This guide to Virtual Data Rooms explains what a Data Room is, how to set up, use, and select a VDR, and how a virtual deal room works:
Data Room is a secure space to store confidential documents and has access only to authorized people. It is a solution for businesses that require space for sharing confidential documents among some selected third parties.
Data Room will let the businesses control access to their confidential documents. This minimizes the risk of accessing confidential data by unauthorized parties.
Data Rooms are available as physical data rooms, virtual data rooms, or data centers. They are useful in various use cases such as data storage, file sharing, legal transactions, document exchange, financial transactions, etc.
Table of Contents:
What Is A Virtual Data Room
Virtual Data Room is a cloud-based solution that securely stores and shares confidential business information. It includes the features of advanced permissions, multi-factor authentication, watermarking, etc.
Traditionally these solutions were used for IPOs real estate asset lifecycle management, and financial transactions only, but all the businesses that require security and specialized management of documentation can use virtual data rooms.
Factors To Consider While Choosing Virtual Deal Room Provider
Before starting with the shortlisting of providers, make sure that you have clear requirements about the capabilities of the platform and the type of your project. While choosing the Virtual Data Room Provider, you can consider factors like ease of use, features of the platform, and the security features offered by the tool.
Other factors that can also affect the selection of the tool are the supported file formats and limitations on the size & the number of files to upload. You should also consider the provider’s certificate to deal with sensitive information. Accredited providers will be a good choice. You can also check the reviews for the provider.
Recommended Reading => Top Virtual Data Room Providers
The below image shows the comparison factors to help you compare the top shortlisted options.
iDeals: The Best Virtual Data Room Provider
iDeals Solutions is a sophisticated and trusted virtual data room provider. Their experience and exceptional results have been tried and tested by investment bankers, lawyers, and top managers of enterprises around the world.
How To Use Virtual Data Rooms
Setting Up A Virtual Deal Room
Selecting a good Virtual Data Room Provider is the first step of this process.
The whole process can include five major steps as shown below.
To understand the procedure, we will take the example of iDeals, which is one of the top virtual deal room providers.
Virtual Data Rooms like iDeals are easy to use and users can use the solution without training. It can be used on any computer, browser, or mobile device. You will not need any plug-ins.
The first thing to do while using the Deal Room is to configure the Room as per your requirements like enabling/disabling automatic document indexing, renaming the project, etc.
Uploading The Documents
You can perform all the operations like uploading, deleting, merging, moving, extracting the documents, and many more under a single Tab – “Documents”.
It is easy to upload the documents, you just have to drag the files from the documents tree to the folder. You can easily track the progress of each file and add files to the queue during the active upload process.
The below image will help in understanding how easy it is to upload a document.
Inviting Users
Functions like inviting users, creating user groups, setting up permissions, security settings, etc., are also easy to use.
To invite a single user or multiple users, you just have to hit the button “Invite” and paste the email ids. Setting up permission is easy as well. You can see it in the below image.
Data Room providers like iDeals offer flexible and scalable solutions. It will let you create new projects and add them to the existing or new contract. As you can see in the below image, an easy-to-use interface will help you with performing such options quickly.
Tips To Maintain An Organized Virtual Deal Room
To maintain and organize the VDR, you can create rules for naming files and the storage structure of files.
If you will appoint a tech-savvy person in charge of VDR, then your data and processes will be more organized and managed. Logging data access and changes will help you with tracing the issues.
Security of Virtual Data Rooms
Security features of a VDR play an important role when choosing it: The security of a VDR depends on the technologies used for secure loading and transferring of documents, user access controls, etc.
The below image shows some of the features of a secure VDR.
Some of the VDR providers like iDeals offer good security features as stated below:
- iDeals offers a solution that is ISO/IEC 27001: 2013 certified and SOC 1 or 2 certified Data Centers, GDPR Compliant, HIPAA Compliant, etc.
- Granular permission Settings, Eight levels of Document Access Rights, etc.
- Physical Data Protection includes physical security, strict access policies, and secure vaults.
- Real-time Data backup using an encrypted VPN tunnel so that any document that is uploaded to the data room cannot be lost or destroyed.
- Two-factor authentication.
- Online facility to securely view and manipulate data in Excel spreadsheets.
- Geographically remote data centers will ensure that data will be available and unaffected even in case of emergencies.
