A secure virtual data room is a secure online repository that allows for the storage and sharing sensitive information in a controlled setting. These special solutions are crucial to support complex projects as well as business processes that require the disclosure of confidential information to parties beyond an organization’s firewall. This includes the M&A, litigation, due diligence for PE/VC investment and fundraising.
Contrary to common file sharing services like Google Drive or Dropbox, data rooms are focused on security at both the document and system levels. They rely on advanced encryption both in transit and at rest and multi-level authentication techniques. They also provide features such as watermarking, disabled print, and blind view in order to stop accidental disclosures.
Some VDR providers make bold claims about the security of their systems using terms such as “most secure virtual space and a highly secure data room’. The reality is that any system that allows authorized users to share login links or other documents with non-authorized users isn’t secure. Even 2-factor authentication doesn’t stop this, as a user could easily forward the second link to others.
It is recommended to choose a VDR that has ISO 27001 certification – it is the gold standard for security management systems for information. Find a VDR that has detailed activity tracking, as well as granular access permissions that let you see who has accessed which documents. This is particularly crucial for M&A and fundraising as it will provide you with insights into the level of interest your shared documents are generating with bidders.