A Comprehensive Guide to Virtual Data Rooms

Learn everything you need to know about VDR
to take your enterprise data security & document management to the next level!

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Just a few years ago, a data room was a physical room where important or sensitive papers could be stored. Bankers, investors, brokers and lawyers would use these rooms at scheduled times to examine documents that were required for business transactions. Fast-forward to today and these physical rooms have become exceedingly rare, replaced by virtual data rooms.

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What is
A Virtual Data Room?

Green and grey vector icon illustrating CapLinked api security features

Virtual data rooms (VDRs) provide secure storage for digital documents and limit access to only those who are authorized to view them. They are used extensively for business transactions, including M&As, IPOs, banking and investing. Stakeholders can securely access documents at specific times, from any platform, and from anywhere in the world with an internet connection. Businesses, governments and other organizations have found a wide variety of uses for VDRs for document sharing and collaboration.

In short, a VDR is used whenever someone needs to securely store information and make it available to a limited group of people. Companies upload data which can be instantly accessed by anyone who needs it, regardless of where those people are in the world. And when they no longer require access, their permissions can be turned off and access revoked — including to any documents that have been downloaded, thanks to digital rights management (DRM)

Why Do You Need A Virtual Data Room?

Today’s VDR is quickly replacing a wide range of outdated business technologies. This is primarily due to the exceptional security it provides, ease of use and a price point that reduces costs. Most likely, your organization is already using cloud storage for important documents — but that’s without the advanced security measures a VDR provides, and most likely at a similar, or even higher price.

Cloud storage services like Google Drive and Microsoft OneDrive are great for sharing files and collaborating on documents, but they simply are not designed for protecting your most sensitive information. Once a user has been given access to a cloud storage folder, you cannot track what they do with the information it contains.

Furthermore, you are now exposing your most important data to a range of variables:

  • How strong is their network security?
  • How good are their passwords?
  • How secure are their home computers and tablets?
  • Do they use two-factor authentication?
  • Do they have up-to-date virus and malware protection?
  • Do they know how to protect themselves from phishing attacks?

The point is, regardless of whatever measures you have in place for your data, your security is now limited whatever your users may or may not be using.

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Why Modern M&A Needs Virtual Data Rooms

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Simple Virtual Data Room Pricing

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Is Dropbox Secure Enough for Enterprise Business?

Common Use Cases of Virtual Data Rooms

Using a VDR is a sound decision whenever security and data access are concerns. There is no limit to the number or type of files that can be securely stored in a VDR, including PDFs, data logs and even videos. Every organization has its own reasons for adopting a VDR solution, but these are some of the most common uses.

FTP Alternative

FTP (File Transfer Protocol) is about as old as the World Wide Web. For decades, it was the only sound option for uploading large amounts of data to a web-based server to be used by someone else. This outdated technology is slow, cumbersome and much less secure than a VDR (although CapLinked does support FTP for clients who still use it). 

Mergers and Acquisitions

VDRs are the standard for the due-diligence requirements of an M&A, where thousands of files need to be securely stored and accessed by buyers, sellers, investors and other stakeholders at different times.

IPOs

Initial public offerings require months, if not years, of careful planning and organization. Thousands of documents are involved, most of which are extremely sensitive. A VDR keeps this valuable data secure while making it available to those who need it. 

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Strategic Partnerships/Alliances

Companies exploring a strategic partnership can share important files with each other while limiting permissions so that groups or individuals can see only what they need to see, nothing more.

Raising Capital and Financing

Organizations can share confidential documents with potential investors when raising capital. Investors are not just able to access the files they need, they can ask and track questions within the VDR and upload their own documents when needed.

Audits

Any company that needs to track access to documents can benefit from a VDR, where audit logs are a standard feature on most plans. If anyone accesses, downloads, deletes or edits a file, it leaves an audit log, or log trail, of those instances. Additionally, if there is a data intrusion, the audit log tracks it automatically.

Legal Compliance

Many companies have legal requirements to keep data secure and to limit access to it. This can come from corporate governance, client requirements or mandates from certification organizations.

Bankruptcy and Restructuring

Bankruptcy and corporate restructuring involve massive amounts of documents containing sensitive business information and financial records, which need to be accessed by accountants, lawyers and investors. Each of these groups can be given access to the information they need without giving them access to what they don’t.  

Asset Sales and Purchases

Selling assets can be almost as complex as selling an entire company, with almost as much paperwork involved. Interested parties can be given access to the information they need and then, if they lose interest, that access can be revoked immediately. 

DRM

If a company owns and licenses intellectual property, the DRM (digital rights management) features embedded in a VDR allow you to determine what is shared and with whom. Whether information can be copied and pasted, shared, or downloaded to certain devices is all controlled by the owner of the copyrighted property. 

