Diversity brings options that create healthy competition in any business market. That said, a large number of virtual data room providers are competing in the data room market and facilitating different business spheres with innovative data room services.
Where competition opens a lot of options for businesses, it can also create confusion among decision-makers. For example, there are approximately 100 notable data room providers offering services globally, and which one you should choose is a tricky question.
If you are struggling to choose a provider among the best data rooms, this guide will help you make a more informed decision.
Important things to consider when choosing a data room software provider
It is important to note that the data room market has several top-tier providers. Still, not all of them may be able to facilitate you in the best possible way. Considering the following elements will help you choose the best possible option.
1. Look out for the vendor’s industry experience
Online data room software is not just a general data management tool. Modern-day vendors are targeting specific industries or business types.
For example, many data room vendors target nonprofit organizations, while others provide services to commercial businesses. Similarly, there are dedicated data room services for small, medium, and enterprises.
What’s more, data room service providers have segregated the market based on financial transactions. For example
- Merrill and DealRoom mostly target large-scale M&As or similar types of transactions
- SecureDocs is known for providing cheaper services to smaller businesses
- iDeals has a huge clientele in the legal industry, M&As, due diligence, and life sciences
Even when it comes to M&A data rooms, VDRs offer different services for the buy-side and sell-side in a merger or acquisition. Thus, it is important to choose a vendor that has proven expertise in the industry you are operating in. You can also read more about buy-side and sell-side VDR services at https://mnacommunity.com/insights/buy-side-vs-sell-side/
2. Define your needs: what do you need data for?
Virtual data rooms are multi-purpose business solutions for different corporate processes such as data management, deal management, communication, and board management. Therefore, start your need identification process with questions like:
- What do you intend to achieve with VDR services?
- Do you need a data room for internal data management or one-time dealmaking?
- Who would be able to access the data room?
- What type of documents will you add to your VDR?
- How much data storage capacity will be enough for you?
- Is your workforce willing to move to digital data management tools?
Answering these questions is important. For instance, if you intend to add highly confidential files to your VDR, it must have strong data access control features to restrict data leaks or breaches.
Most importantly, always start your research by keeping a budget in mind. That is because it will allow you to narrow down the options you can easily afford.
3. Analyze data room security
Data security is the most important factor to consider when choosing an electronic data room provider. It goes beyond doubt that data storage and management is the primary use of VDRs, whether it is used for M&As, board management, IPOs, or fundraising.
When you compare virtual data rooms, make sure they are certified to offer these services. Here are some common certifications to look for:
- FINRA. VDRs operating in the financial industry in the United States must be FINRA-certified
- GDPR. It regulates the data management practices in the European Union. A GDPR-certified data room vendor will settle compliance issues for businesses operating in Europe
Apart from that, other notable certifications include HIPAA, FISMA, SOC2, and ISO 27001.
The type of security varies from vendor to vendor and the package you choose. Common security features include two-step verification, document access control, NDAs, etc.
However, if you plan to share data externally, it is better to look out for advanced security features like fence-view mode, remote shred, dynamic watermarks, and built-in redaction.
4. Consider customer support and free trials
A virtual data room is almost useless without a knowledgeable customer support service. Make sure the customer support is not only responsive and patient but also has ample knowledge to deal with uncommon issues.
Last but not least, always ask the potential vendor to allow a free trial. It will help you assess whether their data room services are good enough for you.
Top 5 Virtual Data Room Vendors in 2023
Following are some of the best virtual data room providers with a proven history.
- iDeals Solutions — best overall
- DealRoom — best for large-sized M&As and due diligence
- SecureDocs — best for small businesses
- Merrill — best for due diligence and corporate development
- Intralinks — best for its products in M&As
Conducting a thorough data room review before choosing a vendor for your business makes sure all your objectives related to data rooms are achieved. Important aspects to look for include data security, ease of use, customer support service, and relevant industry experience.