In the past 20 years, outmoded paper-based processes have been digitized and brought online, significantly improving business workflows. To facilitate the sharing of sensitive business documents, many companies are making use of a virtual data room: an online database for storing confidential and sensitive information and sharing it with third parties. 

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Virtual data rooms are akin to, yet distinct from, generic cloud data storage services. They may include special capabilities such as hardened security, user logs, fine-grained access controls, and collaboration features that distinguish them from standard cloud storage.

As such, virtual data rooms have become an established best practice for transactions such as mergers and acquisitions. During the M&A due diligence process, information about financials and operations must be exchanged in a secure manner, making virtual data rooms the perfect fit.

Yet large enterprises aren’t the only type of business that should consider using a virtual data room. Startups, too, can benefit from a virtual data room solution that allow you to share documents safely and easily. In this article, we’ll discuss three reasons why startups should use a virtual data room.

1. Better security

As a startup, you need to have some kind of winning value proposition for your company, differentiating you from your larger, more established rivals. This “secret sauce” may be a patent, a trade secret, a business strategy, a database of valuable information, or any number of other possibilities.

Of course, this competitive advantage is only effective as long as it stays out of other people’s hands. As a result, IT security is a paramount concern for startups that want to retain their edge and stand a chance at disrupting the market.

Virtual data rooms offer a way to share your startup’s private information with figures such as investors and venture capital firms, in a manner that’s more secure than paper or other digital formats. You can easily define each participant’s appropriate level of access, restricting their use on a need-to-know basis. What’s more, the best virtual data rooms use encryption to protect your data in the event of a breach or other cybersecurity incident, even if it falls into the wrong hands.

2. Lower costs

Efficiency and productivity are key when running a startup in the growth phase. You don’t have time or money to spare on non-essential business activities; every cent and ounce of effort must be reinvested in the company.

Maintaining copies of documents within a physical data room is an expense that many startups simply can’t afford. Not only will you pay for overhead costs such as renting a room and transportation, your employees will also need to print, staple, copy, and sort the documents themselves.

For this reason, a time- and cost-saving solution like a virtual data room is invaluable for startups. Virtual data rooms eliminate the challenges associated with managing physical documents and reduce the total cost of ownership for your most sensitive business data.

3. Accessible from anywhere

One major drawback of physical documents is that they ground you in the here and now, which is directly antithetical to the agility and flexibility required of a startup. You may have employees and business contacts scattered across the globe in different time zones, all of whom need to participate in the document editing and review process.

Virtual data rooms, by contrast, are usable by anyone with an Internet connection and the right level of access. Employees can view and share files around the clock, whether they’re at work, at home, commuting, or on a business trip.

The same benefits of a virtual data room are available to your startup’s potential investors and business partners, who may now be located anywhere around the world. Keeping a virtual data room greatly expands the options available to your startup and increases your company’s long-term viability.

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