies widely in capacity, usually offering less storage and fewer customization options.
CustomizationCustom branding and interface options for a tailored experience.Limited customization, mainly for basic branding.
IntegrationIntegrates with CRMs, legal, and project management tools.Integrates with common productivity tools like Google Drive and Dropbox.
Additional featuresSome data rooms include AI-powered tools and other features to enhance security and document management.Few additional features beyond basic sharing and storage capabilities.
ScalabilityDesigned for large-scale, complex data-sharing needs.Best for personal or small business use, not suited for large transactions.
CostHigher cost due to specialized security and features.Typically lower cost or free for basic use.

Therefore, if your business requires advanced security and compliance, secure data rooms are the best choice, but for simple file sharing, basic solutions might suffice.

When should you choose a data room over file sharing?

virtual data room vs file sharing solutions

Use a data room if:

  1. You’re involved in M&A transactions, fundraising, or legal processes and need to share financial and legal documents with multiple stakeholders securely.
  1. Your industry has strict compliance requirements (finance, healthcare, legal) and must follow data privacy regulations like GDPR or HIPAA.
  1. You handle highly confidential documents, such as trade secrets, intellectual property, or financial reports.
  1. You need advanced security measures like encryption, multi-factor authentication, watermarking, and detailed access permissions.

Use a file-sharing solution if:

  1. You need efficient file sharing for everyday collaboration, like marketing materials, presentations, or team projects.
  1. You work with non-sensitive documents that don’t require additional security measures.
  1. Your organization doesn’t have regulatory requirements for data storage options or compliance-heavy documentation.

Unlike general cloud storage services, VDRs provide the security and control needed for handling sensitive business transactions. If your documents require strict protection and compliance, a data room is the best choice. Otherwise, for simple collaboration, standard file-sharing tools may be sufficient.

Security risks of using file sharing for sensitive documents

One of the biggest risks of file sharing is unauthorized access to confidential data. If files are not properly secured, hackers or even employees without permission can gain access, leading to data leaks or financial loss. 

For example, in 2019, a hacker, who was a former Amazon Web Services (AWS) employee, found a security flaw in Capital One’s cloud storage. This flaw allowed the hacker to access sensitive data, including credit card applications, transaction details, and customer records. Over 106 million customers were affected by the breach.

Another risk is malware and phishing attacks. In 2020, the phishing attack targeting the World Health Organization (WHO) became a major global security concern. Cybercriminals sent phishing emails that appeared to be from the WHO, asking people to click on links that would download malware. This malware could steal personal and financial information.

To strengthen data protection, organizations should use encrypted connections, multi-factor authentication, and strict access controls. These steps help protect data from cyber threats while ensuring secure file sharing.

How to transition from file sharing to a virtual data room

Switching from traditional file sharing to a virtual data room software can improve security, file access, and data management. Follow these steps for a smooth transition:

  1. Assess your current system. Identify how files are currently stored and shared. Check for security gaps and inefficiencies. Determine what features your business needs in a VDR.
  1. Choose a virtual data room provider. Compare VDR providers based on security, ease of use, and pricing. Look for essential features like user permissions, encryption, and audit logs. Consider customer support and integration with existing tools.
  1. Plan the migration. Set a timeline for migration to avoid disruption. Assign team roles for managing the transition. Communicate the change to all stakeholders.
  1. Organize and prepare your files. Clean up old and redundant files. Create an organized folder structure to ensure easy navigation.
  1. Set up security measures. Configure user permissions to control file access. Ensure only authorized users can view, edit, or download sensitive data.
  1. Upload data to the VDR. Begin with the most critical documents. Use bulk upload features to save time. Apply user permissions based on roles and access levels.
  1. Train employees. Provide hands-on training sessions to ensure a smooth adoption of the VDR software. Create an internal guide or FAQ to address common questions.
  1. Monitor and optimize. Regularly review access logs for security. Keep files updated and well-organized. Adjust permissions and settings as needed.

Key takeaways

  • A virtual data room (VDR) is a secure online platform that allows businesses to access files and share documents simultaneously with multiple users, ensuring smooth collaboration. 
  • VDRs are commonly used in industries such as finance, legal, healthcare, and real estate, where secure data access is critical.
  • Key differences between VDRs and file-sharing tools include security, user permissions, audit trails, compliance features, and scalability.
  • Businesses should choose a VDR over file-sharing solutions when dealing with mergers and acquisitions, legal processes, or confidential financial transactions.
  • File-sharing tools work well for non-sensitive data, marketing materials, and general collaboration but may expose businesses to security risks.
  • Unauthorized access, data breaches, and phishing attacks are common risks of using basic file-sharing solutions for sensitive documents.