A data room, or virtual data room (VDR) is a secure storage space for sharing sensitive information. The modern equivalent to physical rooms where documents can be stored to review during buying or selling negotiations Data rooms are usually used to assist with financial and legal due diligence.
Businesses of all sizes use them however SMEs with team members located all over the world consider them especially useful. In the past, larger businesses might have gone with costly internal solutions. However, as VDRs improve and become more accessible, SMEs are also adopting them.
When to use a data space
A data room is useful at any point of the life cycle of a business, but it is typically utilized during M&A activities or other processes that require confidentiality. Venture capital firms, for example, will often want to look over contracts and other documentation prior to closing an investment. This can be accomplished through a virtual dataroom, which has access granted to attorneys and other parties.
A data room used for preparation can also aid an organization in preparing for a due diligence process by getting documentation uploaded early and ensuring it is available before third parties are invited to join. Some data rooms document management include the ability to redact information that are able to effectively and quickly remove sensitive information from documents before sharing them. This minimizes the risk of an embarrassing mistake that might jeopardize the transaction.