“You need to spend less time sorting through the documents, but make sure everyone on the team can access the right information. You need to get this deal started and done quickly, but you can’t afford to miss anything in the audits.”

Ah, the joys of working on a deal - whether it’s M&A, joint venture, IPO or fundraising - with a document-heavy, intense and not so exciting due diligence process.

You have more information to share with the other party and review than ever before and even less time to do it.

Amongst other things, this is one of the main reasons why virtual data rooms (VDRs) - online repositories that allow multiple parties to store and share critical information securely - have become so popular in the past years.

However, with so many VDR providers out there (as well numerous cloud storage platforms), it’s important to know what makes a good VDR before you commit to one provider. Here’s what to look for…

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1. A VDR That’s Easy-To-Use

Sounds obvious right? Yet a number of VDR providers complicate their software with features you don’t need and convoluted processes. Request a demo of the VDR before you commit to it and make sure it’s simple for both you and the deal team to use.

2. A Pricing Structure That’s Tailored To Your Deal

A VDR provider normally charges by how many megabytes (MBs) of data you use or how many pages you store. It’s important you have the flexibility to do both depending on the deal you’re working on.

If the documents you’re storing in a VDR are mainly text based (e.g. spreadsheets or written reports) then it’s best to pay for MBs of data as the cost will be lower.

If your documents contain a number of large graphics and image files (such as patent schematics) then you should pay by the number of pages you store as the file size will be far greater.  

Similarly, you’ll need to decide whether to pay for an unlimited number of people to have access to your VDR or whether to pay per user. Contingent on how you’re staffing your deals, over time the ideal VDR provider should be able to scale up - or scale back - your requirements accordingly.

3. Support Setting-Up And Going Forward

‘I love spending time learning about how to use a VDR and dealing with plug-ins.’ - Said no one ever.

In order to get the most out of your VDR, and to guarantee that everyone on the deal understands where everything in it is and how it works, you should select a provider who will help you get set-up and upload your documents for you.

This support shouldn’t stop here though. Your provider should have a support team on-hand 24/7, ready to answer any of your team’s questions either at night or on the weekends. Your deal won’t wait and neither should you.

4. A Completely Secure Virtual Data Room 

The information being shared in any transactional deal is naturally very sensitive and so any VDR needs to be impenetrable to hacking attacks.

You should check whether a provider has third-party certifications of ISO 27001, SSAE 16 and ISAE 3402 as these are a good benchmark for high-quality security standards.

It’s also worth noting where the VDR’s servers are based as well as the reputation and history of the provider.

5. Capacity To Control Who Sees What

A good VDR will let you control who sees which document - whether that’s a large folder of documents or a single document in a large folder - while also restricting what people can do with those documents.

The best VDR providers will give you the ability to see what people have done, and are doing, in your VDR so that your information remains private. This includes adding watermarks to documents or restricting who prints them.

6. A Dealroom That Never Lets You Down 

Sometimes (just sometimes) technology fails and, in the case of VDRs, a server may go down. The most reliable VDR providers should have a second server in place though, ideally in a different region from the first.

When you select your provider make sure this is the case and, if it is, that the second server continually replicates data so that it can automatically activate and be up to date when the first server is down - ensuring you don’t lose any time on your deal.

7. A Provider Who Gets It

Let’s be honest… You couldn’t care less about VDRs, security certificates, or megabytes. You just need to do your deal quickly with a service that works.

Make sure your provider understands this or, even better, has experience being on your side of the table. Their service will be better, they’ll do the heavy-lifting and they’ll keep things simple for you.

That’s all folks...

This list is by no means definitive but these seven things are the essentials you should look for when selecting your VDR provider.

Coincidently, they’re all things we offer within EthosData’s virtual data rooms. Funny that.

Over the past five years we’ve developed our virtual data room services around these areas as they are the main things we, and now our clients, wanted when we were investments bankers looking for a suitable M&A data room.

Want to learn more about how EthosData's VDRs work?

Schedule a demo with us by clicking here.

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