An investor data room is a secure online space that stores files and details that are relevant to due diligence during business transactions. Typically, it is accessed through a password protected website. It could contain information about a particular project or company, and could be used to collaborate with clients or colleagues.
The top virtual data room providers provide a variety of tools to support M&A deals, such as document version control, granular access rights and protocol reporting. These powerful tools enable seamless due diligence that results in a smoother deal process and less time spent searching through emails or re-creating documents.
It is also crucial to take into account the particular requirements of an industry when considering a potential investment. A startup that works in the financial sector is for instance, and has a different set of due diligence requirements than a company in the chemical industry. This is why many VDRs provide specific functions for certain industries and reputable providers have experts who can answer any questions.
When comparing the options for virtual data rooms, investors should be wary of using free software that may compromise security or do not provide sufficient features to meet the particular needs of the company. For example, Sharefile is a popular free online tool that offers a number of standard functions like view-only access, click trails, dynamic watermarking and granular user access, but has been criticised for not meeting the most basic requirements for security and reliability. It is essential to read reviews prior to choosing a provider.