Businesses from different industries with unique needs have started using virtual data rooms. Initially, data room software was associated with mergers and acquisitions. Virtual data room providers quickly understood that customized solutions are the need of the time. That’s why there are different types of data room services available in the market. As a result, data rooms are a part of almost every business sector around the globe now.
Many data room providers heavily focus on M&As, but they also cater to the needs of life sciences, legal, financial, and many other industries. You can learn more about online data room software, its common types, and how to choose an electronic data room in the text to follow.
What is a virtual data room?
Virtual or online data room software is essentially a digital, remotely accessible data repository for storing, sharing, and managing corporate or private documents. However, virtual data rooms are not just random data storage platforms — they are complete business solutions.
An electronic data room also boasts multiple online collaboration tools for individual and group communication. VDRs are suitable for board communications, webinars, online meetings, and group conversations. The Q&A modules in VDRs are a handy communication tool during dealmaking.
Online data room software is also a core element in many financial transactions. It facilitates mergers, acquisitions, joint ventures, partnerships, consolidations, initial public offerings, capital raising, and real estate trades.
How to choose a virtual data room?
There is no hard and fast rule in the data room selection process. However, the following pointers are helpful in choosing the right one:
- Identify your needs: why do you want a virtual data room, and how can it improve your workflows?
- Determine your budget and the type of feature you are looking for in the VDR.
- Compare virtual data rooms based on ease of use, security, customization, and customer support services.
- Read virtual data room reviews from trusted online platforms like G2, TrustRadius, Software Advice, and Capterra.
- Contact the virtual data room providers which you think are suitable for you and ask your questions. Most importantly, observe the responsiveness and behavior of their customer support.
- Ask for free trials and get hands-on experience of the shortlisted VDR providers.
Speaking of VDR’s competitive landscape, there are many worthwhile options on the market. But some of the best virtual data room providers include iDeals, Merrill, DealRoom, Intralinks, Firmex, FirmRoom, Ansarada, SecureDocs, and Digify.
To make the most compelling choice, be sure to conduct your own data room comparison against the criteria above. These include your needs, your budget, customer reviews, the quality of customer support service, ease of use, security, customization, and free trial.
Common use cases of virtual data rooms
1. Data Rooms for M&As
Private equity firms or companies employ M&A data rooms or commonly known as due diligence data rooms, during consolidations, mergers, acquisitions, and similar ventures. M&A data rooms mainly streamline the due diligence process. In fact, an M&A virtual data room does the following:
- It acts as a central remote data repository where companies can upload their due diligence documents in digital form.
- It provides a due diligence checklist and allows you to organize the documents in the most efficient way.
- It provides all necessary communication tools during due diligence and negotiation.
- It gives potential buyers/investors 24/7 access to due diligence documents.
- It ensures that the target company can prevent data theft and fully control its secret documents.
2. Virtual data rooms for corporations
Modern-day companies and enterprises use data room technology for safe and smooth data management. A high-end virtual data room solution can help a company in different ways.
For example, the corporate sector can use VDRS for:
- Centralized and AI-backed document organization. They can make multiple data rooms for their subsidiaries or departments.
- Fast, safe, and controlled data sharing within the company and external bodies.
- Secure online business meetings. A VDR possesses all necessary meeting tools, such as agenda and minutes builder, HD audio and video tools, electronic signatures, and voting tools.
- Collaboration in joint ventures, strategic partnerships, and other similar projects.
- Easy, safe, and fast board communications.
3. Data rooms for financial operations
Just like due diligence, fundraising is a lengthy venture that can consume days, weeks, or even months. Virtual data rooms are highly effective in fundraising because they provide 100% security to corporate documents, even if they are made public.
Other than that, here is what an electronic data room simplifies fundraising or IPOs:
- Fundraisers or entrepreneurs can create pre-due diligence data rooms and invite investors.
- After pre-due diligence, fundraisers can create separate due diligence rooms for investors interested in proceeding.
- Companies going public can launch their IPOs through data rooms. They can make their due diligence documents public while still having full control over the data.
- Fundraisers, investors, advisors, and other stakeholders can use virtual data room software as a central collaboration point.
- The electronic signature feature in the data rooms can help close deals instantly; no need to courier contracts or agreements to all parties.
Other common uses of data rooms include litigation, clinical trials, risk management, real estate, asset portfolio management, etc.
Virtual data room providers, based on market demand, develop specialized solutions for different uses. Commonly known types of virtual data rooms include:
- Due diligence data room
- M&A data rooms
- Real estate data rooms
- Life science data rooms
To make your choice of a suitable data room solution, it is worth considering your needs and then comparing data rooms in terms of pricing, customer reviews, ease of use, security customization, customer service, and free trial. Some of the best data rooms to start your comparison with include: