Best Virtual Data Room Providers
What are virtual data rooms?
A virtual data room (VDR) or online data room is a highly secure online space for storing and sharing sensitive documents. This business solution is often used to securely exchange documents and manage users in M&A transactions, due diligence, initial public offerings, and fundraising.
Companies use data room software as a better alternative to traditional data rooms to secure their internal documents, enhance project management, protect file sharing, and sign external agreements.
It is considered more secure than traditional physical data rooms, as the risk of files getting destroyed or lost is extremely low. Also, unlike standard file-hosting services (e.g. Google Drive or Dropbox), virtual data rooms allow working with private data without compromising its security, which is crucial for businesses.
Some virtual data rooms are designed for desktops only, while others allow mobile access.
A step-by-step guide to selecting a data room solution
When choosing physical data rooms, you just have to ensure they are appropriately maintained and secured for proper data protection. However, choosing an online solution is a little more challenging. It involves evaluating the features virtual data rooms offer in addition to sophisticated privacy protection mechanisms.
To make choosing the best software easier for you, we recommend using the following simple algorithm.
1. Define your needs
Write down what you and your team expect from using a virtual data room in your file storage and sharing processes.
Tip: Use your use cases as a starting point to create a list of hard and soft data room features that are relevant to you. This will help you compare virtual data rooms. “Hard” features are those your business cannot do without (i.e. must-have tools). “Soft” features are nice to have, but not crucial (think of the wireless smartphone charger in the car).
2. Set a budget
Define the investment price range: how much your company is ready to invest in the virtual deal room at the implementation stage and how much investment you can afford later.
3. Research into providers
Gather information about all the data rooms and move forward with top-level evaluation: analyze these vendors according to various relevant criteria, including positive and negative reviews, the number of negative comments on forums, successful case studies featuring well-known clients, as well as use cases in your target industry.
4. Choose the most suitable vendors
Make the shortlist of virtual data room providers according to the list of key features that you put together at the preparation stage (hard and soft VDR features).
5. Request a trial and try the solution
As a result of the previous step, you should get an even shorter list of data rooms (which is good news). The next step is to contact them — either via email or their website chat pop-up — and request a trial to see what these virtual data rooms offer. Then, select the teams within the business structure to test all the features of the short-listed providers during the trial.
Tip: When testing virtual data rooms, look through all the options for onboarding and customer support this provider offers (it can be a knowledge base, 24/7 phone support, educational videos, dedicated account managers, etc.).
6. Integrate your data room
If the trial goes well, sign a contract and begin the deployment of the virtual data room across your whole company. This is the right time to start the onboarding process, too.
Summing up the above, it is essential to mention the common misconceptions regarding choosing the best virtual data room — for example, the more expensive, the better, or the more features, the higher performance. Avoid these myths and build on what features you need to drive your deal and what users say about the data room provider you want to choose.
Virtual data room comparison criteria
If you want to select the best virtual data room for your company, you first need to define (and later fine-tune, if necessary) the selection criteria you will use.
It’s clear that the guiding criteria for choosing your provider will vary depending on the industry you are in, the size of your company, and other specificities. However, a few things remain always important when choosing a virtual data room, namely:
- Virtual data room features set
- Pricing plans and payment options
- Free demo and free trial
- Onboarding and support
- Certification and document security options
And now, let’s get into those selection criteria.
1. Virtual data room feature set
All the best data rooms on the market offer the same basic services to their users. So, if a provider you are considering does not offer one of the staple features listed below, it’s probably not a good idea to sign a contract with them — if they can’t provide even basic tools, how can you be sure they will cater for your specific needs?
Instead, look for providers who do offer the usual basic VDR features, such as:
Document management features
- Drag and drop file upload. This feature makes it extremely easy to upload onto the VDR files stored anywhere in the admin’s computer or on the cloud.
- Bulk upload. With this tool, admins can upload dozens of documents onto the VDR all at once.
- Support for multiple file formats. Basic text formats like docx, rtf, and pdf should be included, and also image formats such as png, jpg, jpeg and others.
- Automatic naming and indexing. This feature saves admins a lot of time, as they don’t need to change titles one by one to have neatly named folders and files.
