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Virtual Data Room Blog

July 8, 2024
12:00 am

In the past, companies kept sensitive documents under lock and keys, fearing that their confidential documents could fall into wrong hands. If this happens this could result in losing opportunities, costly lawsuits, or even fines and data breaches.

With the development of digital technology, business owners began using virtual data rooms (VDR) to share documents and information with stakeholders quickly and securely. VDRs are cloud software solutions which allow secure, 24/7 remote access of files and folders from any device with an Internet connection. These platforms offer a range of collaboration tools for effective contract management and efficient document management. They also include advanced features like watermarking, granular access, and audit trails to reduce the chance of accidental or malicious deletion.

The most popular use-case for virtual data rooms is due diligence during the mergers and acquisitions process. Both the sell-side and buy-side require extensive documentation to be reviewed, so it’s critical to have a single platform on which the documents can be kept and easily reviewed. VDRs can reduce the time required for due diligence by a significant amount.

Startups frequently use VDRs to work with investors and advisors during fundraising rounds, M&A, and other transactions. They allow startups to upload and organize their documents in an intuitive system which accelerates the due diligence process. These platforms also include tools for collaboration, such as commenting, Q&A zones, and task assignments to help teams work more efficiently. A majority of modern companies offer cloud-based models that doesn’t require any installation or hardware. Self-hosted software, installed on servers that are in use at startup, provides more control, and could require IT resources.

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