A virtual data room (VDR) is a secure online repository which allows users to upload, track and share sensitive documents with outside parties that are not within the firewalls of their companies. The information is then accessible their explanation at any time via the internet or a specific application. Virtual data rooms are becoming more important in many business processes and transactions. This article examines why this is the case and offers advice on choosing a reliable provider.
It’s essential to know the requirements for your business before choosing a virtual room. For example, if you’re planning to conduct an M&A deal, it’s essential that the platform is able to support due diligence and collaboration with buy-side and sell-side parties. This means that the platform should include a user-friendly permission profile and specific activity tracking to ensure only the appropriate people are able to view your confidential documents.
VDRs are also used to share market research and investment memos with private equity and venture firms during a round of funding. This can accelerate the process and ensure investors get precise information about the business. Furthermore, a majority of VDR service providers allow businesses to create a public portal that allows them to share documents with prospective clients and partners. This is particularly beneficial in M&A scenarios where it is important to build trust among potential investors.
It’s important to compare the cost of subscriptions versus one-time transactions when you compare VDRs. Many vendors offer an annual unlimited-use subscription that allows business users the flexibility to start and pause projects or keep multiple data rooms «on standby» as required.