- Full-text search. This tool is beneficial when users or admins want to find specific documents. All they have to do is type the words in the search box, and the search will be conducted across all documents. Most providers offer optical character recognition, which turns an image of text into a readable document.
User management features
- Granular user permissions. This tool allows admins full control over what each individual user can do with each specific document.
- Group permissions. With this feature, admins can save time by allotting permissions to a number of users at once.
- User activity analytics and reporting. It’s often important for data room admins to know how each user has been interacting with the documents. For instance, the admin may see that one prospect has viewed deal documents for longer periods of time than any other prospect. This will signal to the admin that this prospect is more interested in the deal than anyone else, and therefore deserves greater attention. With user analytics and reporting features, admins can know exactly how users interact with documents stored in the VDR.
Document security features
- Customizable watermarking. This basic feature is important because it helps ensure documents stay confidential. The admin can customize documents with a watermark bearing the viewer’s name so that the viewer has every interest in preventing documents from leaking.
- Multi-factor authentication. A secure online repository allows successful authorization to data rooms only through a multi-step login process involving two or more verification factors.
- Remote shredding. This feature allows admins to erase documents even after a user has downloaded them. Remote shredding increases admin control over the confidential data stored in the VDR.
- Built-in redaction. This tool makes it easy for admins to erase confidential data — such as financial figures and personal info — from documents before sharing them with VDR users.
- Group and private chats. With built-in instant messengers, users don’t need other apps to keep in touch. In addition, all chat content is encrypted, so members can discuss top-secret topics without fear.
- Notifications. Each relevant user is notified of adding a new document, user, or project to the data room. Thus, you are always on the same wavelength as colleagues and partners wherever you are.
- Q&A. The Q&A module centralizes large volumes of diligence questions and answers. Furthermore, advanced providers offer attachment of documents to comments, auto-assignment of questions to experts, and import and export of Q&A content from Excel to and from the platform.
2. Pricing plans and payment options
Different data room services have varying pricing approaches and different payment options for their users. These include monthly or flat rates, pricing for a single project, pricing for unlimited projects, data limitations, etc.
It’s important to comb through all the options and understand which virtual data room pricing system works best for your company. In the section “How much does a virtual data room cost?”, you will find a detailed look into the different pricing plans for data rooms on the market.
3. Free demo and free trial
If a virtual data room provider you’re looking into does not have an option of a free demo and free trial, then you need to take a close look at this company: most likely, this is an indicator that there’s something wrong with their product. For example, it might not be updating quickly enough to meet new technology requirements, or the provider itself might be a newcomer on the market.
But even if their product is genuinely good, it might not be the best for you. Do you want to invest in a month-long — or even year-long — contract without first trying out the data room? Surely not, as you risk being stuck with software that does not meet your needs.
4. Onboarding and support
Deployment and onboarding are key to your team and your company accepting — and making good use of — your new file-sharing tool.
Also, you don’t want to lose an important client or a deal just because your data room was malfunctioning at the worst possible time. When there’s any problem — and there will be, because even the best data room solution is not perfect — expert technical support will help your team get back to work with as little time wasted as possible.
5. Certifications and document security options
As we said before, what sets online data rooms apart from other data hosting cloud services is their security. Now, different companies have different security requirements — so make sure you only shortlist virtual data room solutions which answer to your company’s specific security requirements.
To learn more about Canadian VDR certifications for data security, read the section “Secure data room certifications in Canada” below.
Compare data room platforms
Data room software use cases
Virtual data rooms are used by medium and large businesses and organizations across every industry and in most countries in the world. Companies most commonly use virtual data rooms in the following use cases:
- Virtual data rooms for mergers and acquisitions
- Data rooms for due diligence
- Data rooms for real estate
- Law firms
- Accounting firms
- Banks and investment banking companies
- Life science companies
- Universities and research centers
Virtual data rooms for mergers and acquisitions
Mergers and acquisitions through a virtual data room provide unparalleled data protection regardless of the number of parties.
So, for the seller side, the solution is a way to provide unlimited data access for prospective investors, lawyers, and advisers without compromising security. For the buyer, this is a way to quickly and conveniently review documents without traveling.
