Virtual Data Room Blog

A Virtual Data Room or Dropbox: which should you use?

18-Feb-2019 11:58:21 / by Anubhav Singh

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If you are about to start work on an M&A, IPO, or fundraising deal, you’re also about to come across virtual data rooms (VDRs). A VDR allows multiple parties to share and collaborate on a deal’s critical information through a secure and encrypted web platform.

Now, you’re probably thinking, ‘why should I pay for a VDR when platforms like Dropbox or Google Drive let me do something similar, but for free?’. Well, to be precise, a Virtual Data Room is very different from Dropbox or Google Drive.

Here are 5 instances where you  should consider a VDR, always:

1. When Sharing Highly Sensitive Information

VDRs were built for enterprises to store and share confidential information about a transaction. Dropbox was built for people to quickly share photos of their pets and the latest holiday with their friends.

The result is that security is paramount to data room providers.

VDRs have international third-party security certificates and data centers that are physically secured by biometric access and monitored 24/7. In comparison, Dropbox’s security has been breached on a number of occasions.

Furthermore, VDRs allow you to revoke access to a document even after a user has opened that same document. You can also keep all files (regardless of their format) protected with passwords, personalized watermarks, and customizable NDAs. Dropbox only lets you password protect your links.


2. Need more Control over your Data

Through a VDR, as an administrator, you can quickly assign different roles and responsibilities to multiple parties. You can easily set different document access and permission levels for users, and control who can see, edit, copy, print, or forward a deal’s documents.

On Dropbox, you can control who can edit or comment on a document but little else. That’s why VDRs are much more secure on global transactions when multiple parties are involved.


3. Need 24/7 Support

Data room providers will assign clients with a dedicated DataRoom Specialist. That specialist is there to handle all user, permission, and document management - from uploading content to preparing activity reports.

The best virtual data rooms will have this service available to clients 24/7, on weekends, and during nights so that if a user has a problem accessing a file or working on a document, it’s an issue that’s dealt with within 5 minutes, not over 24 hours through an online help desk.

To be blunt - you’re on your own when it comes to platforms such as Dropbox.


4. Track Activities 

Dropbox allows you to see top-level activity logs. The number of active users, the total storage being used by those users, or the number of devices users are logged into Dropbox on.

VDRs show you this. And a lot more.

You can run audits to track when users have viewed files or what they did in the document. This allows you to understand bidder interest and ensures you’re covered in the event of legal action.


5. Streamline Communications

Beyond sharing important files, VDRs come with a range of additional features that speed up workflow and make users more efficient.

The first of these is a Q&A tool where users can post questions and comments about a specific document to the administrator of the data room. The administrator can then reply to more than one question at a time and create hyperlinks to other documents in a reply. This keeps all communication recorded, encrypted, and in one place.

A second feature is customizable email alerts. These notify users to document changes, comments, and new uploads as soon as they happen. In comparison, Dropbox notifications will only alert users when an activity they have directly been involved in occurs, for example when someone replies to their comment. On a fast-paced and complex deal, this can mean that crucial information and activity are either missed or overlooked.


In conclusion, DropBox is a great platform when it comes to sharing information within small teams with fewer complications and non-confidential documents. 

However, when it comes to sharing private due diligence documents (such as finances or patents) with multiple teams and companies across the globe, you need greater levels of security and control that you can only get through virtual data rooms.


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Topics: Data Room, virtual data room, VDR