The common argument against paying for a virtual data room (VDR) is that Dropbox, Google Drive, Box.com or [fill in the blank] are all free. There certainly are distinguishing features between various online file storage platforms. It can be a compelling proposition to use any number of free, commodity online-storage solutions out there, but that does not mean they have the level of security, sophistication and control demanded by the various stakeholders to a deal. What a common user requires in a file storage solution is likely completely different than what a multi-national conglomerate performing M&A or a middle-market firm that is actively uploading and sharing documents for a deal. Here we discuss both the differences and the similarities between online storage solutions and advanced virtual data room products.
When banks, large corporations and governments need online storage for highly-sensitive and proprietary documents, do you think they are more likely to use Dropbox or something they know they can trust? The security differences between freemium and enterprise storage solutions are quite likely the most important feature in choosing a VDR over free storage solutions. Egregious examples of online storage security breaches exist in the consumer-based data storage market. Security on the platform includes a number of factors, including how the files are stored, the server on which they are hosted, the level of encryption and even other soft metrics. As it stands, most enterprise-level virtual data rooms have a much higher commitment and focus on security than what currently exists on the consumer side.
For instance, controlling user rights to specific documents in the data room as well as the timing and availability for said access is a huge differentiating factor for locking down the length of exposure for sensitive material. Other nifty features like personalized watermarks and/or “print screen” blocking tools provide an added layer of document protection throughout the due diligence phase.
Hands-on customer service, differentiates most Virtual Data Room systems from your run-of-the-mill storage solutions. Most VDRs include access to data room project managers, live support teams and other service coordinators to not only ensure the data is appropriately included and shared, but they also provide a nice “warm fuzzy” touch to ensure both buyers, sellers and the trusted advisors being represented are amply supplied with the knowledge they need to use the system. Nothing is worse than a poor User Interface with little to no training on how to actually use the system. In many cases, services for VDR support can get as intense as 24/7 support or even local, direct access to local company reps or affiliates.
The requirements of a virtual data room far surpass even the most advanced features of the paid versions of most freemium online storage providers. Features like:
It is true that those that ask,”why should I pay?” are likely not the accounts that are running due diligence on larger $100M+ transactions. However, regardless of the size of the deal, the items mentioned above can be critical obtaining metrics and protecting data and processes in a way that makes due diligence a more compliance-friendly process. As I have always said, even the features and services of most virtual data rooms are quickly becoming commodity products. When that occurs, there is a race to the bottom on price. That is at least one of the reasons we have included our data room service with a bundle of other cool investment banking software features. In short, when it comes to comparing virtual data rooms to consumer-based, freemium online storage, what’s good for the goose is definitely not good for the gander.