Data rooms for due diligence
While the due diligence process in a physical data room takes time, effort, and money, a virtual platform provides helpful tools for a quick but careful data investigation. Thus, you may benefit from instant data access, an automatically organized document structure, easy file management, and intuitive navigation, no matter how much data you have.
Data rooms for real estate
Communication with investors, portfolio management, and monitoring of long-term projects are just a few of the benefits real estate firms get from this secure platform.
Plus, as a super-powerful document management solution, the data room records each developmental and financial transaction, making document retrieval during high-stakes deals instant and easy.
For lawyers, virtual data rooms provide a multifunctional client portal and a centralized space for real-time communication with clients and colleagues.
During litigation, an online solution is an indispensable tool for secure document sharing at every stage of the litigation.
Finally, the sector makes good use of VDRs to securely store data on bonds, disclosures, trustees, underwriters, and bondholders’ legal advisors.
For an accountant, virtual data rooms are a controlled environment for exchanging sensitive information such as payrolls, profit and loss accounts, taxes, contracts and agreements, invoices, etc. In addition, accountants can track changes in any document they are responsible for in real time.
Banks and investment banking companies
Investment banks need software solutions that combine straightforward communications with reliable data storage. Thus, investment bankers use VDR to gather data, perform due diligence, showcase targets to buyers, and help with post-transactional integration.
Life science companies
The health of companies in the life science industry relies heavily on intellectual property security. With this in mind, life science teams use HIPAA-compliant virtual data room solutions for research and development to maintain the highest level of privacy protection.
Prospective partners use virtual data rooms to share access to sensitive information and data regarding each other. Additionally, they can set permissions to control who has access to what.
Data rooms assist startups in analyzing investor interest during capital raising. For example, businesses use VDRs to monitor which investors spend the most time reading particular firm papers and how much time they spend in a data room, which helps startups gauge investor engagement.
Virtual data room pricing structures
Virtual data room pricing ranges between $60 and $1,250/month for monthly plans, and from $15 to $1,000/month for annual plans. Final virtual data room pricing depends on your requirements and on the level of value the provider is offering. On average, the virtual data room cost for one project with up to 10GB of storage is $100/month.
Going for the cheapest provider when choosing a virtual data room solution isn’t always the wisest course, because higher virtual data room prices often go hand in hand with better productivity and higher data security.
Once you begin comparing available virtual data rooms, you’ll notice that every provider of virtual data room services takes a different approach to pricing. Here are the most common VDR charging structures:
|Per-page pricing||This data room pricing model is ideal for small projects. Each page can cost anywhere between $0.4 to $1, which adds up to a relatively budget-friendly sum. But medium-sized or large projects may throw the fee schedule out of proportion.|
|Per-user pricing||The data room pricing per administrative user can work for most projects, as long as you clearly understand how many people will participate.|
|Storage volume pricing||Paying for data storage volume gives virtual data room users more flexibility. In this case, the virtual data room cost might be priced per 1GB or for a range of storage, for example, up to 10GB.|
|Pricing based on project duration||Some projects only last a few weeks, while others can stretch for years. Pricing models based on duration usually offer more value for long-term projects.|
|Flat monthly fee||The monthly fee is the most common method for online data room pricing. It gives the most flexibility to users and works particularly well when it’s difficult to estimate the project’s storage volume beforehand.|
Benefits of using virtual data rooms
Virtual data rooms are widely spread among the corporate world players thanks to the advantages they offer:
- Compliance with international data security standards. Data security certification is the most trustworthy evidence of the software’s security level. Thus, selecting a licensed data room vendor will ensure your data is managed following industry standards and never threatened.
- Secure sharing of sensitive corporate data. Data encryption in transit and at rest, dynamic watermarks, remote shred, and granular access permissions completely eliminate unauthorized data access and breaches.
- Streamlined document management. Data rooms simplify everything about managing documents by providing bulk upload, drag and drop, automatic indexing, labeling, and full-text search.
- Full data access control. Data rooms offer complete audit trails, so that any interaction with the document, folder, or a specific data room section is fully traceable.
- Enhanced collaboration with multiple parties. Everyone can stay in touch thanks to built-in Q&A modules and document annotations, no matter how many parties are involved in a transaction.
