What Is a Virtual Data Room and How Does It Impact Small Business?

Virtual data room software is currently among one of the most popular business solutions. This explains why the data room software market is growing at a rapid pace and has crossed the billion-dollar mark already. 

The reason why online data room software gained immense popularity is because of the diversity it provides. Data room providers create custom solutions for businesses of different types and sizes.

For example, a large number of data room vendors target small and medium-sized businesses. That’s because the VDR technology is cheap as well as highly secure for sensitive data management. So, here is a detailed guide to virtual data rooms and the reason small businesses should use them.

What is a virtual data room?

A virtual data room, also known as an electronic data room, is a digital document storage and management solution with advanced tools for data management, business communication, and online meeting management.

Virtual data room is a for-all solution that commercial businesses, charities, nonprofit organizations, corporate boards, and public institutions use according to their needs.

It is worth noting that data rooms and online cloud repositories are different on various grounds. 

For instance, data rooms are a product of certified service providers. A certified electronic data room provider is authorized to provide services after complying with the regulations and standards set by concerned authorities.

 A VDR vendor offering services to federal institutions in the United States must be FISMA-compliant. Other common certifications in the VDR industry include ISO, FINRA, HIPAA, SOC, and GDPR.

Why are data rooms important for small businesses?

Startups and small businesses are companies that struggle to get their feet on the ground. It is no secret these businesses have limited resources. Additionally, such businesses can fall apart in case of a data breach which often leads to penalties and even sanctions.

What’s more, convincing the investors and obtaining the funds is the first biggest challenge for startups and small businesses, which is only possible through effective information sharing. However, not all investors are bona fide, which means entrepreneurs must be extra cautious when sharing data with potential investors.

Virtual data rooms have the answers for the above-mentioned issues. They are universal solutions that small businesses can easily afford. Also, VDRs employ the latest digital protection tools for highly safe and controlled information sharing.

Some of the best data rooms for small businesses include iDeals, SecureDocs, Digify, and Ansarada.

Benefits of virtual data rooms for small businesses

Here is how startups and small companies can benefit from electronic data rooms.

Centralized data storage

Small businesses, rather than turning to traditional and expensive data storage options, can use virtual data rooms as their primary information management solution. As VDRs are online repositories, they are accessible from anywhere, which allows business teams, investors, and management to access business data immediately.

What’s more, the best data room providers currently allow VDR access through dedicated apps from tablets and smartphones; your business data is literally one click away.

Centralized data storage is highly convenient when raising funds for startups. It allows entrepreneurs to share data and communicate with potential investors remotely.

Premium data protection

Second, data room software is a sigh of relief for startups and small businesses as it secures confidential documents. Data rooms are unique in terms of cyber protection, and their banking-grade security makes them one of the safest document repositories.

First, data room providers store your data (with backup) in fully guarded remote data centers. Second, there are different mechanisms for internal and external security.

For instance, VDR management is able to define roles in the data room and give access to users according to their roles. It is possible to limit any user from accessing any file or even a part of it.

The data is stored and shared in encrypted form, and there are multiple login steps to minimize the chances of unauthorized access.

Virtual collaboration

Small businesses can turn online data rooms into virtual workspaces (as it happened during Covid-19 lockdowns). The administration can create multiple rooms for different teams or departments where users can share or access data, communicate via end-to-end encrypted chat tools, and conduct online meetings as well.

Activity monitoring

One of the best things about VDR technology is the level of transparency it brings to business operations. Every standard online data room software has an activity log or audit log feature that generates detailed reports on every user activity in the VDR. These activity logs make it easier to track any irregular or prohibited activity immediately.

Pro tip: The availability of security features like audit logs and various permission settings vary from vendor to vendor. Therefore, consider it an important part of your data room review process.

Conclusive thoughts

Small businesses can benefit from virtual data rooms by employing this technology as their primary data management solution. They can use it for fundraising, digital communication, board meetings, and third-party dealings. Best of all, they can do all these activities in a cost-effective, yet completely secure manner.