A data room or virtual dataroom (VDR) is a secure storage space for sharing confidential information. It is the modern version of a physical room where hard copies of documents would be kept for a review during selling or buying negotiations Data rooms are typically utilized document management to aid in legal and financial due diligence.
All sizes of businesses use VDRs and SMEs with team members located all over the world find them especially beneficial. In the past, larger businesses might have chosen to use more expensive in-house solutions however, as VDRs continue to improve and become more accessible, they are being adopted by SMEs too.
Use of a data room
A data room can be helpful at any time in the business lifecycle, although it is usually used during M&A activities or other sensitive processes that require confidentiality. For instance venture capitalists will often require a review of contracts and other documentation of a startup before closing an investment. This can be done in a virtual data room with access granted to lawyers and other stakeholders.
A preparation data room can also aid an organization to prepare for a due diligence process by getting documentation uploaded early and making it available prior to when third parties are invited into. Some data rooms include redaction tools that can be used to safely and quickly remove sensitive information from documents prior to sharing them. This minimizes the chance of making a costly error that could threaten the deal.
