If you imagine a company’s data room, you’ll probably see dozens if not hundreds of folders with sensitive documents languishing on shelves. This is the traditional way for companies to manage their archive. However, as the digital world moves away from physical offices, data rooms follow suit. Instead of a storage room and lots of paperwork, you can now enjoy the benefits of virtual data rooms and let technology do the work for you.
This guide will cover the basics of virtual data rooms, their benefits, functionality, average cost, and provide tips on choosing the right data room provider.
What is a virtual data room?
A virtual data room (VDR) — also called a virtual deal room, electronic or online data room — is a secure cloud-based space designed for organizing, storing, and sharing company documents. You can use it permanently instead of your physical repository or only when you need to transfer the company’s confidential information securely.
Electronic data rooms were designed for facilitating due diligence and negotiations during the mergers and acquisitions (M&A) process. However, the needs of the modern business world have outgrown the capabilities of the original VDRs. The modern dataroom demands functionality and security for document management that only complex systems can provide.
Along with protecting your data, a data room helps you reduce paperwork, automate documentation journeys, and even speed up business transactions.
Why use virtual data room software?
Companies of all industries choose virtual data rooms to organize their documents, so it’s not surprising that the global data room market is expected to nearly double between 2020 and 2025.
Here are the most common benefits you can unlock with virtual data room software.
- Seamless document organization and navigation. Support for dozens of file formats, high software performance, regardless of the storage size, integrations with email and Excel, and advanced search tools are only a few examples of the basic functionality a VDR data room offers.
- Security and access control. Along with advanced encryption algorithms, a data room will allow you to set different access levels for various groups and users. Decide who can view, comment or download specific documents. You can also change or revoke access immediately when needed. This customization of access applies to any interaction with a document, including viewing, downloading, or sharing.
- Enhanced user interaction. Users can access your files 24/7 from any device and location. Besides, most data rooms offer tools for more effective cooperation, such as Q&A sections, commenting, and real-time collaboration with other users.
- User activity tracking and data analytics. You can see who viewed your document, when, and for how long. Based on this information, data room software can even predict deal success. Let’s take fundraising as a simple example, investors’ activity history will shed light on whether they’re interested in your project or not.
- Streamlined negotiations. Transparent data organization, automated management of large data volumes, better collaboration, and predictive analytics will help enhance your decision-making process and speed up deals.
How secure are virtual data rooms?
Even industry leaders like Adobe, eBay, and Yahoo! face data breaches, putting data security high on the agendas of businesses worldwide.
Virtual data rooms offer the maximum level of security available on the market, and encryption is just the tip of the iceberg. In fact, data room security consists of three aspects: compliance with security standards, encryption, and data security functionality. Here’s the lowdown on each of them.
Security standards compliance
Data room providers should comply with international security standards such as European General Data Protection Regulation (GDPR), local laws, and industry-specific security regulations like the American Health Insurance Portability and Accountability Act (HIPAA) for healthcare.
Virtual data rooms encrypt your data before moving it to the cloud. The encryption protocols used are on a par with e-commerce transactions and online banking.
Data security functionality
A secure data room offers unique features aimed to improve your data safety. They include complete access control over who can view your files, limited session durations, watermarks, document self-destruction even after downloading, remote lock, and data erasure from lost or stolen devices.
What does a good data room look like?
A good virtual data room is a cloud-based, feature-rich platform for secure document management, transfer, and collaboration. The leading data room software solutions are easy to use, thanks to their intuitive and friendly interface. Additionally, a proper VDR data room should be accessible from various platforms and devices, be it web, mobile, or desktop.
Any respectful virtual data room has features for data security, access control, and document management. This includes drag-and-drop upload, automatic file indexing, access settings, watermarks, text search, and others. The leading providers also offer an advanced toolset for a higher level of customization, analytics, and reporting.
It goes without saying that a good data room should have a support team that’s accessible 24/7 and can solve users’ problems quickly by phone, email, or live chat.
How much does a virtual data room cost?
