A VDR is an online database in which businesses can share and store confidential information, usually used during a financial transaction. Virtual data rooms may also be described as a type of document filing system or electronic repository. With the ubiquitous reliance on PCs and specialized software to keep a business running smoothly, and coupled with the fact that more enterprises are making the transition of being paperless, many of the previously document-heavy operational practices have been shifted to the virtual realm.
Virtual data rooms are used by companies to securely share and store critical and sensitive corporate data and most commonly used during deals. The information stored in data rooms is often private documentation considered to be of high value to the business or owner of the data room. In addition to the traditional record-keeping, that is required for many legal, financial, and tax matters, a lot of businesses have many other important files, documents, and information they need to retain and would like to store safely and securely to ensure that it remains confidential. For instance, items relating to intellectual property, such as copyrighted works and trade secrets, must be convenient to access but stored in a highly secure location. Because of the growing importance of data and the ensuing increased demand to ensure such data is adequately safeguarded, the VDR was born, and over the years, it has evolved into the kind of solution it is today.
Benefits of Using a Virtual Data Room.
For financial transactions, VDR software has become the norm, replacing the physical data rooms. Physical data rooms had lots of limitations and were inconvenient and time consuming for the parties involved. Thanks to the latest advancements of online security, however, the physical data room became an outdated concept and is being replaced with a virtual data room, where businesses can share information safely, securely, instantly, and from anywhere in the world. Below, you can find the most common uses of VDRs.
For startups and larger enterprises, engaging in fundraising rounds is often key to growing a company. Entrepreneurs know that convincing investors to part with their cash isn’t exactly an easy feat. Fundraising mandates, many documents, and data sharing are really important, especially during the initial steps. During these phases, using VDRs can drastically expedite the requisite exchange of important information, and leadership teams on both sides of the deal should feel comfortable given that using virtual data rooms will allow for better oversight and control.
Merging with or acquiring other companies involves research, looking at detailed reviews, and reading through volumes of documents. For businesses merely entertaining a purchase offer, it can be daunting to hand over the important and sensitive data that will be requested. Thus, businesses engaged in M&A can still participate in negotiations and allow for the safe viewing of confidential, valuable data, by relying on a purpose-built VDR. And, if a deal doesn’t close, access to the data room can easily be terminated.
Even if businesses don’t formally merge or acquire another company, it makes sense to partner with other enterprises for the provision of some service, goods, or to engage in an entirely new venture. These arrangements, no doubt, require a substantial amount of document and data sharing. Once again, this is a situation in which data rooms will prove invaluable, as they will greatly ease the minds of the leaders involved because they can rest assured knowing that all the valuable data will be well-protected.
There are cases when businesses may not be as concerned about sharing valuable data with external parties, but still need a coherent data sescurity strategy, this is particularly true for new companies and other enterprises whose survival and growth are dependent on safeguarding invaluable intellectual property (IP). For businesses falling under this umbrella, establishing a data room to store all IP-related documentation is a wise decision, especially when security standards are imperative.
Other uses of VDRs include audits, board communications, secure document sharing, and more! Today, it is easier than ever to invest in and set up a secure data storage solution, with the modern VDR being the service of choice, data rooms offer lots of benefits including the practical features and tools that companies want, and will use, and they have a user-friendly, intuitive interface.