Virtual Data Rooms: VDR Guide 2023

Virtual data room definition

Virtual data rooms are digital tools that provide a collaborative platform for multiple parties to share, access and review confidential documents securely. Depending on the specifics of a business or a project, VDR functionality can be tailored to meet the customers’ needs.

VDR software is on the rise, and practically every company considers moving all transactions into the digital space. But to make the right choice for your project, you must first get to know the basics of what virtual data rooms are and how they work.

How to choose virtual data room software?

1. Define your digital data room requirements
2. Estimate and allocate the budget
3. Outline the necessary features
4. Shortlist the virtual data room providers
5. Use the free trial to test the software

By taking a close look at online data room offers from top virtual data room providers, you should know what questions to ask and what factors to evaluate to find the best value. This website goes deep down into the details to show you which virtual data room providers have the best balance between the choice of secure file-sharing features and their pricing plans in the virtual data room comparison.

Use this checklist to compare virtual data room service providers and select the most suitable solution for your case.

Data room selection guide checklist

At first glance, all online data room providers look rather similar. They all have pretty much the same features, offers, and approaches. Although, when you take a closer look, you can see that there are differences between them and different virtual data room pricing approaches. Therefore, to choose the best virtual data room for your needs, you have to invest some time in the research. Use our guidelines to compare virtual data rooms and pick the best solution for your project.

Virtual data room functionality

Virtual data rooms are used across multiple industries by various-sized businesses to ensure effective and safe document sharing. Seasoned online data room providers always ensure the security and availability of their platform and establish effective communication with the users. Other key features of the best data room software include a user-friendly interface, detailed analytics, flexible customization, comfortable pricing, and an option to test the tool for free.

Most data room providers ensure high data and access security. However, the most comprehensive security certification to look for is  ISO/IEC 27001:2013 certification — a leading international information security standard. Recently, some virtual data room vendors started getting an additional certification for personal data protection for cloud services — ISO/IEC 27018. Having this standard certification is proof that the provider is trustworthy and safeguards customer data.

A standard data room software should have the following functionality:

• High data security standards
• Instant access regardless of location/time/device
• Extensive data management functions
• User management and access security
• Reporting and analytics
• Customization options

While conducting your search, you need to take into account that no two virtual data rooms are the same and some will be useful for certain types of projects such as due diligence and M&A transactions, while others will be useful for things such as case studies and document repositories.

What features should the best data room have?

So, how do we understand which provider offers the best deal? The key is to understand the variety of features present in solutions by top virtual data room providers and then determine which is best for your business needs.

• Multi-factor authentication. The best virtual data room providers establish multiple steps of user verification to reduce the risks of the unsolicited activity and closely monitor each user’s actions inside the VDR. The authentication process typically involves a password and a verification code sent to an email or a cell phone number.
• Built-in virus scan. Virtual deal rooms are always on the hackers’ radars. Constant virus and vulnerability scans allow building a shield against potential malicious activity and minimize the chance of data leaks or information mishandling.
• Drag-n-drop uploading. An ability to upload files in bulk by dragging them inside the data room online saves a great deal of time and allows deal handlers to focus on more substantial matters. Versatile format support goes hand-in-hand with this feature. 
• Digital watermarks. Trustworthy data room services provide several levels of file protection. Digital watermarking allows insulating sensitive documents without affecting their functionality for authorized users. Such watermarks also imprint the information of each accessing user, which creates an extra level of protection against internal leaks.
• Auto-indexing. This feature minimizes the efforts to organize large document volumes inside the data rooms. Indexing adjusts as the data gets rearranged and allows users to find the necessary documents in seconds.
• View as. Knowledgeable data room providers will let administrators enter the VDR space from the perspective of any user. This way, you can ensure all the rights are correctly assigned, and every participant will have a comfortable and productive experience using the virtual data room services.  
• Granular permissions. There will always be multiple layers of permissions inside the best data rooms. On top of that, the software may allow you to assign privileges on the user level, duplicating the competency framework inside your organization. 
• Q&A. Streamlined Q&A management is fundamental to due diligence, M&A, and even internal collaboration. The best virtual data rooms integrate the Q&A functionality into the interface, creating a transparent and manageable query resolution flow.
• Audit log. Activity reporting is a must-have feature for reputable electronic data room providers. Such reports can help you oversee the project better, attract attention to the neglected areas, ensure utmost data safety, and establish better accountability.
• 24/7/365 user support. Make sure that the data room provider you choose offers access to multilingual, responsive customer support. Look for the guarantees of fast response time and single-point-of-contact resolution.

