What Are the Different Types of Virtual Data Rooms?


Virtual data rooms, being comprehensive business solutions, are used everywhere. Private equities, law firms, clinical trials, mergers, acquisitions, or capital raising, you will find data room software in almost every business sector. The growing demand has not pushed virtual data room providers to be innovative, but they are also developing more industry-specific solutions. That said, DealRoom, a high-end virtual data room, specifically targets the M&A industry.

Similarly, iDeals Solutions are highly acknowledged in the legal industry, life sciences, and due diligence processes. Currently, there are multiple types of online data room software serving different purposes. Here are some common types and the best electronic data room providers in the market. Before that, here is a brief definition of an electronic data room.

What is virtual data room software?

Virtual data rooms are digital cloud-based data management solutions where businesses of all sorts can store, create, archive, edit, exchange, distribute and manage corporate information. Online data rooms support all types or formats of data, including images, podcasts, audio, documents, Excel files, videos, etc.

In addition to data management features, electronic data room software usually possesses virtual meetings and communication tools. You can manage your business meetings, create live polls, arrange Q&A sessions, and use chat messengers for one-to-one or group communication. There are many types of virtual data rooms based on their usage. The most common ones are:

  • Private equity data rooms
  • M&A data rooms
  • Real estate data rooms
  • Due diligence data rooms
  • Data rooms for the legal industry

1. Virtual data rooms for private equities

Venture capital or private equity firms are regularly involved in negotiations and dealings with investors, banks, and other businesses. Such types of transactions are data-driven, where concerned parties exchange massive volumes of data. Virtual data rooms not only help in managing bulk data sharing but also provide much-needed digital security during data exchange. Private equities usually use virtual data rooms for:

  • Buyouts
  • Equity investments
  • Investor communication
  • Partner communication
  • Prospecting
  • Bidding
  • Fundraising
  • M&As

2. M&A virtual data rooms

Mergers, acquisitions, or corporate consolidations (collectively known as M&As) are the biggest use of data room technology to date. M&As are complex processes where companies, investors, and buyers share huge volumes of data and communicate on a regular basis.

Virtual data room software mostly acts as a central document repository where target companies upload all documents needed for the transaction. Buyers or investors have full-time access to the data. However, target companies can restrict buyers from accessing or using any piece of information without permission. Data rooms help in:

  • Data distribution and sharing
  • Meeting management
  • Contract signing
  • Inter-company communication
  • Pre and post-integration stage

3. Real estate data rooms

The use of virtual data rooms has grown significantly in the real estate sector in the last 3-4 years. The COVID-19 lockdowns left real estate businesses with no choice except to look for digital collaboration methods. Virtual data rooms perform different functions in the real estate transactions, such as:

  • Virtual collaboration place for buyers, sellers, investors, and the company
  • Video conferencing tool for arranging online tours of real estate properties
  • Data repository for the real estate companies to manage their portfolio and other routine use data

4. Due diligence data rooms

Due diligence is usually associated with M&As, but it is a major process in different types of transactions. Whether it is financial due diligence, IP due diligence, regulatory due diligence, or HR due diligence, VDRs can be employed for any type.

Apart from regular data management and virtual communication solutions, many data room services provide different types of due diligence checklists. Businesses can use those checklists for more efficient data organization. Companies also use data room software for the pre-due diligence stage.

5. Virtual data rooms for litigation or law Industry

The legal industry falls among the top five virtual data room use cases. Data protection is the biggest reason why lawyers and attorneys use data room software. That’s because law firms deal with the personal and highly confidential information of their clients. The law also requires them to maintain their clients’ privacy and failing to do that usually triggers lawsuits against lawyers.

Virtual data rooms help lawyers tackle compliance issues and make sure the privileged data remains safe. Corporate lawyers also use VDRs for client communication. Some data rooms like iDeals also provide lawyers with a gigantic library of legal forms.

Top 10 virtual data rooms in 2022

Following are some of the best virtual data room providers with a proven history in the VDR market:

  1. iDeals
  2. Merrill Datasite
  3. Firmex
  4. CapLinked
  5. DealRoom
  6. Intralinks
  7. SecureDocs
  8. Digify
  9. Ansarada
  10. ShareVault

Closing thoughts

Virtual data rooms serve different business sectors. The most common types of data rooms include data rooms for M&A, private equity, real estate, due diligence, and legal practices. While some providers offer solutions specifically designed for a certain use case, there are some universal players on the market that can serve a variety of industries. These include iDeals, Datasite, Firmex, CapLinked, DealRoom, Intralinks, SecureDocs, Digify, Ansarada, and ShareVault.

Photo credit: The feature image has been done by Matej Kastelic.

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