Virtual data rooms have become an integral part of the success of many modern companies because it is much easier to manage and share data quickly, efficiently, and securely. Let’s pay attention to the development of VDR technology and find out how it has appeared in the market!
Online Data Room Software: New Age Of Due Diligence
The concept of a global computer network was first developed in 1969 by Joseph Carl Robnett Licklider. He wanted to create a virtual space that would allow users worldwide to be connected and access information from any site, anywhere in the world. According to other sources, John McCartney was the first to propose turning information and computing systems into public service. In 2009, when Web 2.0 was launched, enterprises began to take an active interest in the then-new technology for secure storage and transmission of data. So, in 2009, data room software appeared as an independent technology, and this moment is considered the starting point of its development. The numerous benefits of an electronic data room have led to rapid growth in the industry. Which ones exactly? Let’s highlight the main ones:
- Optimization of daily office processes;
- Simultaneous access of all participants 24/7/365;
- View data from anywhere in the world by connecting to the Internet;
- Instant notification of all participants about events occurring in the data room;
- Access to user activity statistics in VDR;
- No expenses for the logistics of documents and travel.
Thus, from 2009 to 2014, the VDR industry grew at an annual rate of 16.7 percent; by 2017, it had reached $1.2 trillion. Besides, companies’ naturally growing popularity and need for data room services have increased the number of providers. As a result, there are 300+ data room vendors currently. Among them, the leading positions are occupied by iDeals Virtual data rooms, Merrill Datasite, Intralinks, OneHub, CapLinked, ForData, Ansarada, etc.
Has the development of VDRs affected M&A transactions?
Yes, sure! Virtual data rooms have become an integral part of M&A deals. Business leaders in many industries focus on quickly, efficiently, and securely managing data. It is especially true when there is more and more data. Thus, since their inception more than ten years ago, virtual data rooms have replaced time-consuming and paper-based due diligence processes, often leading to higher valuations and shorter transaction cycles. Of course, if you compare virtual data rooms, they may differ in unique features. However, they all provide a professional approach to Due Diligence. In this regard, it is important to note that using VDRs allow:
- preparing all stages of the transaction and fundraising (For more information visit https://dataroom-rating.us/fundraising/;
- ensuring full disclosure of information in preparation for equity transactions. So all persons involved in the transaction receive simultaneous access to the documentation;
- comprehensive work with accounting documentation of merging companies to merge financial systems;
- data storage in corporate storage since the technology provides one safe place for all critical business documents; and
- disclosure to auditors.
Online data room software has evolved so much that any business can use it! Naturally, though, VDRs are prevalent in companies and holdings that deal with confidential data when secure transaction processing is required. However, due to its advanced features, VDR is suitable for meeting the needs of small companies, investors, start-ups, and ordinary users.
Continuous Development & Improvement Of VDR Technologies
As long as there are security issues, VDRs will continue to be improved to address them. However, security is the primary concern that this technology aims to provide. Of course, there are many ways to transfer large amounts of data between users quickly, but one wrong move can send it to hundreds of people for whom it is not intended. So today, virtual data room providers pay maximum attention to security and offer:
- data encryption in VDR and 1024-bit encoding during data transfer;
- SSL (Secure Sockets Layer) based on 128-bit encoding — a secure channel that mixes data and protect it from unauthorized access during an Internet session;
- secure dynamic code that is used to access each document;
- configuration of Document Viewer to leave no magnetic traces on the user’s computer; and
- encryption of the document database and locking access to passwords even for technical support personnel.
The use of VDR demonstrates compliance with growing security and communication standards. In addition, they are simple, straightforward, and provide a secure place for the team to collect data and information together without using the resources of their computers or servers. As a result, modern providers have done their best for VDRs to bring value to a team within a company or bring in customers from outside. The future of a virtual data room will be characterized by competition over which service offers the most security and additional features. For example, chat features will become more common, so important meetings won’t have to be held on public platforms, which often suffer from connectivity issues and lack security features.