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Virtual Data Room Buying Guide: What You Need to Know

Does your company need to buy a virtual data room (VDR) but you aren’t sure where to start? The increasing popularity of VDR providers means they aren’t too difficult to find. But selecting the right one for your company can be an arduous — yet important — decision.

To help you determine the best virtual data room provider for your business, Citrix ShareFile offers the following virtual data room buying guide to help you have total confidence in your VDR and fully take advantage of the many benefits of a virtual data room for your business.

What is a virtual data room?

A virtual data room, according to Wikipedia, is an “online repository of information that is used for the storing and distribution of documents.” Think of a place where you can instantly access and share private information with only selected users. The process needs to be safe and accounted for with a layer of security not afforded by a typical file-sharing site. What you’re imagining is a virtual data room, and with ShareFile, it’s a virtual reality.

The virtual data room from ShareFile is a place where information receives best-in-class security, safety and control. Traditional cloud storage is fine for sharing photos, public information or other nonsensitive material. But when it comes to items such as legal transactions, pharmaceutical data or clinical study results, your documents need a VDR. Not surprisingly, virtual data rooms are frequently used in mergers and acquisitions (M&A), private equity and venture capital transactions.

What are the benefits of a virtual data room?

The virtual data room from ShareFile gives you complete control over the most confidential information with the following features:

  • Added Security — Files are kept in SSAE 16 audited datacenters and encrypted during both storage and transfer phases. Documents are password protected and can be watermarked and available as read-only if desired. As the administrator, you have the power to control security settings.
  • Detailed Reporting — You can receive email alerts about file activity, follow detailed audit reports back to the source and view comprehensive analytical reports.
  • Advanced Tools — If you want to drag and drop files, sync account folders to your desktop or utilize a Plugin for Microsoft Outlook, these convenient features are here along with many others.
  • Easy Use — There’s no training necessary, and the cloud-based format means you have no hardware or software to handle.
  • Involved Support — Your team can enjoy free webinar training and unlimited telephone, email or live chat support from our team of professionals.

Imagine having the utmost security for your company’s file storage and transactions. You’re not dreaming. We offer a free trial for thirty days under no obligation. Learn more about it, and sign up today.

Why are virtual data rooms increasing in popularity?

The virtual data room industry grew at an annualized rate of 16.7 percent from 2009 to 2014, employs approximately 3,500 people and has an estimated revenue of $880 million. The industry is expected to grow from $628 million in 2012 to $1.2 trillion by 2017.

Rob Koplowitz, vice president and principal analyst for Forrester Research, explains the increasing popularity of virtual data rooms. “The space around sharing content externally is being pushed by the nature of our work today across organizations, and pushed by the cloud, which is the natural place where content can be shared.”

Today, more businesses are moving online, resulting in the rapid growth of data.

This infographic from the Computer Sciences Corporation examines the enormous proliferation of the world’s data.

Infographic Highlights:

  • Experts now point to a 4,300 percent increase in annual data generation by 2020.
  • Drivers include the switch from analog to digital technologies and the rapid increase in data generation by individuals and corporations alike.
  • In 2020, more than one-third of the data produced will live in or pass through the cloud.
  • Data production will be 44 times greater in 2020 than it was in 2009.

Businesses are finding that their growing data needs to be managed and shared in a way that saves time, increases efficiency and enhances security. Is your business ready to discover the benefits of a virtual data room from ShareFile?

What types of businesses need virtual data rooms?

The most common people and institutions using virtual data rooms include banks, financial advisors, real estate agents, healthcare companies and the government. But because most businesses are now transferring their data to the web, virtual data rooms are beneficial for any industry that requires sharing information with third parties.

For virtual teams that work in different locations across the world, VDRs can help everyone get into the same “room” to view secure confidential documents and make better, more informed decisions together. The ability to efficiently and securely share data with different parties is one of the main reasons that virtual data rooms have been used since the late 1990s to facilitate private equity, venture capital and M&A transactions.

According to Dr. Christopher Kummer and Vlado Sliskovic from the Institute of Mergers, Acquisitions and Alliances (MANDA), “We have witnessed that almost anything that exists in physical form may be transformed into digital or virtual form. In the past couple of decades, we have seen games, correspondence …” Kummer continued saying that many other aspects of our everyday lives are being “transferred to the virtual dimension that has, in a way, become our reality. At the start of the new millennium, a similar transformation occurred with the M&A transaction due diligence process when the first VDR was set up and used, in place of a PDR (physical data room).”