Compare the virtual data room providers

A productive virtual data room comparison is a step to start with when choosing the data room. It should build off the evaluation of security measures, deployment solutions, and customer support.

1. iDeals

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Best for:

Corporate due diligence, M&A, real estate management, board communications, life sciences, and corporate restructuring

Typical customers:

• Freelancers
• Small businesses
• Mid size businesses
• Large enterprises

Provider review: iDeals Solutions is one of the top data room providers for various-scale businesses across many sectors. iDeals combines the best VDR software security practices with versatile feature sets and user-oriented adaptability. Online data rooms by iDeals are known for a multi-layered approach to data safekeeping and streamlined due diligence workflows.

Pros:

Cons:

• A comprehensive set of security features including dynamic watermarking, single sign-on, and 99.95% server uptime
• Up to 8 levels of access privileges
• Proactive customer service that speaks multiple languages
• Compatibility with all major operating systems and devices

• Occasional technical difficulties

2. Datasite

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Best for:

M&A lifecycles

Typical customers:

• Freelancers
• Small businesses
• Mid size businesses
• Large enterprises

Provider review: Datasite is one of the best data rooms for M&A for large and enterprise-scale companies. Coming from an extensive legacy of a financial printing business, Datasite offers particular value to investment banks and law firms undergoing M&A. The electronic data rooms from Datasite deliver comprehensive merger and acquisitions experiences along with the provider’s other products and services.

Pros:

Cons:

• Extensive expertise in financial markets and M&A
• UK-based technical support and project managing teams
• Utmost protection of corporate data and internal transactions

• Lack of solutions for small and medium businesses
• Unintuitive interface and navigation
• Complex pricing with hidden fees

3. ShareFile

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Best for:

M&A and IPO in legal, healthcare, and financial sectors

Typical customers:

• Freelancers
• Small businesses
• Mid size businesses
• Large enterprises

Provider review: Citrix Systems is one of the M&A data room providers with a focus on simplifying due diligence. ShareFile offers secure, easy-to-navigate solutions with all the basic features necessary for a staple data room experience. ShareFile reportedly offers the most value to users who have purchased other products by Citrix.

Pros:

Cons:

• Intuitive user interface with simplified file-sharing
• White labeling for brand image enhancement
• Integrations with Office 365 and RightSignature

• No option to manage multiple files simultaneously
• Overcomplicated access control
• Inflexible, per-user pricing model

4. CapLinked

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Best for:

M&A, Sale of assets, Board reporting, Raising capital, Real estate transactions, Business development negotiations

Typical customers:

• Freelancers
• Small businesses
• Mid size businesses
• Large enterprises

Provider review: The CapLinked VDR software offers more secure, straightforward, and faster document management and exchange. It allows a user to access and share data 24/7 from any device without risks, which significantly speeds up workflows. Additionally, the CapLinked data room is crucial for due diligence, too. It facilitates reviewing and analyzing documentation, provides guaranteed data protection following international compliance standards, such as SOC 1, SOC 2 Type II, and HIPAA, and reduces the number of administrative staff.

Pros:

Cons:

• Ease of use without compromising safety
• Administrative granular access control over each user
• Good value for money, according to user reviews

• Permission features may be confusing for some users
• Outdated interface design compared to other providers
• Inviting participants to the platform can be difficult

5. DealRoom

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Best for:

M&A Due Diligence lifecycles

Typical customers:

• Freelancers
• Small businesses
• Mid size businesses
• Large enterprises

Provider review: DealRoom is another one of the M&A segment VDR service providers. The provider takes a multangular approach to mergers and acquisitions by offering solutions for every participating side of the project, considering their industry and deal handling practices. DealRoom is a suitable virtual data room business provider for medium and large companies at any stage of the M&A cycle.

