A data room is a type of virtual storage service that provides the security of a place to store documents. It also provides a number of additional features to assist with the due diligence process. These tools include annotations, granular access permissions, watermarking and activity tracking.

A typical use for data rooms is to share security documents (SOC 2 docs or compliance certificates, for example) with clients to aid in the due diligence process. Sharing the information with other parties before the deal closes is a great method to accelerate the due diligence process and reduce the risk.

Email has been used by businesses to share SOC 2 documents and other documents. While this works, it is inefficient and causes issues with version control. This is also insecure, with the increase in email attacks resulting in compromised mailboxes, stolen credentials and phishing attacks.

Many secure storage and file sharing solutions such as Box or Dropbox allow access to documents from any device and in any location. While they provide a good level of security, most users or businesses need more than this. Important documents used to conduct due diligence, fundraising or negotiating deals must be stored and shared with software that offers greater levels of security than the personal file-sharing software.

The most important question to ask any’secure data room’ is, does it stop authorized users from sharing documents with non-authorized users? Unfortunately, the answer is usually no. The majority of “secure data rooms” do not restrict the number of times the same user credentials can be used to access the system. People can easily re-use logins on their own devices or copy and paste URLs into the browser of a computer friend’s.

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