What is a Virtual Data Room for business

In this article, we give the answer to the question: what is the Virtual Data Room and discuss the purpose of using such a tool.

What is the Data Room?

Virtual Data Room is a platform, which provides authorized users with access to a secure database of documents, in accordance with their access rights. It is a unique combination of existing company documentation management systems and web content management systems. The essence of this development is that the company’s confidential data is stored clearly, structured in electronic form.

Unlike FTP, which is used to transmit information in an unprotected form, VDR exchanges data using the E2E encryption principle using secure transport protocols SSL or TLS, which ensures maximum security of data exchange between the server and the agent, protecting them from MITM attacks.

The most common uses of Virtual Data Rooms include:

  • Corporate storage of documents
  • Communication board
  • Secure document exchange
  • Mergers or acquisitions
  • Fundraising
  • Initial public offering
  • Strategic partnerships
  • Audits
  • Increase in venture capital
  • Intellectual property management

How does it work?

Let’s analyze how VDR works on the side of the owner of the document and an external user. There are the following stages:

  • Agent software is installed on the workstation, after which the encryption keys are exchanged between the server and the client. It is possible to work with a virtual data room without installing an agent – using a web browser;
  • The administrator or the user has the necessary rights, selects a directory for synchronizing documents with the corporate data warehouse;
  • Data in the synchronized directory becomes available on the user’s desktop PC and on authorized mobile devices;
  • If necessary, the user in addition to virtual data rooms can create workspaces – shared folders for collaboration with documents with their employees.


How to choose the right Data Room?

There are several factors you need to take into account when choosing a VDR.

Safety. Of course, this aspect will interest you the most. It is important to choose a developer who stores all the information himself and does not give it to subcontractors. Well, and certification, of course. Plus reviews, clients, etc.

Convenience and functionality. Here you need to take into account the format of the files that the system can work with, is it possible to download the zip, on which OS is it available (Mac?). If you are dealing with international transactions, it is important that the VDR is open 24/7 and supports multiple languages. Check if there is a free demo version.

Price. Most developers base their pricing based on space used and the amount of time the VDR is open. Some M&A law firms can afford to provide their own VDRs. If you need a VDR one time, use services that provide storage based on the amount of time. If you plan to use VDR regularly for a large number of transactions per year, then purchasing a subscription is your choice.