Virtual Data Room (VDR) Guide

The latest technology you haven’t heard of but have used many times before.

Executive Summary

A virtual data room is an online repository designed for secure collaboration on sensitive documents with outside parties. It is the physical data room's digital evolution.

Insight Summary

Virtual Data Room
On-a-Page

Store, share, and control sensitive corporate information and meet online securely. A VDR is:

• A secure online repository that allows users to control who can access certain information in the repository, e.g. important financial transactions, fundraising, IPOs, and real estate asset lifecycle management.
• Applied more and more to any organization concerned with secure and specialized management of its documentation.
• A secure online meeting place for all parties involved in the negotiation of an agreement.
• Accessible from anywhere.
• Used for M&A or joint venture investments, executive communication between board members, patents and licensing, loan syndication, and private equity and venture capital funding.
• Different from standard cloud storage in its complex rights management outside the company firewall and how it leads users through the entire deal and due diligence process.

Most popular uses:

• Structured arrangement and organization of all necessary documents, including texts or images.
• High-speed digital sharing of documents, which takes seconds instead of traditional mailing or courier delivery, which takes hours or even days.
• Secure, granular access to the documents and files from any device, whether desktop computer or a tablet.
• Quick, safe, and efficient discussion of documents online instead of time-consuming and risky face-to-face meetings.

Pricing:

• Pricing depends on features offered, project size, project duration, the amount of storage needed, the number of users, and the level of customization required. Like the internet and a cell phone, there is a base fee and add-on fees for extra features.
• There are four pricing models:
  • Per Page: Charged by page storage. Suitable for small projects. Can range from $0.40 to $1.00 a page.
  • Per User: Charged by the number of user licenses. Vendors offer a fixed number for a flat rate. User administration licenses range from $100 to $300. Other users/guest rates are lower.
  • Storage: Charged by the amount of storage required. Overages can add up.
  • Flat Rate: Monthly custom packages are available that support varying amounts of data, pages, and users. Flat rate pricing will eliminate overage surprises and allow for consistent budgeting. An average range would go from $500 to $1,000 a month.
• Pricing can range from a few hundred dollars a month to over $100,000 for a large project.

Virtual Data Room
Features

Top features:

• Access security
• Easy and secure upload, saving and management of multiple files
• Customer support
• Ease of setup
• Reporting

Other features:

• Activity tracking and audit log
• Multiple file format support
• Bulk upload
• Anti-virus protection
• Simple and easy-to-use workflows
• Unlimited users and storage
• Optional pay models, upgrade when needed
• Q&A tool
• Notes
• Alerts and notifications
• Dynamic watermarks
• Machine learning (enables automatic document translation and automatic red flag analysis)
• Accessible from anywhere there is an internet connection
• Multi-language support
• Advanced search
• Mobility
• Multiple projects in one account
• Microsoft Office integration
• Print screen disabling
• Customization
• Collaboration

What to look out for when selecting a VDR

Certifications and audits

• Virtual data room provider should be audited regularly and guarantee the maximum security in line with the highest security standards according to the ISO 27001:2013 certification and the GDPR.
• Ask yourself: Do you only require secure data storage or all the functionality of a VDR?
• Providers offer different levels of customer support – some around the clock, while others have more limited contact.
• You don’t need to spend as much money on one-off projects as you do with ongoing or more business-sensitive projects. Do your projects require file sharing without enhanced security features?
• Review the providers’ certificates. Use an accredited provider when dealing with sensitive information.

Fit for your key use cases

• M&A and due diligence, legal documents management, capital raising, real estate transactions, regulatory risk management use case: M&A involves large volumes of confidential documents that need to be stored and protected with several security. Bidders in the M&A deal have access to information stored in the data room 24/7 with no limits as long as the seller’s side grants this access. The seller has transparency on user activity, documents, or buyer request analytics.
• Fundraising use case: Fundraising campaigns can last for weeks, even years, and engage many teams and professionals to review, comment, or update financial documents. VDR should let users share information quickly and safely. Also a Q&A section and a comments section allow all parties of the fundraising process to communicate and stay on the same page. To improve the cooperation process, the fundraising virtual data rooms offer features like direct messaging, task manager, and other additional functions that facilitate teamwork.

Balance security and usability

• A variety of document protection options: Can make the documents very secure – no printing, no screenshots, no downloading, and a large digital watermark, but the parties reviewing the documents may not be very happy with the user experience and the inconvenience, or the sensitivity of the document may not warrant the restrictive measures you’ve put in place.
• You can make the documents easy to download and share, but at the end of the transaction, you might lose track of those documents, running the risk that local copies are out there outside your view. As an administrator, carefully weigh security and usability to find the right balance.

Who should provide the VDR?

“Those who don't use a VDR may be seen as not professional and that can impact your deal-making advantage.”

Situation 1
The seller should provide the virtual data room of their own data.

Situation 2
If the buyer has a VDR, then they might mandate using theirs since they will own the data,

Situation 3
If there’s a third party (e.g. a bank) to help facilitate the transaction, then you might not even need to purchase a VDR.

VDR Value Determination Matrix

Customize the color of matrix to your organization’s usage. The column with a single most likely circumstance is the option with the best chance of avoiding extra charges. For example, the best options for consideration in this instance are by page and storage as they are the only options with the highest overall likelihood.

Info-Tech Insight

If you are working with a third party (e.g. a bank) to help facilitate your transactions, then they might already have a VDR; therefore, the decision is made for you: VDR purchase is not needed.

Success Metrics

Adoption: How much engagement does your data room yield?

Efficiency: How efficient is it to conduct tasks in your data room?

Versatility: How flexible and accessible is your data room?

Security: How vulnerable is your data room and its assets?