What Is a Virtual Data Room?


The most effective virtual data rooms have intuitive interfaces that are easy to use as well as powerful report systems. They also have robust security features to guard sensitive information from unauthorized access. These include multi-factor authentication and advanced encryption. They also provide the ability to set permissions that are granular, allowing you to limit who can view, print, download or copy documents. They can also include a hierarchy of folders with primary categories and subcategories. Standardized names for documents are also available. A master index as well as search and filter options and an index master are all available.

Many industries utilize VDRs. Construction projects often require a large number of contractors and suppliers to share data via the VDR. These contractors may have to review, sign, and certify contracts that involve confidential information. A VDR permits safe and easy sharing of documentation for all of the different parties involved. In life sciences, for instance the R&D process requires an extensive collaboration between partners. A VDR helps to manage milestones in projects and assists in data transmission.

M&A transactions require a massive amount of documentation, and it’s imperative that the documents are stored safely in a controlled space. A VDR is a powerful tool for both the sell-side as well as buy-side during due diligence. Private equity and venture capital companies analyze multiple deals simultaneously, and have to organize reams of documents for each. A VDR helps them keep on top of the various contracts and financial statements as well as other documents in a safe environment.

It’s important that the documentation be clear for potential investors. A cap table, for example can help investors be aware of how equity is divided between founders and shareholders. The VDR should include a user guide that is clear and concise, and also includes instructions on how to navigate to, search, and use the system. Furthermore, the system must include a log that records who has viewed which documents and for the length of time.

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