Despite being an increasingly essential part of many professional services businesses, virtual datarooms are still a relatively new technology in the grand scheme of things.

It’s sometimes not clear what a dataroom is, what it’s used for, or how it’s relevant. Not to worry, Huddle has brought together a list of frequently asked questions to shed some light on the situation.

A brief history

Traditionally known for their physical counterparts – literal Data Rooms that would house reports, contracts, agreements and more. Datarooms went digital and are now seen as the ultimate solution for modern business file sharing.

What is a virtual dataroom?

A virtual dataroom, also known as a VDR or dealroom, is an online document portal that provides firms with a secure method for transferring documents online.

Almost all professional services companies are now adopting dataroom systems, but datarooms are seeing growth in particular within the property, architecture, legal, financial and accounting sectors.

Firms within these sectors are often sending proposals, brochures, photos, contracts, reports, accounts and other files to clients and coworkers to facilitate due diligence or store documents.

Security, usability and a positive client experience are increasingly important when sending files to clients, and virtual datarooms are an ideal solution to meet all of these.

How does a data room work?

A dataroom is a business file sharing system that allows documents and files to be sent to many recipients at once through a secure portal. You can upload files to the dataroom which can then be seen or downloaded by recipients.

Look for a dataroom with an easy drag and drop interface.

Depending on your user authority, you can also assign and revoke access, track who has interacted with files, and monitor user activity.

What is a data room used for?

Datarooms can provide solutions for variety of business processes such as:

  • Distributing files on an investment deal
  • Organising files on a project
  • Centralised document location for a particular client
  • Allowing clients to sign off or approve documents

What does a VDR look like?

Unlike traditional physical datarooms, a modern VDR uses a web interface to display an overview of all documents.

The typical interface of dataroom systems vary, with some placing more emphasis on data storage and resembling a traditional folder file system, whilst others placing more emphasis on a visual, web page style interface.

View of screenshot on computer screen displaying the sharing capabilities of Huddle's dataroom software

Some interfaces place more emphasis on data storage, and others on visual design.

How to organise a data room?

The best way to organise a dataroom depends entirely on what that dataroom will be used for. Datarooms are most useful and effective when designed around the purpose of the documents they contain.

You may have a dataroom for an investment deal, which requires folders of documents and image galleries. Your next dataroom might need a tabbed interface to split up a project into different stages or versions.

Modern datarooms are used for all kinds of purposes, so you need a system that allows you to change the organisational layout with ease.

Can my files be stolen?

In today’s digital landscape impacted by ongoing cyber threats, security is always paramount.

In comparison to traditional consumer-grade file sharing methods, a business dataroom system provides enhanced peace of mind with additional security considerations.

As a rule of thumb, some security features to look out for include:

  • 256-bit SSL data encryption as standard
  • The ability to revoke file access at any time
  • The ability to restrict to previews and prevent downloads
  • Easy to use permissions management
  • Passwords never stored or sent as plain text
  • Require approval for new recipients to view files
  • Password re-entry for dangerous actions
  • Email validation for new devices

What else do data rooms do?

One unique feature of some datarooms is their analytical and tracking capabilities, which allows you to monitor which recipients have seen which files. Some feature algorithms to predict which recipients are the most receptive to the files, invaluable with investment deals.

Datarooms become more powerful with lead generation features

What’s the difference between a virtual data room vs Dropbox?

Dropbox is a platform designed for file storage and sharing, marketed as appropriate for both personal and commercial use.

Datarooms have a number of advantages over a platform such as Dropbox, for example:

  • Datarooms act as a fully branded document portal, an extension of an organisation’s own marketing material. The client’s experience is consistent and seamless.
  • As many IT managers will attest, since Dropbox is used for both business and personal use, there is always a risk of the two overlapping and the security of your business documents may be at risk.
  • Another shortcoming of the consumer file-hosting service is limited file formatting. Depending on your line of work, you may be required to browse and interact with niche file extensions. Architects will struggle to view CAD files in Dropbox for example.

For this reason, data rooms are much more appropriate for business use, particularly with highly sensitive or confidential information.

Why use a virtual data room? Do I really need one?

Whether or not you need a VDR depends on your specific priorities and needs.

You may be happy using consumer-level file sharing solutions such as Dropbox, or sending all of your files over email.

However, if you’re starting to lose track of documents, want some way of knowing if your documents have been received and read, or want a more consistent experience for your clients or customers, then it might be time to consider a virtual dataroom.

In these cases, a dataroom can likely make file-sharing a breeze and drastically improve your efficiency.

Find out how we helped Allsop LLP streamline their due diligence process and increase their value proposition for leads and existing clients with our dataroom services.

Read the case study