- Multi-layered data Encryption to transfer files with a high-grade TLS protocol and encrypted at rest with 256-bit AES keys.
- Facility for the administrators to restrict login from particular IP addresses.
- iDeals provides many more security features like Remote Wipe. This feature allows administrators to remotely lock and wipe encrypted data from the lost or stolen device.
Usage Of Virtual Data Rooms
Businesses use virtual data rooms for various uses, but the most common use of them is to help with financial transactions. The most common uses include M&A, IPO, Fundraising, secure document sharing, strategic partnerships, audits, IP Management, board communications, etc.
The below image will show you the transaction types where Virtual Data Rooms are used.
How Does VDR Work
The VDR is installed on the server. It acts as a centralized resource and can be accessed by people according to their credentials.
Thus, the software is run by a server and allows access to its digital environment as per the credentials. Devices communicate with the server for accessing the VDR as well as other programs.
Cloud-Based Vs On-Premise VDR Servers
Virtual Data Room is interacted with by users through screens like desktops or other devices. Virtual Data Rooms are hosted on servers that are controlled by humans.
You can use the on-premise solution where the organization controls and maintains the server. Cloud-based VDR solutions are accessed through the internet and are controlled by a third party. Both the solutions have their benefits as well as challenges.
We will see their differences in the below table.
| Factors | Cloud-Based VDR | On-premise VDR |
|---|---|---|
| Server maintained & Controlled by | Third-party | Organization itself. |
| Response to potential threats | Quick, as third-party can have IT-professionals of cybersecurity. | Depends on the organization’s staff. It may not be as quick as a cloud-based solution. |
| Backup | Automated backup available | Automated backup can be available. |
| Cost | Less as compared to On-premise solutions. | Higher up-front cost as it includes the price of the server, its components, and for changing electrical or computer network configurations if required. |
| Internet Connection | Must | Can work without the internet through LAN. |
Virtual Data Room Pricing
The pricing of a Virtual Data Room is based on various factors such as storage required, level of document security required, document management & collaboration tools, administrators, number of workspaces, etc.
VDR providers like iDeals offer pricing plans that are based on the project type, required features, security requirements, and level of support.
Hence VDR pricing can be based on the following factors:
- Number of projects
- Number of administrators
- Guest users
- Storage, etc.
According to the transaction value and size, the VDR price can be in the range of $20000 to $40000 for a per-page pricing model. The price of VDR can be based on various factors and it varies according to the provider. Various pricing structures for VDR are per page, flat-monthly fees, storage size, data usage, per user, per feature, etc.
What Documents Should And Should Not Be Stored
Businesses use VDR for storing or sharing their sensitive documents. It includes various types of documents. If the documents are broadly categorized, then there can be around 10-15 types of documents such as basic corporate documents, financial & tax matters, property & assets, intellectual property, etc.
Though there is no fixed rule about which documents to be stored and not to be stored in VDR, we recommend you not to store the below-mentioned documents in VDR.
- Passwords
- Source code of applications.
General File Sharing Vs Virtual Data Room Platform – Differences
To explain the difference, let’s take the example of each type of platform. We will consider Dropbox as an example of a file-sharing platform and iDeals for VDR.
| Features | Dropbox | iDeals |
|---|---|---|
| Focus | Built for file sharing and storing. | Build around data security |
| Ease of Use & Security | Easy to use but not secure | Easy to use and secure. |
| Data Organization | Don’t have the data organization features as VDR. | Provides features for organizing documents |
| Protection from outside attack | No | Yes |
| Security Features | Basic like user-generated passwords, etc. | Offers various security features like commercial-level 256-bit data encryption, backup servers, etc. |
| Access Control Functions for the protected file sharing | No. | It has various features that will let you share the documents with multiple parties at the same time with different access permissions. |
| Similarities | Storing & sharing of files. Allows remote access Can easily backup files | Storing & sharing of files. Allows remote access Can easily backup files |
Conclusion
Virtual Data Rooms are for securely storing and sharing confidential business documents. It offers safety, speed, convenience, collaboration, and transparency. VDR can be used for various use cases such as working with investors, bankruptcy proceedings, etc.
A VDR platform will be more secure if it is fully audited and certified. The provider should offer reliable support and quick implementation of the solution. We tried to cover all the aspects of the topic through examples.