Pros:

Cons:

• Well-organized document management capabilities
• Customizable document security
• Advanced collaboration tools such as user tagging

• Users need to undergo several settings’ stages to restrict access or configure rights
• Takes a long time to understand the platform
• Poor file tracking in terms of document status updates

6. Firmex

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Best for:

M&A, real estate management, and investment banking

Typical customers:

• Freelancers
• Small businesses
• Mid size businesses
• Large enterprises

Provider review: Firmex is a Canadian data room provider specializing in assisting small and medium companies across all major sectors. Firmex combines simplicity with practicality to deliver comprehensive, robust solutions. Firmex is a suitable solution for projects with low staff count and minimal digital data room requirements.

Pros:

Cons:

• Intuitive interface and sensitive data protection mechanisms
• Responsive and proactive customer service
• Several levels of access privileges and dynamic watermarking

• No online chat to reach the technical support
• Inconvenient pricing for short-term projects
• Poor file tracking capabilities without an option to see old versions or restore accidentally deleted documents

7. Ansarada

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Best for:

Ansarada is clearly a solution designed for the big fish, and as such it’s a nice fit for corporate deals and transactions such as due diligence for M&A, overall deal management, and post-deal integration. It’s also an ideal tool for mitigating governance risk and compliance, overseeing tender lifecycles, and managing board planning and other actions.

Typical customers:

• Freelancers
• Small businesses
• Mid size businesses
• Large enterprises

Provider review: With 17 years of practice in the game, Ansarada is more than your bread-and-butter virtual data room provider. With Ansarada, you’ll get access to every resource necessary for clean, transparent, and smoothly-executed transactions. This includes thorough audit trails, access controls, and a slew of other advanced data protection features. As a pioneer in the field of AI for data insights, the Ansarada data room also deploys some powerful tools for dealmaking, including its AI Insights, Workflow, and Board Management features. Ansarada is one of the ultimate solutions for big dealmaking in any field, from legal to pharma to financial services and technology.

Pros:

Cons:

• High level of security. Ansarada deploys a multitude of security features to ensure a 100% protected data environment. This includes file control levels, comprehensive audit trails, and bank-grade encryption.
• Bidder engagement score. Among its many AI-based features, Ansarada gives the data room admin a score that evaluates bidder interest based on their interactions with data room content and predicts the outcome of a deal.
• Instant customer care. An often-praised feature of Ansarada is their dedicated and friendly customer service, available 24/7.

• Expensive. The platform is pricier than many of its competitors, which makes it a less-than-ideal option for companies that don’t require the whole breadth of features available and would rather not pay big bucks for a data-management tool.
• Unintuitive design. Getting used to the platform can take longer than with similar services, as reported by some users.

8. FirmRoom

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Best for:

M&A lifecycle, due diligence, company audits or onboarding, and training new staff.

Typical customers:

• Freelancers
• Small businesses
• Mid size businesses
• Large enterprises

Provider review: FirmRoom is a simple, but effective VDR solution. Powered by a young and motivated team, the SaaS platform offers all of the essential tools for streamlining work with large amounts of files. This includes bulk upload/download, drag-n-drop, and easy sharing of documents. Certified by SOC-2 and ISO 27001, and compliant with HIPAA, FINRA, and SEC, the cloud-based service ensures your sensitive data is secured by military-level data encryption.

Pros:

Cons:

• Value for money: The FirmRoom data room is an inexpensive solution, offering all essential VDR functionalities at a low cost
• Intuitive design: The platform has a simple build and is easy to navigate
• Customer support: FirmRoom emphasizes a human approach, with a friendly and eager-to-help support team

• Compatibility and deployment: FirmRoom has only a web-based platform, without any dedicated apps. While it runs well on Chrome, the service has been reported to be slower on other browsers
• Fewer functionalities: The platform offers fewer analytics/audit trail resources than some of its competitors

9. Vault Rooms

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Best for:

From law firms working on big cases to major corporations closing a merger or acquisition

Typical customers:

• Freelancers
• Small businesses
• Mid size businesses
• Large enterprises

Provider review: Vault Rooms provides a solid platform to host, send, receive, and manage data in a highly secure environment. Its RLM feature is particularly useful as a way to organize the inflow of documents from clients or partners, sparing you plenty of headaches and saving time.

