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A secure virtual data room is a secure online repository for storing and sharing sensitive documents in a controlled environment. These special solutions can be crucial in supporting complicated projects and processes that require sharing of confidential information with individuals outside an organization’s firewall. This includes the M&A litigation, due diligence required for PE/VC investment and fundraising.

As opposed to generic file sharing services such as Google Drive or Dropbox, data rooms are focused on security at the document and system levels. They rely on advanced encryption both during transport and at rest, and multi-level authentication techniques. They also provide features like watermarking, blind view and printing that is disabled to protect against accidental disclosures.

Some VDR providers make big claims about how secure their systems are using terms such as “most secure virtual space’ and ‘highly secure data room’. The truth is that any system that allows authorized users to share login links or documents with users who are not authorized is not secure. Even 2 factor authentication doesn’t stop this, since a user could forward the second link to anyone else.

You should look for an VDR that is certified with ISO 27001 certification – it is the gold standard of security management systems for information. Look for a VDR which has detailed activity tracking, as well as granular permissions that let you see who has accessed what documents. This is crucially important for M&A or fundraising procedures, because it will provide you with insight into the level interest that your shared files are generating among bidders.