There is a debate on why management teams and deal makers use due diligence data room software when there are other tools like Google Drive, DropBox, and email for data sharing and communication.
While these platforms are great data storage and sharing tools, when it comes to deal management, virtual data rooms are much more than traditional information storage platforms.
Below is a detailed guide on due diligence data room software, the difference between data rooms and free storage platforms, and how VDR technology helps management teams during due diligence.
What is a due diligence data room?
Due diligence data room software is a combination of different technologies that help automate multiple processes during the due diligence phase. That due diligence can be financial, environmental, strategic, legal, administrative, etc.
A data room specifically addresses two main domains during due diligence:
- Data management which includes sharing, storage, and distribution of information between leadership, investors, clients, management, and other parties having a stake in a transaction.
- Online communication between the parties and stakeholders involved in due diligence.
Why are virtual data rooms different from free storage platforms?
If you can store, share or distribute information via sources like DropBox, why would you want to invest in a virtual data room? Here is the answer.
Platform protection
Free data storage or sharing platforms usually don’t have strong platform protection features. Users mostly log in via password or a preset codeword.
Additionally, users have to go through two-step verification or sometimes a multi-step verification process which requires them to provide different details accurately. Second, data rooms allow the administration to remove or disconnect any users anytime if they see suspicious activities.
Most importantly, high-end virtual data rooms are usually HIPAA, FISMA, FINRA, FedRAMP, SOC2, GDPR, and ISO-certified. In simple words, it is almost impossible to break their security.
Document control
Once you share a document via email or free platforms, you have zero control over it. In virtual data room software, you can control who can access, edit, view, share, or annotate your file. Also, you can track all the activities performed on the document.
In addition to that, you can easily revoke access to any document whenever you want. VDRs make sure you can shred documents even if they are downloaded by the users.
Multi-purpose solution
Free data-sharing tools may help you share data, but you have to switch to other applications for communication. Also, you cannot track the activities of your team members unless you use a different software.
However, a due diligence data room is heaven for dealmakers and management teams. They can use built-in tools to have online meetings, live Q&A sessions, and private or group conversations. Team leaders can easily assign and manage the tasks and activities of their teammates.
How do data rooms help management teams?
Data rooms are technically virtual deal rooms or workspaces for businesses and dealmakers. Here is how management teams can benefit from VDRs.
Easy document management
Virtual data rooms make document management and navigation a whole lot easier for management teams. They can create separate data rooms and organize documents according to their own preferences.
Any team member will have immediate access to any document at any time. Team members can work on the same document simultaneously and make/save changes immediately. Many VDRs have Google Docs integration which allows team members to create live, shareable links.
Virtual data room features like full-text or smart search give users the option to locate any document with simple keywords, while the auto-indexing feature automatically organizes documents.
Due diligence data rooms have built-in checklists for different due diligence types. These checklists make sure dealmakers or project management teams upload and organize the documents in the right order.
Real-time communication
The importance of flawless, real-time communication is simply undeniable for management teams. There are free online meeting tools, but they are relatively easy to hack. Also, data sharing becomes difficult in most of the online meeting tools.
Virtual data rooms primarily come with built-in communication tools for different purposes. Teams can easily streamline their meetings from beginning to end. They can:
- Prepare, share, and store meeting agenda or minutes
- Assign and manage roles before, during, and after meetings
- Arrange audio and video conferences as per their needs
- Sign documents electronically and cast votes online if the need arises
- Track and manage the performance of the team members
Other forms of communication like one-to-one conversations, group chats, FAQS, annotations, and Q&A sessions are easily possible on data room software.
Wrapping up
So, that was everything you needed to know about the benefits of data rooms for management teams. Long story short, data rooms not only offer top-notch document protection, but also they make communication, collaboration, and data management a breeze.