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What is a Data Room and How Virtual Data Rooms are Used


You may have a superficial knowledge of VDR software but feel like you are not ready to make the optimal choice even from the best data rooms available in the market. It's no wonder. Although all VDRs have many common functions, each separate data room provider has its peculiarities as for options, support, prices, etc.

However, you do not need to know all the technical specifics of this software to be capable of comparing VDRs and selecting a suitable one. Follow our brief guide to grasp the basics of online data rooms. Get the quickest review of VDR technology that will help you to select the best VDR provider for your business. No matter what your domain, you can be sure to pick exactly what you need.

What is VDR?

VDR , or virtual data room, is an adjustable repository and a physical deal room that can be used online. These are the two main features that define any VDR. This is technology you should integrate into your business as it is tightly bound for storing, organizing, and sharing huge volumes of info with strategic partners, auditors, your board members, or employees.

Imagine data room software as an ideal library in which all of your docs can be wisely arranged and sorted so that you can find and share anything in a click. The key advantages of this library will be:

  1. You can adjust it for a definite transaction, be it M&A due diligence or legal audit;
  2. You can expect a 100% secure exchange of your documentation.

VDRs can be regarded as improved versions of physical data rooms of the past with the only difference that it works online and no random person can get access to it.

Where is it used?

The above-mentioned abilities of virtual data rooms attract numerous business types, no matter its sensitive data, trade secrets, or even intellectual property. However, the main areas of use are businesses that involve the following operations:

  • Buy/Sell transactions or M&A;
  • Legal audits;
  • Initial Public Offering (IPO);
  • Investments / Venture capital mobilization;
  • Licensing and other operations with intellectual property;
  • Board Communication.

Sensitive data is a most precious asset. So, for both large and smaller companies focused in the arenas of law, life-science, new-tech industries, etc, truly reliable data room services will be a top-priority need.

How to use a VDR with the most profit?

Most business transactions do not require all VDR functions, but for certain businesses, these features will be absolutely irreplaceable. The best virtual data room providers will be able to offer you this minimum set of options, and more.


Top notch virtual data room providers can supply you with industry standards of security so you won't need to set up anything more. However, you will be free to apply two-factor authentication, set permission rules for each user, and trace the IPs of the VDR users. Some higher quality providers also allow such options as e-signature, etc.


Which user should have which access level? You will be the one who defines this. The most effective means here are such tools as watermarking and view-only options. They will help you to avoid illegal copying and unauthorized access to your sensitive data.

Setting up a VDR

When organizing a virtual data room, you can configure it exactly for the transaction you have planned. At your disposal will be such instruments as:

  • Drag & drop;
  • Auto-indexing / reindexing;
  • Due diligence checklist option;
  • Inviting users and assigning roles for them;
  • and more.


This feature of any decent electronic data room will allow you to log any activity made in your VDR. Thus, you will be able to trace each user's IP, device, or (suspicious) behavior. Moreover, this is a nice way to analyze and improve the way your transaction runs.


This must include not only a 'how-to' section for beginners but full-time assistance available 24/7 at whatever stage of using your VDR. No matter how good you are at it, problems occur with any software, and urgent help may be crucial for your deal.

Free Trial

This option is one of the most precious. With its help, you can evaluate the convenience of the VDR's interface and try most of its instruments.

How to pick the best VDR provider?

Whether you plan a data room fundraising, legal due diligence, or a similar time-consuming and critical activity, be sure to opt for a VDR vendor that:

  • complies with your business size and needs;
  • has a fair name and enough experience;
  • offers free trials and flexible pricing;
  • provides clients with full support that includes help with both setting up a data room and during its usage.


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