A virtual data room (VDR) is a secure online repository used for the storage and distribution of digital files and documents. VDRs allow companies to share confidential or proprietary information with an additional party in a controlled setting. A VDR’s robust security features often include encryption, two-factor authentication, single sign-on controls, and compliance with standards (e.g., ISO 27001, SOC 1/2/3). The tools enable the hosting of confidential information under strict permissions and manage the viewer’s ability to release the information by limiting the ability to forward, copy, or print the documents.
Digital rights management is a critical aspect of VDRs due to their use during the due diligence process for mergers and acquisitions transactions, as well as private equity and venture capital transactions. Additionally, legal firms and real estate professionals use VDRs as a controlled and secure setting for sharing confidential agreements that involve their clients. Besides the granular use cases for specific industries and professions, compliance departments also use VDRs as a hub for sharing sensitive compliance-related files. Businesses may incorporate a separate file storage and sharing software alongside a VDR as an extra document repository that requires fewer security measures.
To qualify for inclusion in the Virtual Data Room (VDR) category, a product must:
Enable secure storage and distribution of content, data, and documents in a controlled environment
Provide security measures such as encryption, two-factor authentication, and single sign-on controls
Offer customizable role-based permissions structures
Support dynamic, user-specific watermarking, link expiration, print and download restrictions, and information rights management controls
Provide audit trails that enable verification, tracking, and enforcement of document permissions
Enable data compartmentalization with isolated, project-specific environments to prevent overlap
