A secure virtual data room is an online repository for storing and sharing sensitive information in a controlled environment. These special solutions are crucial to support complex projects and business processes that require the disclosure of sensitive information to third parties beyond the firewall of an organization. This includes M&A litigation, due diligence of PE/VC investments and fundraising.
Contrary to common file sharing services like Google Drive or Dropbox, data rooms are focused on security at the system and document level. They rely on advanced encryption in transit and at rest and multi-level authentication processes. They also provide features such as watermarking, disabled printing and blind view to avoid accidental disclosures.
Some VDR providers make huge claims about how secure their systems are using terms such as “the most secure virtual data room’ and ‘highly secure data room’. Any system that allows users to share login details or documents with non-authorized users is not secure. Even two-factor authentication is not enough to stop this as users can easily forward the second URL to other users.
You should seek out an VDR that has ISO 27001 certification – it is the gold standard in security management systems for information. Choose a VDR provider that has detailed activity tracking, as well as granular access permissions to allow you to see who has accessed which documents. This is particularly important for M&A and fundraising as it can give you insights into the level of interest that your shared documents are generating with bidders.