Pros:

Cons:

• Good storage interface. Highly intuitive file management interface, saving users’ time and energy
• Security. Vault Rooms is extremely focused on the security of its users, and it delivers one of the most all-around protected environments for cloud-hosted VDRs
• Request List Management. The RLM feature designed by Vault Rooms is a great way to optimize workflow for collecting and storing documents

• Price. Its most basic pricing plan will set you back nearly $200 monthly, which isn’t by far the most competitive option in the same range of providers
• Inadequate file viewing. Because it doesn’t allow users to open several files at the same time, the viewing/comparing process can be significantly slowed down

10. Imprima

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Best for:

Imprima offers valuable software for companies of any size across a variety of industries. Thanks to its cutting-edge technology, expertise, and experience on the market, Imprima data room is extremely useful for professionals working with M&A, capital raising, IPOs, real estate transactions investments, and portfolio management.

Typical customers:

• Freelancers
• Small businesses
• Mid size businesses
• Large enterprises

Provider review: Imprima provides a satisfactory level of security, essential organization, and fast sharing. Imprima can accommodate any real estate transactions, asset businesses, and IPOs, ensuring a seamless and structured document sharing process. M&A teams are given the tools that enable them to have users’ activity reports, giving greater clarity and insights with regard to the possible opportunities for better decision-making. The data room software offers a variety of assets for life-cycle management, raising capital, real estate transactions, mergers and acquisitions, and IPO.

Pros:

Cons:

• Al tools for automated redaction
• 24/7 top-rated customer support service
• Advanced security practices and GDPR compliance

• Sending out invitations and selecting file security settings is very slow and inconvenient
• No free trial for users to test before purchasing

As you can see, even though we’ve picked only the best data room providers, there are still many of them. That’s why you should start with understanding why you need the online deal room. What kinds of deals will you hold using it? Which functions do you need to feel comfortable maintaining your corporate documents? How often will you use it?

What to consider when choosing a virtual data room provider?

The global VDR market is saturated with many online data room vendors, all claiming to be the best virtual data room providers. The most important aspects to consider when choosing a virtual data room software is the providers’ experience, security certifications, expertise in the industry where your company belongs, and their pricing approach.

1. Software provider experience

When reviewing a VDR provider, look up their previous and existing clients. Look for companies you can trust. Pay attention to what business fields they represented the most and whether they had a good experience given the industry specifics. A lot of data room vendors showcase their clients on their websites, highlighting reviews from the most popular companies. Also, compare VDR ratings. There are some trusted review sites worth checking out offering top data room provider ratings. Ratings are typically given for software overall performance as well as in categories such as functionality, ease of use, support, availability, pricing, among others.

2. Compliance with data security certifications

Check whether the VDR service provider has been audited by ISO/IEC 27001:2013 Certified Data Centres or SOC 1 or SOC2 (Type I, Type II) Certified Data Centres. Also, take account of additional data processing terms as required under GDPR, for example, the obligation to secure protections from any subprocessor. If relevant for your business, check whether the VDR provider has compliance with HIPAA (Health Insurance Portability and Accountability Act) and sets the standard for sensitive patient data protection.

3. Expertise in your industry

A lot of VDR providers tailor the functionality of their software to the needs of a specific industry or use case, for example, M&A due diligence, legal operations, or real estate. By making sure your selected provider has experience in your industry, you can be sure of a successful and smooth transition to a digital data platform. Of course, some vendors claim to be suitable for any industry, offering different platform templates based on the type of project you will have. A software specialized for a particular business field, however, offers more guarantees that your individual needs will be met.

4. Pricing approach

Price is one of the main factors companies consider when choosing an online data room, but it should not be the deciding factor. Keep in mind that most data room providers offer a wide array of plans to choose from and with some of the most advanced features include in the more expensive plans.

