A virtual data room (VDR) is simply a more secure -- though still virtual -- version of the conventional cloud storage that has been accepted and so widely used by individuals and businesses alike.
According to Webopedia, “VDRs are assumed to be secure and confidential virtual meeting rooms where buyers, attorneys, accountants and other professionals can review sensitive documents.”
No business that is serious about carrying out pertinent business dealings with an external party in an efficient, private and secure way should oppose the idea of a virtual data room. Why? Because, while it is more or less the same as conventional cloud storage, a VDR assigns priority to security and privacy.
It is also the direction many companies are taking. As Rob Koplowitz, vice president and principal analyst for Forrester Research, told a business publication, “The space around sharing content externally is being pushed by the nature of our work today across organizations, and pushed by the cloud, which is the natural place where content can be shared.”
There are many scenarios in which using a VDR could be of immense benefit to your business. Here are a few:
1. VDRs are the best way to preserve documents.
In a digitally dependent world, where information is king, the need to preserve data in a secure and “non-biodegradable” way is of paramount importance. Virtual data rooms have almost the same grade of security as high-level financial agencies like banks. With a VDR, you can be sure that your private information will not be affected by natural and manmade disasters, fire or flood.
According to Zach Clayton, writing in the Huffington Post, “Virtual data rooms have become an integral part of M&A transactions, as businesses find that their ever-expanding data needs to be managed and shared in a way that saves time, improves efficiency and enhances security. Since their introduction 10 years ago, virtual data rooms have replaced laborious and paper-heavy due diligence processes, often resulting in increased valuations and shorter deal cycles.”
In fact, physical documents can get damaged and lost and often need constant care to keep them in legible condition. With time, papers begin to pile up, making it more difficult to manage and access your business documents.
A virtual data room however, takes care of this problem very efficiently. It eliminates all the difficulties associated with traditional record-keeping. As long as your business uses a VDR alongside multiple backups of all your documents, through to the present day, there is almost no chance that you will ever lose anything.
2. VDRs entail a much lower setup and operational cost.
With a physical data room, your business cash flow will likely be affected, as money will continually seep out of your business’s coffers. There'll be the matter of renting a physical space to store your documents and keep them under constant surveillance.
And then let’s say you have some potential investors or an auditor, perhaps, coming to look at your sensitive company information: You may need to worry about the additional cost of the time you'll spend with them, and their hotel stay.
If you decide to get started with a VDR, on the other hand, all you will need is a computer system and access to your documents: no need to worry about rent, surveillance, transportation or lodging fees.
3. VDR is the poster child for accountability.
Investors love accountability, and using a VDR will help you show you have this attribute -- in spades. Having all your company information stored in one place tells potential investors that you have nothing to hide, ultimately increasing your trust rating.
The relationship you'll build between your business and its investors, by using a VDR, will be worth its weight in gold over time.
4. Global accessibility and the integrity of VDRs may attract higher investor bids.
Your VDR is on the internet, which means that it can be accessed by investors from anywhere across the globe.
Also, with a well-structured VDR, these investors will have access to whatever important documentation they need to make informed decisions concerning bidding. This mixture of global accessibility and quality information may well translate into a higher monetary gain.
The integrity and transparency of your VDR service may persuade more investors to want to bid on your business. More people, more bids, more gain. If you own a small business that plans to attract funding, you should definitely consider going virtual.