Secure Document Sharing and Document Management

Teams can easily collaborate on documents, presentations or other projects, as well as make notes and discuss the project in real-time chat, all in a single secure virtual room. Document versions can be tracked, reviewed and reinstated as needed, and editing can be limited to only those who need access.

Industries That Need Virtual Data Rooms

  • Banking and Finance

    Investment banks were among the first adopters of VDRs, for M&As and IPOs. Today, any investment opportunity or investment banking transaction can use a VDR.

  • Pharmaceuticals and Life Sciences

    VDRs are used to protect intellectual property, clinical-trial data, research, patient files and data that requires HIPAA compliance protocols. 

  • Investment

    Venture capital firms, private equity firms and other investors use VDRs to securely manage thousands of different documents while tracking the progress of each potential deal in real time.

  • Manufacturing

    VDRs are ideal for storing and sharing new designs, product specifications, research and development data, as well as anything else that will be trademarked or patented.

  • Technology

    From software-as-a-service providers and software developers to network security specialists, there is no shortage of technology companies using VDRs to collaborate across the globe.

  • Law and Accounting

    VDRs have replaced the locked filing cabinets and safe-deposit boxes once needed to store confidential client information.

  • Startups

    VDRs make it easy to collaborate on business plans, financial projects and other important documents, while making them accessible to potential investors, with unprecedented transparency, on an as-needed basis. 

  • Consulting

    Client confidentiality is a vital concern for consultants. Using a VDR to manage client documents allows both the consultant and the client to rest assured that confidential information will be kept confidential. 

Over 250,000 professionals from 75+ countries and nearly half of the Fortune 1000 companies use CapLinked.

Blue Logo for KPMG, a customer for CapLinked due diligence data rooms unnamed (1)Main Microsoft Logo is red, green, yellow, and blue. Microsoft pays for secure virtual data rooms by CapLinked.Comcast uses CapLinked VDRsroche_logo

How to Choose a Virtual Data Room Provider
– Must-Have Features –

There are three key features to look for in a VDR provider: security, ease of use and excellent support. These are the pillars of any professional VDR service, and they should be nonnegotiable. You need to be able to securely upload documents at any time, guarantee protected access to them and then remove that access as soon as it’s no longer needed. 

Even before signing up for a plan, it’s easy to determine which VDR providers will deliver on their promises and which won’t. Here are the tell-tale signs to look for when comparing VDR providers:

  • Certification: Even if you don’t require ISO 27001 certification, working with a VDR provider that is certified tells you that the company has the framework, policies and procedures in place for a secure information security management system, including the physical, technical and legal precautions necessary for a proactive risk-management system.
  • Security: Documents need to be secure while stored and while being transferred. This is why CapLinked uses only 256-bit advanced encryption, premium-grade SSL/TLS protocols and TLS v1.2 cipher suites. Your documents are stored on secure Amazon OpsWorks servers with 99.9% uptime. 
  • Easy FAQs: The FAQ page is a good indicator of what type of customer support you will receive. It should cover potential questions clearly and thoroughly, reflecting the expertise of the team behind the answers.
  • Customizable permissions for user groups: Permission settings should suit your needs, without hassles over reconfiguring permissions for each person you share a document with.  
  • DRM: Digital rights management is the new standard in document security, allowing you to track (and revoke) access to your documents even after they have been downloaded. 
  • Activity tracking: When you grant someone access to a vital document, you should be able to know whether they have actually accessed it or not — and if they have downloaded it. 
  • Document control and management: Like user permissions, you should be able to manage and control documents quickly and easily, whether you’re managing a single document or an entire library of data.

Why CapLinked:

  • World-class security
  • Easy-to-use
  • Seamless Integrations/API
  • Enhanced productivity
  • Enterprise-level solution
  • 24/7/365 Customer service

Choose a better virtual data room

Pricing:
How Much Does a Virtual Data Room Cost?

Comparing prices of VDRs can be challenging. It’s not at all like buying a computer, where you can compare memory and screen sizes between models to determine which is the better value. It’s more like comparing packages from different cable providers, with different services available in different bundles. One company’s standard plan may contain services that another provider offers only in its premium plan.

In addition, you need to factor in the amount of data you intend to store in your VDR, and how long large bundles of files will need to be secured there. Customers overextending their budget due to a miscalculation isn’t something anyone wants to see happen.

