What is a Data Room?

A data room is a digital storage solution that gives you the security of a place to store documents. It also offers a number of features that help with the due diligence. These include annotation tools, granular access permissions, watermarking, and activity tracking.

A typical use of the use of a data room is to share security documents (SOC 2 documents as well as compliance certificates,) with clients to assist in the due diligence process. Sharing this information with other parties prior to the deal closes is a great strategy to accelerate the due diligence process and reduce the risk.

Traditionally, companies have utilized email to share SOC 2 documents and other documents. Although this is a good idea, it’s inefficient and can lead to problems with controlling versions. It’s also a security risk with cyber-attacks increasing, which can lead to compromised inboxes, stolen credentials, and hacking exploits.

Many secure storage and file sharing solutions like Box or Dropbox allow access to documents on any device and at any location. While they provide a high level of security, most users or businesses need more than this. sensitive documents that are used to conduct due diligence, fundraising or negotiating deals must be stored and shared in software that offers more security levels than these personal file-sharing systems.

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 limit the number of times the same credentials can be used to access the system. It is simple for users to re-use logins from their own devices, or copy and paste the URL into the browser on a friend’s computer.

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