Everything you need to know about virtual data rooms

A virtual data room or data room is a cloud solution especially made for the secure storing and sharing of confidential business information. Data rooms offer specific sets of features such as advanced permissions, Q&A tool, notes and bookmarks, as well as multiple factor authentication and watermarking. Although virtual data rooms are traditionally employed for financial transactions, IPOs and real estate asset lifecycle management, their use cases have been expanding over the past decade. Potentially any business concerned with the secure and specialised management of its documentation can turn towards data rooms. Today, data room providers are increasingly building machine learning technology into their software, thereby enlarging their offer to include tools such as automatic document translation, findings management and automatic red flag analysis.

What to consider when choosing a data room provider?

A data room is a place to store confidential business documents. The concept has now moved online – virtual data rooms are now the norm and are increasingly replacing the need for physical data rooms.

As the name suggests, a virtual data room is a place to store sensitive documents. The virtual element comes from it being accessible from anywhere, as long as there’s an internet connection. Companies that need to carry out due diligence typically use virtual data rooms. It’s also useful when entering into a variety of collaborations between business stakeholders. Some examples of this include M&A or joint venture investments, but also communication between board members, patenting and licensing, etc.…

Essentially, a data room will act as leverage in all sorts of projects that require secure and professional document storage, management and sharing.

Finding a suitable data room provider is crucial for the success of a project. By focusing on the right provider, you add a layer of security to your confidential business documents. It also significantly contributes towards the success of the cooperation or transaction.

What to consider when choosing a data room provider? What is a data room?
What is a data room? What functionality should a data room have?

What functionality should
a data room have?

The overall concept and functionality of different data rooms may be similar to each other; however, each provider and data room have functions that fit specific use cases. Each user will also come with their own expectations and needs and therefore, it can be impossible to pin down what the most important features of a virtual data room are -- it really depends on the project and the user.

Nevertheless, virtual data rooms have a core functionality which is the easy and secure upload, saving and management of multiple files. The files can range from documents to business letters and diagrams; all sorts of information transfer can take place in a data room. The important thing is that this happens smoothly and safely.

It’s also about the intuitiveness of use. If the virtual data room comes with simple and easy-to-understand workflows, the user experience will be positive. This, in turn, will play an important part in the success of the negotiations. If the setup in the data room doesn’t have an intuitive and easy feel, the project participants will need to put more effort into uploading, saving and managing the files. This can hinder and slow down the project’s flow.

VDR Functionality slider 0 - More functionalities (EN)

These are the most critical data room functionalities:

Advanced permissions, automation tools, audit log, other reporting functions, and security features.

VDR Functionality slider 1 - Advanced permissions (EN)

Advanced permissions

In a virtual data room, you can provide different types of access to the users. You are able to choose who can view, save or edit documents.


VDR Functionality slider 2 - Automation tools (EN)

Automation tools

Providers have developed automation tools for various processes. These tools tend to be used in projects which require the analysis of large quantities of documents. With such automated processes, the information can be easily filtered for quicker analysis.


VDR Functionality slider 3 - Audit log (EN)

Audit log and other reporting functions

You can also monitor the useage of the data room with audit logging. This function shows the users who have logged into the data room, as well as information about their activities. Audit functions provide this detailed information, which helps to eliminate inconsistencies andand ensure compliance.


VDR Functionality slider 4 - Security (EN)


There is also a range of security functions available in data rooms. These vary from backing up documents to providing users only limited access to documents. In addition, virtual data rooms also offer secure server locations to prevent hacking.


How much does a virtual data room cost?

The cost of a virtual data room varies greatly depending on the provider. A number of providers offer free trial versions. This allows for the opportunity to test the product and make a better decision on the data room’s suitability for a specific project.

Many providers offer virtual data rooms with a monthly subscription fee and flexible notice periods. However, flat rates are also available. Some providers have personalised offers that take into account things like how much data was consumed in a month and how many users are operating in the data room, as well as specific requirements.

There is one simple distinction between standard cloudstorage and a virtual data room. For uploading and sharing non-confidential documents, a regular cloud storage can be a more cost-effective solution. However, if you’re dealing with sensitive information, you require complex rights management and Q&A features, and if you’re managing large amounts of documentation, a virtual data room is the solution you need.

When assessing the costs, you should find an answer to these three questions:

What data room features
do I need?

Perhaps you only require data storage or you might look for enhanced security functionalities, such as the use of two-factor authentication.

What kind of customer support
and services will I require?

Providers offer different levels of customer support – some around-the-clock, while others a more limited contact. There are also differences in how you can get in touch. Certain providers offer a range of contact methods from phone to Skype connectivity.

What types of project
will I perform in the data room?


You don’t want to spend as much money on one-off projects as you do with ongoing  or more business-sensitive projects. You also need to consider if your projects require file sharing without enhanced security features.

How do you find the right data room provider?

How do you find the right
data room provider?

Aside from the above criteria, you must also pay attention to the providers’ certificates. You want to use an accredited provider when dealing with sensitive information. Furthermore, software review platforms like Capterra can be useful in finding what other users have said about various data room providers. There, you will be able to evaluate the positive and negative aspects of the data room in question.

You should also consider referrals – colleagues and acquaintances might be able to share their experiences with data room providers in terms of specific projects. This can help you better understand whether a specific provider is suitable for your project.

With the above in mind, you will be able to find the right data room for your confidential documents and for the overall success of your project.

What is a data room for M&A?

All corporate finance transactions require the sharing of confidential information and in these time-critical situations, the use of data rooms can be useful. It is specifically the case with M&A deals – highly sensitive documents need to be passed between experts in order to conduct proper due diligence. In M&A data rooms, efficiency and security become a top priority.

A data room for M&A helps manage each step of the process from the warranty phase to compliance. The so-called transactional data rooms come with important functions such as Q&A and real-time document translation.

The integrated Q&A tool allows experts to quicly answer any questions you send them. Communication is faster, clearer and results in a more sustainable communication flow. Issues are monitored and questions solved, moving the M&A process forward by maintaining full confidentiality.

With real-time document translation, you can also take care of issues global M&A deals might impose. Language won’t be a barrier – texts are translated real-time, improving comprehension and transparency.

Learn more

What is a data room for M&A? About data rooms