A data room is a secure place that holds a company’s confidential documents. Most often, data rooms are used in due diligence in M&A transactions when both parties must review crucial documents and contracts. It’s also used for sharing information with investors in order to finance or restructure projects, or third parties in e-discovery and bankruptcy proceedings.

The most effective data rooms are built with due diligence in mind and provide features like granular access privileges and user activity reports. These will allow the administrator of the data room to view the number of users who have viewed and downloaded specific documents. They can then make sure that only the intended parties have access to confidential documents.

There are numerous file sharing tools that are free and easy to use, however they may not have the security or features of a virtual data room. They may lack the structure of a folder, search functions and other crucial features needed to help in the due diligence process.

It is crucial that the data room is equipped with several storage capacities based on the amount of documentation will be stored and uploaded. The capability to upgrade or downgrade subscription plans without hassle is also vital for flexibility and peace of mind. It is also crucial that the data room allows for team collaboration, with features such as secure chat, video conferences calls and a powerful question-and-answer tool to handle due diligence.

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