What are the differences between a virtual data room (VDR) and a physical data room (PDR)?

What are the pros and cons of a virtual data room versus a physical data room during an M&A transaction?

In her article “The Advantages of Virtual Data Rooms,” Steven & Bolton LLP Senior Associate Lucy Handford outlines these benefits of using a VDR:

Time Saving

  • A VDR can be made available for access by potential bidders usually within a couple of days.
  • When ready, it enables multiple bidders and their various advisers to access the due diligence information at the same time and at any time 24/7.

Cost Saving

  • The upfront costs of setting up a VDR can seem high at first. However, in the long run, VDRs are usually more cost effective than PDRs, since the latter are likely to involve lawyers copying and collating hard copy files of due diligence information.
  • The bidder does not have to bear the travel costs of his or her advisers visiting a physical data room.

Efficiency

  • When questions arise, the traditional procedure of having to return to a PDR several times is replaced by a much more interactive, real-time processes provided by a VDR.
  • Email alerts occur when new documents are uploaded to the VDR. Also you can easily see documents which have not been viewed to ensure that nothing is overlooked.

Reporting Information

  • A VDR’s activity log shows what documents that were reviewed, who reviewed the documents and for how long. This can reveal the level of interest of the various bidders and also provide an indication of possible concerns and negotiating points that may arise.

Dr. Kummer and Sliskovic from MANDA reference many of the same advantages as Hanford but also explore the potential disadvantages of a VDR from the buyer and seller’s perspectives.

Watch the video below to hear how a virtual data room from Citrix ShareFile helped the law office of Smith Moore Leatherwood manage a due diligence process:

Video quotations:

  • “We had something over 1,000 contracts, so a total of thousands and thousands of pages of documents that had to be accessed, and we were very concerned about who got access and what they did with the documents.” — David Otterson, partner
  • “We went with the virtual data room product for a number of reasons. The virtual watermark on each page of every document was very important to us. Probably more important though was our ability to give people access and control the amount of access that various people had.”  — Otterson
  • “For anyone who’s done due diligence or corporate legal work and transactional work, typically you get put in a physical data room with paper everywhere, and being able to put the documents online in a shared space and controlling access accordingly really creates a lot of efficiency.” — Justin Puleo, associate attorney
  • “It was just a very easy process to get everything set up, and by the end of the first day, I had close to 100 people added, and documents were already being exchanged.” — Puleo
  • “When you call the support number, a person actually picks up and a knowledge person that can actually answer your question.” — Puleo

How much does a virtual data room cost?

When evaluating the pricing of a virtual data room, you should consider the same variables as any other purchase. Take the $4 you spent on one gallon of 2% milk, in the brand you prefer, with an expiration date in two weeks. Whether you considered all those elements, they were factored into the price — and into your decision to buy.

Pricing for VDRs is no different. Before you get caught up in the dollar amount, consider the variables. As an example, let’s use the VDR from ShareFile and its starting price of $295 per month.

What factors affect the pricing of a VDR?

-How is it priced?  VDRs typically price per page or per megabyte, blurring exactly how much you get. The offer from ShareFile is a flat fee, eliminating hidden costs or surprise charges.

-What’s included? Many VDRs advertise a price that includes just the basics, and any features to make the service worthwhile will cost you extra. Included in the starting price from ShareFile are:

  • Unlimited 24/7 support
  • Detailed tracking and audit logs
  • Custom portal design
  • Access from any browser
  • Individual and group permissions

-How many users have access? A great deal isn’t one if it only grants access to one person when you need to include several people on the account. The VDR pricing ShareFile offers allows for unlimited rooms and client users.

-How flexible is the pricing? Dollar amounts surrounding VDRs often come with restrictions, terms and conditions that can hinder your budget more than you think. The pricing plan offered by ShareFile has options for annual or quarterly billing and accepts all major credit cards. Customers can opt for invoice billing should they choose not to use a credit card.

Last but certainly not least, consider what kind of a return you’ll get on your VDR investment.

After that, see what we can do for you. Try the ShareFile Virtual Data Room free or contact us at 1-888-260-6550 to set up a demo.

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