A virtual data room is an online secure repository that allows business users to share, upload and track sensitive documents with a variety of third parties beyond the firewalls of the company. The information is then accessible on demand via the internet or a dedicated application. Virtual data rooms have become more important in many business operations and processes. This article explains why that is the case and offers advice on how to choose the most reliable service.
It is essential to understand the requirements for your business prior to deciding on a virtual room. For instance, if planning to conduct an M&A transaction it’s vital that the platform is able to support due diligence and collaboration with sell-side and buy-side parties. The platform should be able monitor every activity and provide customizable permission profiles. This will ensure that only the appropriate people can access your personal files.
VDRs are also used to anchor provide market research and investment memos with venture and private equity firms in the course of a round of funding. This will speed up the deal process and ensure that investors get accurate information about the business. Furthermore, a majority of VDR service providers allow businesses to create a public portal that allows them to communicate documents to prospective clients and partners. This is particularly useful in M&A situations where it is important to build trust among potential investors.
It is important to consider the costs of subscriptions and one-time transactions when you compare VDRs. Many vendors offer an annual, unlimited-use subscription that gives business users the ability to pause and start projects, or put multiple data rooms “on standby” according to the needs.