A data room is a digital storage solution that offers an secure storage space for documents. It also comes with a variety of features that aid in the due diligence. These tools include annotation tools, granular permissions, watermarking and activity tracking.
A typical use of data rooms is to share security documents (SOC 2 docs or compliance certificates, for example) with clients to support the due diligence process. Sharing this information with other parties before the deal is completed is a great method to speed up the due diligence process and decrease the risk.
Traditionally, companies have utilized email to share SOC 2 documents and other documents. While this is effective, it is inefficient and causes version control issues. It’s also not secure, due to the increased number of emails that are a result of compromised mailboxes, stolen credentials and phishing attacks.
Many secure storage and file sharing options like Box and Dropbox allow access to documents on any device or in any location. While they provide a good level of security, many companies or individuals need more than this. Documents that are sensitive and used for due diligence, fundraising or negotiating deals should be stored and shared through software that offers higher levels of security than these personal file-sharing platforms.
The most important question to ask any “secure data room’ is will it stop authorized users from sharing documents with non-authorized users? Unfortunately the answer is typically “no”. The majority of secure data rooms do not restrict the number of times the same credentials can be used to access the system. It’s easy for users to re-use logins they have created on their own devices or copy and paste the link into the browser on a friend’s computer.
