How to Choose a Data Room Provider: The Complete Checklist

Data room software technology has become a leading force in every major business sector. That is because a virtual data room enables businesses to collaborate and manage sensitive documents in a synced ecosystem. With so many data room providers in the market, opting for the right platform can be overwhelming since it can either make or break the transaction or even a business.

Not all virtual data room solutions are equal. Yes, some have industry-recognized security protocols, easy navigation, and collaboration tools that others lack. So, how to go about it? Read on to learn how to choose from electronic data room providers that align best with your business operations.

Key factors in choosing data room providers

Complex business transactions such as capital raising, mergers and acquisitions, and IPOs demand a secure and efficient system for dealing with confidential data.

The following is a breakdown of the VDR checklist for security features that you need to take into account to make an informed decision.

Security & compliance features

Security is non-negotiable when it comes to dealing with confidential documents. That is because compromised data not only destroys your company’s reputation but also puts your customers’ information at risk. Thus, reliable virtual data rooms provide:

·       Encryption. Always opt for the data room that offers 256-bit encryption to secure sensitive data.

·      Access control.  Granular access permissions provide precise control over what one can do and when. It allows admins to specify user access levels.

·   Compliance with regulations. Depending on locality and business sector, a reputable cloud storage solution conforms to regulatory frameworks like the Australian Privacy Principles.

·   Multi-factor authentication. Best data room software now offers an advanced multi-factor authentication feature to ensure only authorized entrants in the data room.

·   Certifications. Certifications are further segregated into two types: regional and international. Reputable data room services should have accredited certifications for local and international dealings.

Ease of use & user interface

Even the most secure online repository would not add value if it is difficult to use. Thus, look for the following for efficient task management and easy navigation.

·       Intuitive interface. A simple and clear layout makes it easier for users to navigate and find what they need.

·       Easy to use. Ensure that the platform’s navigation is simple and offers easy document uploading and clear folder structures.

·       Training. The best virtual data rooms offer comprehensive training and support to ensure users become confident with the data room. That is because good user training minimizes the learning curve, reducing costly errors.

Document control and management

Effective document control and management play a pivotal role in maintaining data security and integrity. Hence, key features to look for are:

·       Document permission. Effective control over user access level ensures only the right people have access to sensitive information. Thus, a good virtual data room enables businesses to set document-specific permissions, including editing, printing, or viewing.

·       Version tracking. This feature is crucial for monitoring any changes or updates in the documents.

·       Audit Trails. The right virtual data room provides detailed audit logs, providing full visibility into who accessed what and when.

·       Watermarks. Dynamic watermarks are one of the best data room features when it comes to reducing data leaks. It embeds the file owner’s information and helps track all the activity on the file.

These real estate data room use cases show how effective document control and management streamline the complex real estate transactions.

Customer support & service quality

Exceptional customer support and quality service play a key role in ensuring smooth business operations. Hence, when evaluating a secure data room, the following factors should be taken into account:

·   Support availability. Consider the vendor that offers 24/7/365 support.

·   Languages offered. High-end VDRs come with multilingual support, which is helpful for non-English speakers.

·   Responsiveness. Quick response time is invaluable, especially during a crucial business deal. Hence, always assess the provider’s time to queries and issues.

Pricing models & flexibility

Evaluating the right data room software that suits your business requirements is vital. For instance, if you are a startup seeking a basic offer, opting for a dedicated platform with comprehensive features may not be a good option. Thus, key considerations include the following.

·       Pricing structure. Data room pricing structure varies based on data storage, user count, and features. Also, the pricing model comes with flat-rate, per-page, and per-user subscriptions.

·       Scalability. Invest in a data room solution that enables you to upgrade the plan as the business evolves. It should support an increased amount of data as well as users.

·       Contract terms. Reviewing the contract terms can help you choose the platform that has everything to offer, from transparency to value for money to flexibility.

Also, a VDR price comparison can help you understand the pricing structures across data room providers and help you avoid overpaying.

