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Selecting and Creating a Virtual Data Room 

A virtual data room (VDR) allows organizations to send and store confidential documents during due diligence securely. Whether going through a business funding process or exploring mergers and acquisitions (M&A) and other types of deals, VDRs can help streamline and accelerate the due diligence process.  

The due diligence process can include financial statements, cap tables, lists of shareholders, intellectual property (IP), Pharma testing results, reports, employee files, management agreements, and specialty file types relevant to an M&A or financing and underwriting. Suppose these documents leak beyond the authorized parties. In that case, it may open either party to nefarious person access or could result in unwanted attention and affect the entire dealmaking process.  

Here are the considerations to help you effectively evaluate and select and set up your data room for due diligence and other transactions.  


Be sure the requirements will meet and exceed your needs and allow you to achieve regulatory compliance associated with your type of business. Security is among the most reviewed features when setting up a virtual data room for due diligence. The value of security extends from the origination of your process through the completion and long-term storage of the documents and files. A simple cloud environment does not offer the protections required by FINA, FTC, FDA PCI, or HIPPA compliance. Be sure this is the initial requirement of your VDR selection. 

To ensure that your documents are protected during due diligence, look for data room software that is purpose-built for security. A purpose-built data room will make you look more professional to your partners, clients, investors, or buyers. Security is to include a two-factor credentialed access and that the provider maintains a Business Continuity Plan.  


Using a data room ensures that authorized people can only access documents according to your rules and permissions and supports security with detailed IP, user logs, and all other activity. Efficient recording of all actions and activities is a FINRA requirement, and reports should be easily accessible and not editable. Reviewing this activity is helpful when reviewing a person’s interest level and recording such activities.  

Permission-Based Access 

Your data room will have several folders and documents. Creating your users may require many access levels, expanding access as your transaction process progresses with a specific user. Be sure you will have an intuitive ability to end access, expand access, and allow printing and view restrictions only, with or without watermarking.  

File Structure 
Look for a data room application that comes with a file indexing feature. File indexing is a method that makes a file easily available by automatically creating an index number to locate it. This number will be automatically renumbered when you rearrange the files if you should modify your due diligence checklist, saving you time and effort. 

Uploading Documents 

Virtual data rooms should be quick to set up, and the interface should be user-friendly. The data room should be optimized for your due diligence workflow, such as displaying an NDA/Terms of Access before allowing access to the files and having auto-numbering features. Also, most data room services should include instant notifications of document uploads and other activity.   

Verify that the solution offers key security features to be set at the room, folder, or document level. Examples of these controls include watermarking, copy protection, expiry, NDA, and reporting in one platform. Suppose you go with a provider that doesn’t. In that case, you may be forced to find and install standalone tools separately, making your workflow more complicated. 

Adding Watermarks  

Sensitive files in your data room may require additional security measures. When evaluating your VDR choice, be sure you will have the ability to apply your custom watermark that will allow certain users to access without the watermark at your choice. In contrast, others will have the watermark automatically implemented for their view. The watermarking should offer document specif, room specif, or apply to all. Watermarking will help discourage recipients from sending these documents even after downloading if permitted, as they contain their username and IP address. Some data room providers also offer the functionality to present terms of access they must accept before viewing documents. These measures are especially useful to ensure intellectual property protection during the due diligence stage.       

Does a deal require multiple rooms? 

Some companies set up separate data rooms for the different stages of the dealmaking process or, based on the level of sensitivity of the files that need to be sent. Find a VDR that allows a user to view the document structure to which they should have access. VDR should offer a single room with document levels and user levels, making your need to manage multiple rooms unnecessary. 

Follow a due diligence checklist. 

Once you’re in the due diligence phase, your lead investor, buyer, and or legal counsel may give you a diligence checklist. Create a file structure, and if doing several deals, have a template that will allow rapid room deployment. Incorporating a workflow (tasks) native to the platform will save time, ensure all relevant parties have a checklist and process flow expediting, and reduce time administrating your data room. 


With a wide field of virtual data room features and functionality, you should use a VDR that offers the required functionality at a price point that reflects your requirements.  

Price is a common consideration when choosing a data room software provider. Find out how the pricing plans depend on the number of people who can create data rooms, the number of data rooms that can be created, and how many recipients can be invited.  

Final Thoughts 

Creating and implementing a plan is important for due diligence or other business transactions. To satisfy all the needs with a VDR platform, review and find Vault Rooms virtual data room services that are quick and easy to set up for due diligence for fundraising, M&A, and other complex deals and meet all requirements, including compliance.