A data room is a kind of virtual storage solution that provides an secure storage space for documents. It also offers a variety of additional features that assist with the due diligence process. These tools include annotations that allow for granular access, activity tracking, and watermarking.
Data rooms are typically used to share security documents with clients (SOC 2 documents or compliance certificates) to support due diligence. Sharing the information with other parties prior to the deal is completed is a great strategy to accelerate the due diligence process and lower the risk.
Traditionally, companies have utilized email to share SOC 2 docs and other documentation. This isn’t only inefficient, it also causes problems with version control. It’s also vulnerable with email attacks increasing, leading to compromised mailboxes, stolen credentials and phishing exploits.
Many secure storage and file sharing solutions such as Box and Dropbox allow access to documents from any device and in any location. While they provide a good level of security, most people or businesses require more than this. Important documents used to conduct due diligence, fundraising or negotiating deals should be saved and shared in software that offers more security levels than the personal file-sharing software.
The most important question to ask about any «secure data room» is whether it prevents authorized users from sharing files with non-authorized users. Unfortunately the answer to this is usually no. The majority of «secure data rooms» do not restrict the number of times same user’s credentials can be used to login to the system. People can easily re-use logins on their devices, or copy and paste URLs into the browser of a friend’s PC.