Setting Up a Data Room: A Comprehensive Guide for Secure Information Sharing

In 2024, the global virtual data room market is growing steadily and is expected to continue rising. By 2031, the market is anticipated to reach US$ 3933.29 million. The growing adoption of cloud storage minimizes the use of physical storage and reduces paperwork.

Today, businesses store their data in one place and securely share documents with third parties using virtual data rooms. 

What is a virtual data room?

A virtual data room (VDR) is an online repository for secure sharing and storing important business information.

Virtual data rooms are ideal tools for supporting complex projects and business processes that require the sharing of confidential data with third parties beyond the firewall.

VDRs provide detailed activity tracking, allowing users to view which files have been accessed by whom. They are used for storing confidential business records, such as sensitive financial documents, legal documents, contracts, etc. Any type of information is reliably protected and to get access permission and authentication are required.

Why are data rooms needed?

Various businesses and companies use dataroom software for several reasons, for example:

• Due diligence. During mergers and acquisitions or fundraising rounds, a data room assists in conducting the due diligence process, efficiently and securely sharing information for potential investors or buyers. Data room providers may offer specially designed data rooms for due diligence and virtual data rooms for mergers and acquisitions.
• Better organization and control. VDRs provide a centralized location for data storing, improving management, and controlling access, which is essential in many situations: from regular project management to mergers and acquisitions.
• Efficient collaboration. A data room allows stakeholders to collaborate on a project in real life with easier information sharing and effective reactions, which, in turn significantly accelerates the due diligence process.
• Secure storage and sharing of sensitive information. Setting up a data room provides multiple levels of security, which include encryption, two-factor authentication, and watermarks.
• Improved transparency and accountability. Data rooms provide a transparent way to store and share information with easy user activity tracking. It reduces the risk of data misapplication.

What are the benefits of data rooms?

Here are the main advantages of VDRs for users and organizations:

1. Enhanced security. Users rely on the VDR technology that keeps sensitive information and documents secure with the help of various dedicated features and reliable compliance and certifications.

2. Time and resource savings. Electronic files and a user-friendly dashboard reduce time spent on finding, sharing, and communicating information. Using a data room time spent on emails, offline meetings, and phone calls is saved and can be consumed more effectively.

3. 24/7 availability. Virtual data rooms provide round-the-clock access to critical documentation. Every file can be accessed at any time and any place. 

4. Increased efficiency. VDRs take care of many administrative and supporting processes. They make uploading and sharing files easy and fast, saving time going between different operations.

How to set up a data room?

Now, let’s explore the best way to set up a data room:

1. Choose the best data room software. First, select the best VDR that suits your organization’s needs. Virtual data room providers offer a wide range of services dedicated to different use cases. If your company is focused on mergers and acquisitions, you can set up an M&A data room with the help of an M&A data room provider.

2. Arrange files. Before setting up a data room a company should prepare the documents which will be uploaded and shared. All hard copies need to be digitized by scanning them and organizing them most conveniently.

3. Upload files. The next step is transferring files. You can navigate records and decide who has access to which data, which is especially important for a due diligence data room, for example. With it, the VDR due diligence processes will advance significantly. 

4. Create a non-disclosure agreement. Before providing access to external parties or shareholders, a non-disclosure agreement should be arranged. Define the scope of confidential data by choosing what must be excluded from the agreement.

5. Build groups. Create separate user groups and give them access. Some of them need full access to all the files in a data room, for example, administrators. While others need access to certain documents only.

6. Define rules and restrictions. Setting up security rules and permissions is one of the final steps. With the help of a watermark, you define what files can be downloaded, copied, edited, or printed.

7. Test and start using a VDR. If the software runs without errors and interruptions, it is ready to go live. 

Conclusion

Data rooms become highly specialized services with top-level security and control. A VDR is an essential solution for secure file sharing. However, it also has differences to look for when choosing VDR software. After finding an appropriate data room, it is easy to set it up following simple steps. Undergoing them you will experience the advantages of your data room.