A Virtual Dataroom, or as it is most frequently called a “VDR,” as the name suggests, is an online database in which businesses can store and exchange confidential information, typically utilized during a financial transaction. It may also get defined as a kind of online archive or filing system for records. With the omnipresent dependency on machines and advanced tools to maintain a business running efficiently, coupled with the fact that increasing numbers of companies are making the transition to an entirely paperless workplace, many of the traditionally document-heavy operating activities have been transferred to the virtual world.
What’s in the Data Room? Organizations use VDRs to safely archive and exchange relevant and confidential corporate data and are used more commonly during transactions. The material contained in a data room is usually confidential documents usually perceived to be of high value to the data room client or owner. For example, in addition to traditional record-keeping that is being needed for many accounting, legal, and tax issues, many businesses have other valuable documents and information that they need to maintain and would like to store to ensure secrecy continues safely. Due to the growing value of data and the consequent increased demand to ensure adequate safeguarding of such data, the automated data room was created, and over the years it has developed into the kind of solution it is today.
Why use a room for virtual data? Digital data room tech has become the standard for financial transactions and replaced the once-ubiquitous physical data rooms. Physical data rooms had their limitations and were time-consuming and unpleasant for the involved parties. With the advent in online security (which is of paramount importance to virtual data rooms), the physical data room became an outdated concept, being supplemented by a virtual negotiation room, where businesses could easily and from anywhere in the world exchange to due diligence details. These are the most popular applications of VDRs:
- M&A: M&A due diligence is a case of frequent use on a VDR. Merging with or purchasing other companies involves a great deal of work, and particularly the furnishing and examination of records quantities and volumes. It can be daunting for companies merely entertaining a purchase offer to pass on the sensitive data that will be requested. Therefore, businesses that are heavily involved in M&A can still engage in discussions and by depending on a purpose-built VDR, allow the secure display of sensitive, confidential data. However, in the case that a transaction does not close, you will easily cancel access to the data space.
- Funding: Engaging in multiple funding rounds is often crucial to growing business for both start-ups and more prominent companies. However, as many business people know, it isn’t exactly an easy task to persuade investors to fork over heaps of cash. Fundraising usually requires a lot of data sharing and document sharing, particularly during the due diligence investigation. Using a VDR will dramatically improve the necessary sharing of sensitive information during these fundraising processes, and leadership teams on both sides of the transaction will feel comfortable because using a VDR would allow for better transparency and monitoring.
- IPO: IPOs can be particularly tricky deals since the choice to go public means companies are subject to additional rules and regulations, often at the city, state, and federal levels. Therefore, this process requires greater accountability for the general public and prospective shareholders. To go through all the necessary and appropriate steps to execute and withstand an IPO, careful preservation and maintenance of records will be crucial, which naturally requires the use of a VDR.
- Strategic Partnerships: Even if businesses do not officially combine or buy another company, it often makes sense to collaborate with other firms to provide some good or service, or invest in a completely new enterprise. These agreements, as with most collaborations, would undoubtedly require a substantial amount of data exchange. Finally, this is a scenario in which a VDR can prove invaluable, and it will relieve the minds of the partnership’s members as they can rest assured that all valuable data will be secured.
- Audits: There are many situations where external parties will need to review data from a company, although not necessarily in an adversarial or competitive manner. For example, when legal counsel, accountants, or auditors need to take a look at corporate records or other documentation from a company, the leadership team will need to find a way to provide them with the information they need without compromising it.
- IP Management: Organizations may not be as adamant with exchanging sensitive data with outside parties in some situations but still need a consistent data security policy. It applies primarily to entrepreneurs and other businesses whose development and viability are highly dependent on safeguarding essential intellectual property (IP).
- Board Communications: Often, members of the board rely strongly on being associated with the leadership team of an organization and other aspects of the activities. Nevertheless, members of the board do not always live nearby, nor do they visit the office premises regularly. In such scenarios, where key employees are dispersed across the world, or even around the globe, it will be essential to have a system in place that allows for immediate, but safe, information sharing.
Data management and security have come a long way, especially in the last five years or so. Investing in and setting up a highly secure data storage solution is now simpler than ever, with the new VDR being the technology of choice. SecureDocs was and continues to be a leader in the VDR area, priding itself on transparent pricing, realistic apps and services that businesses want and will use, and elegant, user-friendly design.