The cost of a virtual data room will vary depending on its functionality and VDR pricing structure. Modern VDR providers have four pricing models: per page, user, storage size, and flat rate. Let’s take a closer look at each of these.
- Per-page pricing model. Per-page pricing is the oldest pricing model, but it’s still very popular. Though the average price is around $0.40-$0.90 per page, it’s not uncommon for companies to end up paying over $100,000, mainly due to project sizes.
- Per-user pricing model. The provider determines the number of authorized users. If your company wants to add more, you may end up paying as much as $100-250 per user.
- Storage capacity pricing model. Simply put, a VDR data room’s price can depend on how many gigabytes it uses. Like in the per-user pricing model, providers include limited storage capacities based on your plan and charge if the limit is exceeded (typically around $70 per GB).
- Flat rate. Monthly fees vary greatly, starting from around $100 on up to $3,000, depending on the functionality, storage size, and the number of users.
Tip: Choose pricing models based on your project size and duration — per-user, per-page, and per-storage pricing is a natural choice for small businesses and short-term projects.
What to consider when choosing a data room provider?
Your data room provider should align with the project requirements and budget constraints, but these two factors aren’t the only ones to consider. You hand over your most sensitive data, so your provider should be reliable and experienced enough to ensure data security.
Here are the three most important factors to take into account:
- Security level. Check that your provider has all necessary certifications and complies with international security standards. Along with compliance, compare what security functionality your candidates can offer.
- Experience and industry-specific expertise. Opt for providers who have expertise in your industry. They can offer you more industry-specific features and an extra layer of security (for example, by complying with industry-specific regulations). Check their experience, customer feedback, and global reach.
- Sufficient functionality. Along with core virtual data room’s features, your provider should offer extra functionality that will match your project requirements and business goals, be it security, process automation, analytics, or else.
Tip: Consider providers with a free trial period of 14 days (for simple transactions) or 30 days (for more complex ones). You’ll have enough time to try out and evaluate the software before investing your money.
What is the difference between cloud storage and a virtual data room?
A virtual data room stores your documents in the cloud but, unlike cloud storage services, it was designed for secure company document management. As a result, it addresses specific challenges and security risks.
While both virtual data rooms and cloud storage services provide tools for collaboration and encryption, data rooms are tailored to business operations since they put sensitive information at stake. The advanced data security functionality of virtual data rooms offers users an extra layer of security.
Dropbox faced one of the largest credential leaks in history when emails and passwords of more than 68 million users were stolen and sold on the darknet.
Here are more differences that make data room software stand out from cloud storage services like Google Drive, Dropbox, or OneDrive:
- You receive increased storage capacity — which is more suitable for managing business transactions with mountains of data.
- You can organize and navigate large volumes of information faster thanks to the search functionality and automation tools.
- You have complete control over data access and can closely track user activity.
- You are protected from users sharing data with unauthorized users.
- You can expect high-quality assistance 24/7 in case something goes wrong.
Virtual data room is your best assistant
Virtual data rooms are a modern solution for storing company documentation and managing it during business processes like M&A or fundraising. The rich functionality of virtual data rooms allows companies to improve documentation transparency, automate workflows, and speed up negotiations. Not to mention they can rest assured that their sensitive data won’t get compromised.
It’s no wonder companies from various industries are now adopting virtual data rooms at full tilt. If you’re about to jump aboard this train, choose your data room carefully to ensure its functionality and pricing suit your particular needs.
After exploiting the data room services, you are unlikely to break your cooperation with a vendor: the pluses brought by a data room eliminate possible imperfections and doubts. To gain the experience highly appreciated by VDR users you must find the right data room providers and choose one of them. There are plenty of virtual data rooms in Canada, so you are not expected to face multiple obstacles on your way to the perfect deal room. Generally, data room providers in Canada do not differ significantly from the vendors you may cooperate within other regions. Hence, you may boldly read virtual data room reviews and perform virtual data room comparisons. Whenever you are done evaluating aspects of appealing data rooms you are expected to check if it is active in Canada – and your new assistant would be ready to please you.