A virtual dataroom is an online repository that allows the storage and distribution of documents. It’s used to assist with due diligence in M&A transactions and loan syndication as well as venture capital and private equity transactions. Virtual data rooms allow authorized users to access secure documents through the secure website or agent applications. VDR users include small-scale start-ups as well as renowned organizations.
When selecting a VDR for their business, companies must be aware of the changing requirements of their business. It is also important to consider if the company has any special requirements for storage of documents, e.g. HIPAA compliance as well as the sensitivity of files and documents, or regulatory compliance. Also, they must ensure that the business they choose provides a trial for free and ongoing technical support to allow them to test the product before making a decision to purchase it.
Many companies employ VDRs to communicate information with their stakeholders such as investors and vendors. The ability to view and sign documents online eliminates the need for offline meetings and speeds up negotiations. Furthermore, it permits companies to engage a wider number of potential bidders and reduces the chance that the deal will not go through.
A VDR differs from a collaboration tool or a file-sharing service, because it is designed to store and protect sensitive information. It comes with features such as two-factor authentication and IP-based access restrictions. It also comes with certifications for data protection like SOC 1, SOC 2, ISO 27001 and GDPR.