What is a Virtual Data Room
A Virtual Data Room is a secure online repository used for the secure storing and sharing of information. Typically a virtual data room is used in investment banking for storing and disseminating files for mergers and acquisitions (M&A) transactions, loan syndication, and venture capital / commercial financing transactions.
More often than not, virtual data rooms are used within the scope of corporate due diligence for tasks such as the collection, storage, sharing and reviewing of documentation throughout the transaction process.
Critically, virtual data room access is offered to the participant organisations and representatives, often in the same way that a client portal functions - that is, with documentation viewable only to pre-approved users of the platform. Of course, a platform like Clinked, provides all of the functionality of a virtual data room but with the greater functionality you would expect to find in a comprehensive client portal platform.
What makes a good virtual data room?
So, we've established that a virtual data room is an ideal platform for securely exchanging confidential business data in a secure and structured environment. But with a vast array of virtual data room providers on the market, there are a number of factors to consider when choosing the right virtual data room for your needs.
Depending on your specific requirements, the following features and functionality could make all the difference:
White label branding
You may have come across the practice of white labelling in the past without realizing that was the term for it. White labelling essentially allows you to put your branding and logo on a third-party product and claim it as your own.
Why would you want to do that? Well, for many reasons, but particularly so that you can promote your own branded client portal ti your clients without the need to invest inordinate amounts of money into the platform, not to mention the time requirement and stress of such a development.
By way of an example, Clinked, the world's favorite custom client portal has been funded to the tune of several million dollars over a 13 year period. Assuming that you'd like to avoid making that kind of time and financial commitment but still enjoy the benefits of your own branded client portal, the white label approach is a great way to go in providing great value to your clients with a platform that's ready to go.
Custom functionality and workflows
Before committing to a client portal it's important to understand how it will support your business.
They key to successfully leveraging SaaS (software as a solution) products is to make sure they work for you - not the other way round. That is to say that you shouldn't be trying to shoehorn your working practices into the software - rather, the software should be flexible enough to be tailored to meet your needs.
Most 'off the shelf' platforms simply don't accommodate this level personalisation. There is of course, one platform that does.
Ease of use
When adopting a virtual data room for internal and external teams with varying levels of technical expertise it's vital that all parties can use the system without extensive training. Your virtual data room needs to be intuitive - otherwise you'll find that it's simply not used.
The key to establishing the usability of a virtual data room is as simple as it is effective - book a demo before committing to a platform.
When selecting a virtual data room, as with most SaaS products it's always best to start small and upgrade. While the inevitable demo and trial period will highlight the suitability of the platform to you to some degree, it's only once you start using it in a real world scenario that you can truly appreciate the value and potential shortcomings. Be sure that your VDR provider offers flexibility to upgrade and downgrade to suit your needs.
Wonder how much you should pay for a VDR? We've written a separate article about VDR pricing.
Arguably one of the most important aspects of your virtual data room is the ability to manage the sharing of documents.
Keep in ming though, the workflow and access needs around those document. Will you need version control, audit trial functionality, user permissions and the ability to share upload and download functionality to third parties?
Getting documents onto the platform is the easy bit. Integrating those documents into a secure and efficient workflow is a whole other consideration. If you need any guidance about what an effective document control strategy looks like, contact the team at Clinked.
Content hierarchy and structure
The format for storing and retrieving documents within a virtual data room presents something of a paradox, inasmuch that on the front end, the system must be the definition of simplicity, providing the user with an intuitive and easy-to-use interface that feels almost natural. Conversely, the technology required to efficiently provide such an uncomplicated user experience, is typically quite advanced.
It's important to ensure that your virtual data room of choice not only provides the aforementioned intuitive experience, but also, and this is something we at Clinked see provides a lot of value, universal search that allows the user to find documents, messages, files and other data with a simple word search - a Google for your virtual data room, if you like.
Audit trail functionality
Having full control of yours and your platforms data is a critical element of any virtual data room.
Think of your audit trail functionality as a kind of insurance. You likely won't utilise it... until you really need it. The same is true of audit trails. Typically you'll require access to the audit trail only in the instance of some dispute or catastrophic failure.
Your VDR audit trail functionality will help you to ensure compliance, locate lost files, detect unathorized access to the platform, promote user accountability, provide insight should there be a dispute and ensure you're always in total control of the data and ensure you're prepared for unforeseen circumstances.
Your virtual data room should have at the very minimum, 256 bit bank grade security. Anything less just isn't adequate and presents a potential risk to yours and your clients data.
To further support the security of your data you should insist on the ability to add complex password functionality, 2FA (two factor authentication) and audit trails will help ensure you have the highest possible levels of security.
Ultimately, robust security protects not only your data, but also your firms reputation.
Depending on your workflow and internal processes, it's likely that there are specific apps and standalone software packages that your business utilises in its everyday business.
When selecting your virtual data room, consider how the software you currently use works with your VDR.
Integration of apps with your VDR could make all the difference to efficiency and ensuring a seamless workflow all round.
Service and support
The value of excellent client service becomes invaluable only at the time it's really needed. While the lure of low prices might be strong for some virtual data rooms, if your supplier doesn't provide excellent support and fast response times, you could find that the benefit of low cost of your virtual data room is offset by lacklustre support.
It's critical to ensure your virtual data room provider is able to support your business now and in the future.
Finally, based on the principle of the 'wisdom of crowds', you'll get a good idea of the reliability, functionality and service level of your prospective VDR provider by simply checking their online reviews. G2, Capterra and softwareadvice.com are established and well respected sources of genuine reviews.
There are a host of virtual data room providers, each with an offering that will provide differing levels of functionality and various levels of value to your business. Hopefully this list has provided some insight into the key aspects related to the options for consideration.
If you'd like to find out more about the Clinked virtual data room, as well as the other tools that make up the Clinked platform, please do contact our team.
- Virtual Data Room Pricing: How Much You Should Pay For a VDR
- Best Virtual Data Room Providers 2022
- Virtual Data Rooms vs. File Sharing Services
- M&A Data Room: Everything You Need To Know
- VDR Meaning and Examples
- Client portals for M&A firms - increasing the chances of deal success