In the past, companies kept sensitive documents under lock and key in fear that their private documents could fall into in the wrong hands. If this were to happen, it could mean the loss of business opportunities, costly lawsuits or even fines and data breaches.
With the advent of digital technology, business owners started using virtual data rooms (VDR) to share documents and anchor information with stakeholders quickly and securely. VDRs are cloud-based solutions that enable secure, 24/7 remote access to files and folders on any device with an internet connection. These platforms provide a range of collaboration tools to facilitate dealmaking and efficient document management. These platforms also come with advanced features like specific permissions and audit trails that reduce the risk of accidental deletion or malicious intent.
The most popular use-case for virtual data rooms is due diligence in the mergers and acquisitions. It is essential to have a platform that permits both the sell-side as as the buyer side to examine and archive documents. VDRs simplify the due diligence process by significantly reducing the time required to complete due diligence.
Startups make use of VDRs to collaborate with advisors and investors on fundraising rounds, M&A and other transactions. These platforms let startups upload and organize their documentation into an easy-to-use indexing system that eases searches and speeds the due diligence process. These platforms also provide tools for collaboration, such as commenting, Q&A sections, and task assignment to help teams work more efficiently. Cloud-based models are offered by a wide range of modern companies that don’t require any hardware or installation. Other options include self-hosted software installed on the server of the startup, which offers more control but does require IT resources.