Comparison of potential data room providers

When evaluating a VDR, it is imperative to take into account potential providers to find the best fit for your business needs. Here is a detailed virtual data room comparison based on the above key factors.  

Best data room features you shouldn’t ignore

Although some VDR providers promise the same capabilities, some features are essential, while others add more productivity. The following table categorizes features into both essential and desirable, helping businesses to choose the right data room.

Secure document sharing: ensuring data integrity

Don’t know what goes into the quest of maintaining data integrity and secure document sharing? The following are the key steps that not only protect sensitive information but also help avoid data breaches.

1.    Document security standards

Reputable data room software adheres to industry-recognized protocols to protect the confidentiality of the data, such as:

·       DRM (digital rights management) is a tool that helps in restricting unauthorized actions, such as copying or screen recording.

·       Admins can assign permission at both file and folder levels, allowing accessibility to authorized users only.

2.    Secure collaboration tools

Virtual data rooms nowadays make it easier for stakeholders in different geographic regions to collaborate in real time. Here is how.

·       Commenting and annotation features enable internal communication, which enhances efficiency.

·       Notification alerts assist in keeping investors informed without compromising data integrity.

·       Chat messengers for end-to-end encrypted communication.

3.    Common pitfalls to avoid

Even with the most secure virtual data room solution, small errors can compromise data integrity. Hence, be aware of potential pitfalls such as:

·       Always avoid sharing sensitive files via regular email and free file-sharing systems.

·       Giving more access to users than needed imposes a higher risk.

·       Not keeping a track of user activity or maintaining audit trails to detect potential data breaches.

Also, for a deeper understanding of how to protect sensitive data and collaborate safely, explore this secure document sharing guide.

Virtual data room checklist: a quick reference

Here is a quick-reference VDR checklist to evaluate and compare virtual data room providers efficiently.

·   Security and compliance certification. Does the virtual data room provider possess the essential security and compliance certifications as per your region? For example, data rooms in Australia must adhere to Privacy Act guidelines.

·   User experience. Can it be easily used by anyone, or is it techy?

·   Encryption. Is the data end-to-end encrypted (in transit and at rest)?

·   Robust search functionality. Does the platform offer a search and filter feature to quickly find the document?

·   Customer support. Is 24/7/365 support available?

·   Training material. Does the platform offer comprehensive training materials?

·   Access control. Does the data room software offer granular access control?

·   Scalability. Can the data room cater to your growing business needs and user count?

·   Pricing. Is the pricing structure clear with no hidden costs and matches your business needs and budget?

·   Integration capability. Can the data room integrate with your workflows and existing system?

·   Reporting analytics. Does the virtual data room provide audit logs for security purposes?

·   Provider reputation. What do the virtual data room reviews say about the vendor’s service quality?

·   Free trial. Does the solution offer a free trial before committing?

Common mistakes when choosing a data room provider

Opting for an electronic data room without proper evaluation leads to costly setbacks. One of the major mistakes businesses make is not taking into account security certifications. That is because VDRs with no security certifications lack proper encryption and weak access control, putting businesses at serious risk of:

·   Data breaches

·   Reputational damage

·   Non-compliance

Also, opting not to run a test prior to making a final purchase often leads to issues during crucial business operations. That is because the platform might not be that intuitive and easy to use, eventually negatively affecting the smooth workflow.

Many businesses often overlook scalability. Focusing primarily on present needs without considering future growth prospects reduces efficiency, leading to higher costs in the future.

Key takeaways

·       Businesses should consider all aspects, from efficiency to ease of use to security to smooth workflows when choosing the right data room provider.

·       A good virtual data room comes with robust security features, streamlining business operations.

·       Not all virtual data room services are equal. Although some virtual data room services promise the same capabilities, some features are essential, while others add more productivity.

·       Intuitive interface and easy navigation not only maximize productivity but also help identify potential roadblocks.