What Is a Virtual Data Room?


The best virtual data room features user-friendly interfaces that are simple to use and powerful reporting systems. They also provide robust security features to protect sensitive data from unauthorized access, including multi-factor authentication and advanced encryption. They also provide specific permission settings that control who can view the documents, print them, download them or copy documents. They can include an organizational hierarchy of folders that includes primary categories and subcategories. They also have standardized names for documents, a master index and a variety of filters and search options.

Many different industries use VDRs. Construction projects often require a large number contractors and suppliers exchange data through VDR. Contractors might be required to examine, sign and certify contracts that require confidential information. A VDR provides secure and streamlined documentation sharing across all parties involved. In life sciences for example the R&D process requires an extensive collaboration between partners. A VDR assists in managing project milestones and also facilitates data transfer.

M&A transactions require a substantial amount of documentation. It is imperative to store this information safely and in a controlled environment. A VDR can be an effective tool for both the sell-side as well as buy-side during due diligence. Private equity and venture capital companies often review multiple deals simultaneously and must organize huge amounts of data for each one. A VDR helps them keep on top of the various contracts financial statements, contracts, and other documents in a secure environment.

It’s also essential that documentation is simple for potential investors to understand. For example an updated cap table will allow investors to understand how company equity is divided between founders and other shareholders. To do this, the VDR should have an easy and concise user’s guide, including instructions on how to access, navigate and search the system. Furthermore, the system must have a log that tracks who has read which documents and for how long.