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The History of Data Rooms


Analyzing data has always been an important part of business transactions, and for a long time, it was often a costly and time-consuming pursuit. This was especially true for the due diligence phase of many deal processes, particularly large scale mergers and acquisitions. Financial institutions, lawyers, accountants, investors, and basically anyone with an interest at stake had to be sure that they were getting the best deal possible. This usually required hours of diligently scrutinizing volumes and volumes of important documents.

Of course, these documents had to be organized, filed, and stored in a “data room,” with countless boxes filled to the brim with papers taking up precious square footage somewhere. Here is a look at how data rooms have evolved over the last few decades:

Physical Data Rooms

For anyone under the age of 25 that may be reading this, there was actually a time that most documents were in fact physical documents and not just little icons on a computer screen. Companies had to invest in things like three hole punches, binders, dividers, and tabs, and trying to keep up with toner cartridge usage was a perpetual and not the least bit entertaining game.

In addition, because documents were primarily available in their paper format, this meant that embarking on due diligence required booking a flight, holing up in a hotel, and spending the days wading into a sea of paperwork. There are plenty of people who likely still prefer to hold an item in their hand as they read it, but there is no denying that this simply wasn’t an efficient document management system.

Early Electronic Data Solutions

As the use of computers became more mainstream and were eventually the norm, companies began to transition away from physical data rooms and started experimenting with electronic data solutions. In the beginning, these solutions still required someone to spend quite a few hours scanning documents into the system that was going to be utilized. Once that was finished, the files then had to be organized.

Most of the early solutions, although more convenient and far more environmentally friendly than physical data rooms, weren’t exactly quick and easy to implement or use. Some required the installation of special software while others continued to rely on clunky drives to store information. Plus, most did not have strong privacy features built into them. Early electronic data solutions certainly made it easier for outsiders to view loads of documents from afar, but they were still a drain on the implementing company’s time and budget.

Virtual Data Rooms

Electronic data storage is now quick, easy, and affordable thanks to the development of virtual data rooms. People have become so accustomed to reviewing information on a computer screen that few documents actually need to be printed these days. Thus, most companies rely on cloud computing to facilitate their document storage and sharing needs.

It may seem like there are a lot of virtual data room solutions to choose from, but some services are much better than others. In general, the best solutions provide ample storage, allow a company to have unlimited users, and make document security the utmost priority.

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