Efficient working on the go. Mobile and laptop apps from data room providers are a great way to stay productive non-stop. Upload files, share documents, set user permissions, and participate in decision-making wherever you are.
Secure data room certifications in Canada
Since the data room industry is a leader in business security, providers must ensure that both physical and digital mechanisms protect your privacy.
Physical security features
Even virtual data rooms have offline security standards. However enhanced and secure VDR cryptographic algorithms are, they also need to be in line with offline security standards to prevent hackers from physically visiting your server rooms and downloading sensitive data stored there to their DVD or USB flash drives.
Therefore, multiple data centers distributed across several continents and redundant data copies must be physically guarded 24/7 with the help of a security service, advanced biometrics, and keycard controls.
Digital security features for an electronic data room
- Two-factor authentication (2FA) protocol ensures that deal room users verify their identity and confirm their rights to the data with the help of two authentication steps.
- SSL or TLS protocols that are gradually becoming the standard for any data exchange on the Internet provide maximum security for data exchanges between the server and the agent, safeguarding both of them from MITM (Man In The Middle) attacks.
- End-to-end data encryption. 256-bit AES end-to-end data encryption. In case virtual data room providers do not comply with this protocol, the data transfer between servers and agents is protected but the document itself is not secured. Secure virtual data room has addressed this issue and now makes the documents themselves encrypted.
- Digital Rights Management (DRM) limits or hampers copying, modification, and viewing actions with digital data. DRM protection allows businesses to control access to documents even after they are downloaded from a virtual dataroom by third parties.
- The DLP system prevents leakage of confidential information thanks to built-in mechanisms for determining the degree of confidentiality of a document that can be detected in intercepted traffic.
- ISO-27001 (digital asset security standard) compliance. An international standard that governs information security management in a company.
- ISO-27081 compliance. Regulates the principles for protecting Personally Identifiable Information (PII) following the principles of confidentiality described in ISO-29100 for a public cloud computing environment.
- GDPR compliance is important for the users of the file-sharing service who work with contractors, customers, or partners from the European Union, where it is impossible to proceed without following this standard.
- HIPAA compliance. An important standard for those VDRs that have customers from the medical sector: the Health Insurance Portability and Accountability Act (HIPAA) is the information protection standard for sensitive data about patients.
- FINRA compliance. This standard is created by the Financial Industry Regulatory Authority (FINRA) which provides regulatory services for the financial sector players.
How to choose virtual data room software?
The process of choosing the best and most convenient virtual data room software is no different from any other project you need to deal with in your daily routine. And, like any other project, it has two crucial stages that require a thorough understanding and attention to detail every step of the way: preparation and execution.
The better you plan, the better your results will be, and the higher ROI you will get.
How to set up VDR software?
Well-built VDR software is easy to set up. If the basic customization is done correctly, it shouldn’t take much time to start using the software efficiently. Even though the process is very straightforward, you can always refer to a virtual data room tutorial for guidance. The major steps of setting up a virtual data room are:
- Select a VDR solution that meets your criteria
- Decide on the structure of the data room
- Upload files and organize them according to your planned structure
Gather the required documents and place them into the folders and subfolders you outlined during planning. Take advantage of features like bulk uploading and auto-indexing to speed up this process.
- Establish permissions and invite users
- Maintain the data room and keep your files updated
What file formats can I store in a VDR?
Depending on what virtual data room providers you’re looking at, file formats that can be uploaded to their electronic data room include:
- text files such as pdf, doc, docx, rft, and others
- image files such as jpeg, jpg, raw, psd, pdr, ai and others
- video files such as mp4, mov, avi, wmv, flv, and others
- audio files such as mp3, aac, wav, and others
- spreadsheet files such as xlsx, ods and numbers
How do companies use virtual data rooms?
Most often, online data rooms are used to securely exchange sensitive documents during M&A transactions. But a virtual data room can be used in any other situation when an organization needs secure cloud storage and sharing tools to make sure confidential information stays protected.
For instance, organizations use a virtual data room solution when they need to exchange confidential documents while conducting a due diligence process, performing a real estate transaction, or carrying out an initial public offering.