What is a Virtual Data Room and What Does It Offer?
Technology has significantly impacted the business world, showing new ways of secure data handling. Virtual data room services emerged as a way to support that.
What is a virtual data room?
A virtual data room is a secure online file storage that can be used in M&A deals, due diligence processes, and many other activities that involve a secure, problem-free flow of documents.
Online data rooms are the digital counterpart to physical data rooms. However, virtual data rooms are a more cost-effective solution, and the documents held in the cloud storage aren’t suspect to all the limitations a physical form factor includes. It also increases the safety of those documents as they are protected by both an algorithmic and personal security protocol. This digital solution is slowly replacing the old way of document handling in the world of dealmaking.
This digital environment encourages an exchange of information, communication about the data stored in the space, and alignment on the pieces that still need to be uploaded into the data room virtual space. Without the need to physically meet, all of those activities can be done from any place in the world. This is the true strength of an electronic data room — unlimited accessibility without a security compromise.
Here are some of the uses of the solution proposed by electronic data room providers.
Uses of a virtual data room
Virtual data room solutions are tools that have practical use in a variety of industries. Secure data rooms come especially handy in the following use cases.
An M&A deal involves a lot of moving parts, and a digital data room can assist in the organization of all of the paperwork involved in that process.
Before the deal making even begins, all of the documentation needs to be put into the secure sharing space. You can monitor who enters which folders on the virtual drive, and how much time they spend on the documentation in there.
Any problems with the assignments and instances of wasting time can be easily noticed and done away with:
- Helping on each step of the way. When the other side of the deal enters the online file repository, they can look through the documents, and give comments, and suggestions about the filled out paperwork. The due diligence process involves a lot of moving pieces, and a tool in the form of virtual data room solutions can assist you. After this is completed, the new files are put into the space, and the financial transactions are concluded.
- Post-merger assistance. Even after the deal is done, there are still activities that involve active use of the online data room. Post-merger integration can be aided by the collaboration tools that are present in the online file repository, and the upcoming issues can be addressed in real-time by both sides of the deal. In contrast to physical data rooms, virtual data rooms invite everyone involved in the deal and aren’t subject to physical limitations.
This online file repository is also quite useful when it comes to collaboration between companies. When two sides want to cooperate to create a new product, a new drug, like was in the case of the COVID vaccine, they usually would resort to a virtual data room.
- Permission settings. The documentation stored there is secure from any intruders, and only the people with the required permissions are allowed to see the data within the data room. Each individual that has been invited to the space can be monitored via reports, and they can restrict access if they notice any suspicious activity.
- Tools fostering cooperation. People collaborating on the project might also leave comments, and give suggestions for changes in the documentation from within the virtual environment. And if the person who has originally submitted the file isn’t online, they get a notification on their email that something has been changed.
- Data backup. After the creation of the product is completed, there are files in the virtual data room solutions that need to be deleted. If during the preparation process of the product some files consist of sensitive documents that aren’t directly connected to the project, they may also be redacted in the space, which allows for greater confidentiality.
There are instances where a company needs to be audited. This means that the people responsible for all of the documentation in the business need to assemble the files and share them all with the auditors to prove that they have not infringed on any laws or agreements.
- Better organization. The virtual data room space is used for its organizational properties. Following a simple folder structure to organize all of the documents is usually a good way to start the whole process. A clear naming convention combined with a tagging system leads to greater folder brevity.
- Access control. You invite the auditors into the space by giving them appropriate permission settings. They can go through all of the files, and comment on the unclear parts, and the files that are still missing. The Q&A functionality allows the people in the virtual data room space to ask questions about information stored there.
- Built-in editor. Some of the changes might be done directly in the online file repository space. The built-in editor of files gives you the ability to change the content of the files, and add the necessary data. And you can keep track of the edits because the previous versions of the files should also be available in the virtual data room space.
There are not many industries that are as heavily regulated as the one that deals with law the most directly. Lawyers use secure online file repositories to store important case files, and always have immediate access to them wherever they are. And with the help of a virtual data room, they can do that on a variety of devices.
- Use of templates. The files they put into the virtual data room are also organized according to a pre-selected structure that improves the workflow of the caseload. And if a virtual data room is powered by an AI it gives the lawyers new organizational tips.
- Cooperation with other lawyers. The case might also involve collaboration with other lawyers who also could request access to the files inside of the virtual data room solutions. If they have any doubts about the case files, they can let the host know about the activities that still need to be done. And if there is a lack of files that adhere to the regulatory guidelines, they can be uploaded by the other lawyers.
- Safe space for sharing. The online file repository can also be used to confer with teams on the opposite side of the case. If there is some detail that is important to this case, they can be safely shared within the virtual data room environment.
If a company wants to go public, the people behind the business need to present a lot of information. Copious amounts of paperwork are connected to IPOs and the whole preparation process is oftentimes streamlined by the use of a virtual data room.
- File management help. Starting the whole procedure, all the departments submit important paperwork to the space, and thanks to the proposed folder structure, they can organize them much more easily. As physical documents might be misplaced, or destroyed due to mismanagement, this hardly ever happens in the virtual data room.
