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Why Do I Need a Virtual Data Room? Common VDR Misconceptions

Virtual Data Room (VDR) Misconceptions

While many people consider a virtual data room as an option for a sensitive business transaction, it is often based on the recommendation of counsel, an investment banker, or trusted advisor. Because of this, we've found that not everybody is clear on their utility- and have quite a few misconceptions about their use. In that spirit, we'd like to clear up a few of those misconceptions once and for all so that you can make a smart, well-informed decision.

1. A Virtual Data Room is the Same as a General File Sharing or Collaboration Tool

While you will certainly share files within your virtual data room, a VDR is not the same thing as a file sharing service. File sharing services (like Dropbox, Box, etc.) were specifically built to allow you to easily share and collaborate on documents. The security features of file sharing services are pretty standard and they're especially effective at allowing you to share and edit everyday documents that don't require a high-level of security. Virtual data rooms, on the other hand, were purpose-built around secure business transactions. They are highly-secure, highly-controlled data repositories designed specifically for securely sharing and storing corporate documents. VDRs generally have roles and permissions to limit access on a granular level, and audit logs to monitor any activity in the data room. Some also require that an NDA is signed before entering the data room.

2. A Virtual Data Room is Only for M&A Transactions

Though originally used for M&A, virtual data rooms are now used for any project requiring sharing confidential information. We see them used during fundraising rounds, joint ventures, licensing deals, audits, strategic partnerships, litigation, board communication, etc. One person on our staff even used it to share documentation to refinance their house (though admittedly, that is not a common use case).

3. Virtual Data Rooms are Best for Short-Term Projects

While many use virtual data rooms for relatively quick transactions, they are also used long-term as a corporate repository. We have clients who set up their data room when raising their first round of funding and then maintain it throughout the life of the company. It essentially serves as a CFO's secure and virtual filing cabinet. Keeping sensitive corporate documents stored and indexed in a VDR for the long-term helps to facilitate efficient audits, fundraising rounds, and other transactions in the future. You'll always be ready.

4. All Virtual Data Rooms Are Basically the Same

As with any technology, this is not true. While you can assume that any purpose-built virtual data room solution will have taken above-average security measures, features will vary from one provider to the next. One feature we're particularly proud of here at SecureDocs is that we include two-factor authentication with every data room at no extra cost. Decide what's important to you and vet accordingly.

5. Virtual Data Rooms are Hard to Use and Expensive

Many of the 'traditional' virtual data room providers did have solutions that were challenging to use. They took a substantial amount of time to implement, users needed training, and the overall experience was clunky and confusing. That is no longer the case. There are a few virtual data room providers who have focused on providing a simple, efficient, and enjoyable data room experience. We are proud to be leaders amongst that group.

In terms of pricing- it all varies. There are still quite a few data rooms that are prohibitively expensive (especially for smaller companies) and there are some who are not. Our goal at SecureDocs is to provide a superior data room that is affordable to any type or size of business-which is why we offer a $200/month flat-fee price for unlimited users and documents. Be sure you understand the price structure of the solution you choose. Some data rooms charge flat fees, others charge by page or user, some have implementation fees, etc. It's not always transparent and it's not always presented up front.

Still unsure if you need a data room or have any other questions? Let us know- we're always looking to help.

(And should you decide that you do need a data room, we offer a free trial).

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