Depending on the duration of the deal, the number of users, and the required storage volume, it is necessary to compare different pricing plans. Costs vary drastically among providers. Some virtual data room service providers offer flat rate pricing — a monthly fee that includes unlimited data storage, users, data, etc. This option is budget-friendly and prevents any surprises regarding VDR expenses. Some vendors also offer flexible billing — monthly, quarterly, or annually — with additional discounts when choosing a longer-term plan.

Once you answer these questions, it will be easier to determine your requirements and realize what you’re looking for. Another thing you should do is figure out your budget. Virtual data room providers set different prices for their services. Therefore, you should know in advance how much money are you ready to spend on the data room. It will help you to instantly drop options that are too expensive so that you don’t overpay.

Data room use cases

Virtual data rooms are powerful tools that are used by investment bankers, business owners, lawyers, and many other professionals, working in fields related to IP management, private equity, intellectual property, life sciences, and more. Many strategic partnerships are supported by the advanced functionality of data rooms and collaboration tools to complete complex financial transactions.

M&A

Mergers and acquisitions are always complex and involve many people and sensitive documents. M&A data room software allows M&A professionals to navigate the deal better and react to any query a lot faster.

Due diligence

A digital data room can significantly simplify time-consuming due diligence procedures by organizing large data volumes and allowing third-party experts to access necessary information without putting the rest of the files at risk.

Real estate transactions

Online data room assists real estate transactions with keeping all documents, such as building construction plans and data, NOCs, insurance, mortgage documents, land register entries, contract of sale, etc., in a safe environment for all involved parties to access.

Fundraising / capital raising

When managing a deal with potential investors, it is necessary to disclose confidential business information. VDR provides a safe way to do it while protecting companies’ intellectual property. You can read more about virtual data rooms for startup fundraising

Investment banking

Investment bankers use VDR software to share information with qualified buyers. Ability to view who has accessed the files, for how long, and what exact pages, are of particular benefit to investment bankers. 

IPO

Some data rooms are specifically equipped for the IPO preparation process. VDR helps efficiently share large volumes of documentation with potential share buyers. As going public is a very time-consuming and stressful process, a company must remain transparent, consistent and share necessary information promptly. VDR is a perfect tool for that. 

Licensing / legal document management

A virtual data room can help a law firm and its customers communicate in a secure virtual environment. VDR allows both parties to view, update, sign confidential documents and contracts virtually. 

Corporate repository

Corporate Repository holds and archives the most sensitive company information. A virtual data room can help distinguish document access and permissions among employees.

Virtual data room set up

To ensure a smooth transition to your new VDR, consider following these steps:

1. Gather all the necessary data and follow a specific file naming system
2. Have a clear vision and create the internal structure of your VDR (use folders, subfolders, access levels, categories, etc.)
3. Upload all files (VDRs typically have an automatic index numbering that numbers folders and documents sequentially as they are uploaded)
4. Create groups of users, set access permissions
5. Double-check everything and test functionality
6. Invite team members to begin work
7. If necessary, seek training for your team

These are the basic steps of a virtual data room set up. However, often it’s better to learn much more about how to set up a data room and we’ve prepared the needed guide for you.

The advantages of virtual data room software

The combination of basic and advanced features, unlimited application approaches, and tailored offers for virtually any business makes virtual data room software an irreplaceable element of modern deal-making. The most prominent VDR benefits include:

• High-level security. Data room security exceeds the safekeeping mechanisms of most file-handling software. If you go with the right provider, the chances of data leaks or breaches are extremely low.
• Convenience. A digital data room eliminates the need for physical relocation during anything from department meetings to global mergers. With VDRs, you can exchange sensitive data, collaborate on tasks, and possess high-stake deals faster and easier than ever.
• Improved workflows. Activity centralization and transparency improve the overall accountability of all contributing parties. If your virtual data room is organized well, each user will have a clear vision of their tasks and communicate with the rest of the team in a more streamlined way.
• Faster deal closing. Decision-makers tend to process transactions faster due to the variety of online data room features, utmost security, and enhanced convenience.
• Cost reduction. Maintaining a virtual deal room is a lot cheaper than storing corporate data in a physical space. The same goes for the costs of in-person meeting organization, which involves travel, accommodation, printing, and more.