Physical data rooms are quickly being replaced by virtual data rooms, partly because of the complex procedures that are necessary to protect the information held in these rooms. Having confidential deal information in a specific location means that the parties in a deal need to travel to and from the location each time they view documents, which also results in high costs associated with transport, accommodation, premises and security. Another complex issue is the on-site management of the venue, which needs to be restricted to only those who are essential to the due diligence process. Use of Virtual Data Rooms has considerably evolved over the years over its Physical counterpart in many ways.

Let’s take a closer look at the procedures involved in using a physical data room.

I was invited last week to share with a group of MBA students our perspectives on the history of Virtual Data Rooms. This is a brief compilation of what I shared with them on my experience in this business line. Experience, you see, is a precious commodity because someone was present, involved and personally learned from an event – and hence can share their story first hand to let people relate to it in much better way.

Starting from the humble beginnings when the world’s first VDR was created and used for Debt Underwriting, the industry has grown significantly. VDRs have become the norm in almost all transactions that are in the due diligence phase substituing Physical Data Rooms. But back then, it was a whole different story as the people were reluctant to shift from traditional Datarooms to a Online one. Lets have a look at some of the challeneges that the industry faced when it was nascent .

Virtual Datarooms have changed a lot in the last 10 years.  From rarity to almost commodity.  Something that was very complicated now seems much easier with the wide availability of file sharing and also the creation of cheap providers that define themselves as datarooms. 

Prior to my role as a Virtual Data Room Consultant, I had the opportunity to work on a number of M&A transactions which required a significant amount of data sharing between parties. This was the time when physical Data rooms were still the first option for most of the transactions and virtual datarooms were still very rare. The first time we used a virtual data room, the costs went significantly over our initial estimates. We were very surprised with how quickly the total fee charged by the dataroom provider ballooned to a cost that we were uncomfortable with.

EthosData has been very busy building our new virtual dataroom platform.  

Social engineering is probably the biggest threat for your confidential information.  We as dataroom providers spend a very significant amount of time making sure that our professionals are well versed in the tricks that can take down the most secure systems.   

"How do you as a Virtual Data provider destroy your documents?  What should I do to destroy our data?" A very good client asked us this question the other day.  

In the third of our posts about a robust security policy from a Virtual Data Room provider's perspective, let’s take a look at how you actually implement the policy.  As in other posts in these series, we are sharing with you some of the learning/policies, that we have implemented in EthosData to manage our Dataroom business.

The hardest part of the process is often rolling it out to your organization and getting employees’ buy-in and commitment to comply with it. The best intentioned projects can fall flat when it comes to the implementation phases, so you need to plan this step carefully to ensure its success.