- Versions log. A couple of versions of the same document can be stored in the space, and if the new edits suggested by people browsing the virtual data room space do not lead to improved brevity of the documentation, it is just as easy to revert back to old versions.
- Redaction. The files in the space can also be redacted, so the confidential documents not connected to the IPO might just be obscured. If there are some sensitive documents that require a timely deletion, they can also be scheduled to auto-delete after a set time.
What functions do virtual data rooms offer?
As mentioned above, many industries make use of the features a virtual data room offers. This functionality manifests itself in a variety of ways across different virtual data room providers, but there are some features that are universal for most online data rooms out on the market.
Virtual data rooms are built with security in mind. Leveraging the newest security protocols, and safety features known as online banking, online file repositories are one of the safest environments to both store and share files. The providers follow various rules and regulations to make sure that the place for confidential documents is secure.
Thanks to elaborate permission settings, only people with appropriate access settings are allowed to view the documents held in that space. It is this combination of security algorithms and the human factor that makes the virtual data room a secure data archive.
The online file repository is also known for supporting collaborative efforts. People who work on the files held in a virtual data room need to communicate with each other, and they can do so in a couple of different ways.
One of them involves leaving a comment or a question on the document. The tagged individual or the person who is involved in the editing of that document will get an email notification that something was done to the file.
For a more immediate reaction, the chat functionality will suffice. With it, you can directly reach out to the other person in the data room service, and discuss the details in real-time. This cuts the time it takes to confer with other members of the team and improves the workflow of file management. This is crucial, especially in a due diligence process.
There might also be an instance where someone has altered the file directly. Any such changes will also spark a notification, and the person responsible for the document will be able to approve or undo the modifications.
Spaces created for data storage encourage a clear folder structure and organized data management. This is why virtual data rooms often include templates dedicated to a certain purpose like M&A deals or a due diligence process. However, those structures might also be improved by the use of AI.
AI in virtual data rooms becomes more and more popular, as it learns the behavior of its users, and can suggest additional tweaks to the file management strategy. Alongside a clear folder tree, an easy-to-grasp naming strategy, and a tag system, the organization of files in the online file repository becomes straightforward. More and more online data room providers involve this type of solution in their cloud solutions.
Accessing the file space from any place in the world is one of the selling points. The use of virtual data room software isn’t limited to a desktop computer. Ideally, a data room provider has its own proprietary apps, but even if this isn’t the case, there is usually some sort of web-based version of the virtual data room services that support mobile access.
Access from anywhere
This means that even if you need quick access to the contents of the virtual data room, and you don’t have a computer you trust nearby, you can access it from the safety of your smartphone. The virtual data room might be less functional on the mobile browser than on the desktop version, but still, have enough functionality to browse through the files stored in the cloud.
With virtual data room solutions, you have absolute control over who does what in that online file repository. Thanks to a variety of permission settings, and the ability to put people in different permission groups, they have access to files that relate to them directly.
All the files they use and the time they spent in the space can be checked in an auto-generated report. This allows you to monitor all of the behavior, see what files were edited the most, and on which documents people have spent most of their time. Those are valuable statistics that help fine-tune each of the departments and their workflow.
This can also be used to judge the interest of the people invited into the virtual data room space. If you see someone spending larger amounts of time on any particular fragment of the project, you can tailor the discussion to have more favorable deal terms.
People entering the online file repository expect that the space will be easily navigated, and will be a similar experience to using an operating system on their desktop. Most online data rooms are designed in a way that fosters a frictionless experience between the user and the software solution.
Data room software encourages exploration of the space and hints at possible uses of new tools. It is a place for experimentation, and through trial and error of all the features a VDR data room has to offer, you will be surprised at how easy it is to use them.
People who are less technologically proficient can also benefit from the use of the space, as they do not have to learn a large amount of new information, as the layout of the space is simple, and combined with a straightforward naming convention, it should be easy to navigate.
There might be times when you will need to require assistance. The top virtual data room service providers have 24/7 support that will always take their time to help you out with any issues in the virtual space. Data room providers take special care of this aspect because they know how important a human representative is.
There might be situations where you will need immediate assistance, and it is good to know that there is always a physical human being ready to jump in and give you a helping hand. Those people know the space the best and relying on their knowledge might be the course of action when it comes to accidents in the virtual data room.
This support might also manifest itself in the form of blog posts, training sessions, and video tutorials for a specific activity in the data room space. Giving you updates about the newest addition to the software solution is also a responsibility the tech support bears.
Alternative to a VDR
A VDR service could be substituted for a regular cloud storage solution. However, this would involve significant risks to data security.
A regular online file repository is built around accessibility. All of the tools inside are designed with that in mind, and through a variety of permission settings, and features within the space, people can join in and download the files, or alter the documents that are already there. There is a lack of permission levels and the screenshot protection of the data is also non-existent.
A virtual data room is built around security. Every VDR provider knows that the safety of the clients' files is a priority. People can similarly get into the space, and modify the documents within it, but their activities are closely monitored, and thanks to additional security protocols known from online banking, stealing files from it is an almost impossible task. With the combination of tools that foster safety and algorithms that make it an almost impenetrable fortress, the best virtual data room for you supports your dealmaking without having to worry about file safety.
Take a look at the market now, and pick a virtual data room provider that fits your business needs!