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What is a Virtual Data Room?

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A virtual data room is a software repository that securely separates your key sensitive files from the rest of your company’s assets. 

A virtual data room can be used at any time, but this security practice is most commonly applied when an organization participates in an audit, merger, or acquisition. 

See below to learn more about how a virtual data room works and how it can benefit your company in different transactional scenarios: 

The Virtual Data Room Landscape

See more: IT Ops Acquisitions in 2020: Continued Innovation Drives Investment

Virtual Data Rooms vs. Data Rooms

The virtual data room descends from an actual data room or a secure physical room where sensitive files and other materials are stored. Data rooms are locked rooms in the owner’s headquarters, or sometimes a secure room at a bank or other third-party location that ensures the security of the room’s contents from outsiders. You have to be an authorized visitor or receive special consent to visit the room, and even then, time limits and strict rules usually frame what you can do in the data room. 

As more companies have digitized their most secure data, a traditional data room became an inefficient way to store and share sensitive information. Virtual data room software has taken over as the preferred data room approach, allowing organizations to secure their digital materials in a virtual environment that requires a secure login for access. Much like a traditional data room, access permissions can be tailored to each user and revoked or deactivated at any time.

Virtual Data Room Features

Virtual data room software holds on to many of the traditional features of a data room, but the digital format features more accountability and communication tools for users. Here are some of the security features that most virtual data rooms incorporate:

Unique User Logins

Every user granted access to the virtual data room has a unique login, or username and password, but they cannot change their login information on their own. This unique login ensures they only have the permissions they need, and their login can be turned off whenever necessary.

Detailed File Permissions

The owner of a virtual data room decides more than who has access. They also get to decide what they can access and how they can interact with it. Virtual data rooms allow you to manage and monitor version control, and you can also set different permissions for different users and files. For instance, some files can be viewed only, some can be downloaded, and some can be edited, depending on the user.


Virtual data rooms focus on security, and one of the top security features they offer is file tracking. The owner of the virtual data room can see when and how often different users login, which files they access, and if they make any changes or add anything else to the room. Especially during key business negotiations, it’s important to know who’s engaged and what they’re contributing to the room.

Mass File Uploads

Most virtual data rooms allow you to upload several files at once, which is especially helpful if you have a large amount of secure data stored in different locations across your network. Make sure your documents are all identified and uploaded as soon as possible. This makes transactions more likely to proceed and external audits run smoother.

Built-in Communication Tools

Not every virtual data room offers this feature, but many include chatting modules or ways to communicate with other users in the data room. Not only is this a great way to facilitate time-sensitive communications, it’s also a secure way to document conversations related to secure information.

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Virtual Data Room Use Cases 

There are many scenarios when you need to keep your virtual data secure, and although there are other software options, like collaboration tools and file-sharing services, they don’t offer the same levels of security and control as a virtual data room. There are several high-profile instances when you should pick a virtual data room:

Merger and Acquisition Transactions 

During the due diligence portion of the transaction, both the buyer and the seller need to learn key information about finances, real estate, assets, and other secure information that should not be made available to all members of the organizations. With a virtual data room, you can give access only to key team members in both the buying and selling organizations as well as any legal and financial team members that may need access. If the due diligence period ends or you decide to move on to a different potential buyer, you can easily deactivate access for the unneeded user logins.

Initial Public Offerings (IPOs)

When a company decides to go public, the transparency of company data to important stakeholders is crucial. In combination with the additional rules and regulations they will need to follow, keeping up with organized, clean, and secure documentation becomes a full-time task with traditional systems. Virtual data rooms help companies to identify, secure, and display their data to the IPO team.

Audits and Investigations

Audits and investigations are difficult for most companies, because they have limited visibility on the requested documents. Identifying and sharing the materials takes excessive time and labor when the information is stored in disparate locations and systems. With a well-maintained virtual data room, your most important documents are readily retrievable.

See more: Why Acquisitions, Partnerships are Key to Simplifying IT Deployment

Virtual Data Room Market

The virtual data room market was valued at $1.49 billion in 2019 and is projected to grow 14.7% annually from 2020 to 2027, according to Grand View Research

This growth is particularly happening among banks and legal firms engaging in secure transactions. Virtual data rooms are also growing their presence in the health industry, where organizations are searching for new ways to secure protected health information (PHI) in scenarios like biomedical trials. 

Virtual data rooms can benefit any industry and organization that needs a secure location for a specific set of sensitive data. 

Software Makers

If you’re interested in creating a virtual data room, here are some vendors that offer a solution:

  • Anserada
  • OneHub
  • Intralinks
  • Datasite
  • Citrix
  • iDeals
  • SecureDocs

See more: Top Virtual Data Room Providers

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