This is why CapLinked lets you try out the professional Team Plan for the same rate many others charge for a basic plan: $149 for the first month (and $299 for subsequent months)

The Team Plan includes:

  • 5GB of storage (approximately 3.4 million pages of documents)
  • One workspace
  • Ten administrators
  • Unlimited guest users

Security, support and document-management tools for the Standard VDR tier include:

  • Enterprise-grade encryption
  • SOC 2/SSAE 16 Type II security
  • Custom permissions/access-control lists
  • Standard help center and email support
  • File-version history tracking
  • Q&A process management
  • Updates and notifications feed
  • Audit trail and report-building tools
  • Secure file transmission via email with a custom URL
  • FileProtect (Digital Rights Management)
  • Enforceable two-factor authentication
  • Custom branding/invitations/login page
  • Custom dynamic watermarking
  • Full-text advanced search
  • Collaborative document editor
  • Real-time virus scanning
  • Desktop bulk uploader

Comparing Virtual Data Room Providers

For many firms, it’s difficult to know what you’re getting into with a VDR provider until you’ve already signed a contract and have started relying on it for your business needs. On the surface, many of the companies appear to be the same, but the mechanics behind the operation aren’t always as secure and reliable as the marketing copy makes it appear. 

That’s why a free trial is exceptionally important. Just like being able to see inside an office before you’re asked to sign the lease, you should be able to see what you’re getting into before you put your organization’s profits and reputation in the hands of any VDR provider. 

Word-of-mouth referrals have been a staple of CapLinked’s growing client base for years. If you have clients or partner firms who are already using VDRs, ask them who they use, as well as what they like and dislike about the service:

  • Has there been downtime?
  • Does the service ever lag? 
  • How long does it take to master the interface?
  • Can you integrate it with your current business software?

You should also talk to your internal developers to see what features they will need to access in customizing the VDR services for your specific needs. CapLinked APIs give your organization complete control over how your VDR is used, allowing you to integrate it with your current business software. 

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The CapLinked Price-Match Guarantee

If you’re comparing prices for VDR solutions, CapLinked will match the written quote you receive from any comparable vendor with competitive software features. This guarantee only  includes companies with authentic VDR services designed for deals and transactions, like those from companies like Datasite, Intralinks and Donnelley Venue.

Start using CapLinked’s VDR!

  • World-class security
  • Easy-to-use
  • Seamless Integrations/API
  • Enhanced productivity
  • Enterprise-level solution
  • 24/7/365 Customer service

How to Use Virtual Data Rooms: Tips to Maximize the Features

Once you have chosen your VDR provider and the plan that suits you best, there are six steps you should take before launching your VDR. A bit of planning before going live will save you time, money and potential mistakes in the long run.

1. Determine a File-Usage Policy

While VDRs are a great secure replacement for cloud storage, if your organization is on a tight budget you should limit its use to only the most important files. Restricting use to essential managers and employees will also make the VDR easier to manage. 

You may want to use it only for specific situations, like an upcoming merger or investment opportunity. Alternatively, you may prefer to use it for any files or documents that contain sensitive or restricted information, like financial records, business transactions or server security log files.

 

2. Organize Your Files

Before uploading any files, decide on the structure you will use for their folders. Nested folders are usually the best choice. The basic structure may be organized with main folders for departments, clients or projects. Specific types of files can then be placed in their own folders inside a main folder.  

As an example, if you’re a consultant working on various projects for six clients, then the main folders will be the six client folders, each containing subfolders with project names. Files used for each project can then be placed in folders organized as needed. Financial records or audit logs are often best organized in folders by year and month, but the system you use should be the one that works best for your organization.

Both files and folders should use standard naming conventions so they can be easily scanned, organized and accessed as needed. Ideally, you should be able to determine the contents of a folder or a document simply by looking at the name. 

3. Determine User Roles and Permissions

It’s best to determine groups of different user permissions before you begin using VDRs. If you begin adding users on an ad hoc basis, you will soon have a tangle of different permissions that will be difficult to sort out weeks or months later. 

Board members, for example, may require unlimited access to all documents, while investors, auditors and consultants may only need view-only access to specific groups of files. Once you have determined which group a specific person belongs to, you can then customize the permissions as needed.

 

4. Establish a Document-Management Policy

In addition to user permissions, you should have a clear policy on how you will manage different types of documents. If you are giving outside stakeholders or new hires access to confidential documents, you should enable dynamic watermarking and determine a schedule for reviewing access logs, so you can be certain that the documents aren’t being accessed by the wrong people.

efficient data room setup

5. Draft Your NDAs

Nondisclosure agreements are generally a standard procedure when it comes to sharing sensitive or restricted documents with anyone. A nondisclosure agreement is a binding contract that users will not share restricted information with others. Of course, NDAs should be signed (digitally) before anyone is given access to a VDR.

 

6. Test Your VDR

Go through your VDR to ensure that files are organized and user groups are specified, and then test the software to make sure there are no glitches before you give anyone access to the information. Always keep in mind that human error is the most common cause of a data compromise, so double-checking your settings is always a good idea.

Summary

Choosing the right virtual data room provider is no small decision for any organization. That’s why CapLinked makes it easy to test-drive VDRs without any obligation. 
When you sign up, you get unlimited access to CapLinked for 14 days, with a private and secure virtual data room for your team to work in, collaborate and test the security features. You also get to see firsthand how easy the online support system is to use. Start a free trial today.

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