What Are Data Rooms?


A data room, or virtual data room (VDR), is a secure repository for sharing confidential information. It is the modern version of physical rooms where documents in hard copy would be kept for review during sales or buying negotiations Data rooms are typically used to assist with financial and legal due diligence.

Businesses of all sizes utilize them however SMEs with team members spread all over the world find them particularly beneficial. In the past, large companies might have opted for more expensive in-house solutions however, as VDRs continue to improve and be made more accessible, they are being used by SMEs too.

Use of a data space

A data room can be beneficial at any stage in the business lifecycle. However it is typically utilized during M&A or other sensitive processes that require confidentiality. Venture capital firms, for instance will typically want to review contracts and other documentation prior to closing an investment. This can be accomplished in a virtual data room with access granted to attorneys and other key stakeholders.

A preparation dataroom can aid a company in preparing for due-diligence by uploading documents earlier and making it available prior to when third parties are invited to join. Some data rooms offer redaction tools that can be used to effectively and quickly remove sensitive information from documents prior to sharing them. This decreases the chance of making an embarrassing mistake that might jeopardize the integrity of a deal.