In the past, companies kept sensitive documents under lock and keys because they were afraid that their sensitive documents could fall into unintentional hands of someone else. If this happened it could lead to the loss of business opportunities, costly lawsuits or even data breaches and fines.
With the development of digital technology, business owners began using virtual data rooms (VDR) to share documents and data with their employees quickly and safely. VDRs are cloud-based solutions which provide secure, 24-hour remote access to folders and files from any device that has an internet connection. These platforms provide a range of collaboration tools that help in deals and efficient management of documents. They also provide advanced features like watermarking, granular permissions and audit trails to reduce the chance of accidental or malicious deletion.
Due diligence is the most popular use of virtual data rooms during mergers and acquisitions. Both the sell-side and buy-side require extensive documentation to be reviewed and it’s crucial to have a single platform where these documents can be stored and reviewed easily. VDRs can cut down the time needed for due diligence by significant amounts.
Startups use VDRs for collaboration with investors and advisors in fundraising rounds, M&A and other transactions. These platforms let startups upload and organize their documents into an easy-to-use index system that facilitates searches and speeds up the due diligence process. These platforms also provide tools for collaboration, such as commenting, Q&A sections, and task assignment to assist teams in working more efficiently. Cloud-based models are provided by a wide range of modern companies that do not require any hardware or installation. Self-hosted software, installed on servers that are in use at startup, provides more control and may require IT resources.