The Rise of Digital Data Rooms
Learn about the history of digital data rooms, how far they’ve come, and how next generation VDR technology is boosting opportunities for advisors and their clients. What you can do with digital data rooms today might surprise you.
In our digital age, technological transformation is rapid and commonplace. The amount of data created by organizations is multiplying exponentially; it reached 64.2 zettabytes in 2020 and is projected to grow to more than 180 zettabytes by 2025 (Statista).
Data proliferation not only brings with it challenges of data storage, but more alarmingly, fast-growing cybersecurity risks. On the flip side, the right digital tools can bring unmatched efficiencies, data insights and security to companies and their advisors.
Why are modern dealmakers making the switch?
As an advisor, you take your clients through the most significant events that their business will ever undertake, whether in times of growth (e.g. IPOs and capital raises) or times of stress (e.g. restructuring). Either way, their most sensitive information is prepared, reviewed and shared under pressure, and strict time constraints.
This requires tight, efficient collaboration and an unparalleled level of security to mitigate data risks. If the wrong information goes to the wrong party, the ramifications can be severe.
During a critical transaction, speed and security are paramount, which is why the tools used to manage and share information must support an increasingly rigorous standard. Advisors seek digital data rooms as a way of running deals efficiently and effectively while protecting their clients, and their own reputations.
This is where digital data rooms shine.
What is a digital data room?
Digital data rooms, also called virtual data rooms, VDRs, or deal rooms, are purpose-built depositories that serve this exact purpose. Digital data rooms are highly secure software platforms where digitized information can be reviewed, verified, collaborated on and shared with relevant third parties. These rooms are created for a specific purpose – most frequently, for the confidential sharing of legal documents by businesses participating in the mergers and acquisitions (M&A) space, auditing, IPOs, capital raising, and other legal document management.
Crucially, digital data rooms are not general file sharing systems. Systems like DropBox and OneDrive might be great for basic document storage, but they don’t offer the necessary levels of security, auditing capabilities, or other purpose-built deal functionalities that come with digital data rooms.
What is the history of digital data rooms and how have they evolved?
Digital data rooms were developed in conjunction with M&A deals. Legacy data rooms – where parties could come and physically perform due diligence – required weeks or months of manual labor for a single deal, and posed substantial risks. Dealmakers were driven to find new, secure and efficient data storage solutions.
The first answer was developed by Sony, who launched the CD-ROM in 1984. Suddenly there was a digital solution for document storage and distribution. Of course, there were risks associated with floppy disks as well – including loss and corruption. But in 1996, Compaq Computers developed another solution which minimized those risks. This new development, known as ‘cloud computing’, allowed the storage of data to move from a physical floppy disk to an online facility.
Within a decade, major players – including Google – had seized upon the idea of cloud computing and brought it to mainstream corporate industries. Ansarada was among the first to develop a solution to improve both the security of documents and the speed of their distribution, creating their first digital data room in 2005.
Since that time, digital data rooms have grown in availability, compatibility, and functionality. They are used in virtually every due diligence process worldwide, and today’s rooms continue to evolve to better manage cybersecurity issues and growing compliance requirements, and to guarantee the security of the information they hold.
How to choose digital data room software
When it comes time to choose your digital data room software, you need to ensure it can accomplish everything you need it to do for your deal or project. At the absolute minimum, digital data rooms should support the following:
- Provide secure storage and distribution of data, information and documents
- Enable you to control your document environment and documents held in that environment
- Provide security measures, such as encryption, two-factor authentication, and single sign-on
- Allow customizable security permissions structures
- Track all document activity with comprehensive reporting and audit trails
Next generation digital data rooms
While digital data rooms have been crucial in supporting the speed and security of today’s transactions, they have historically focused on a single phase of the deal – the due diligence phase. But with new digital technologies comes the ability to automate and streamline all aspects of the transaction from start to finish, starting much earlier in the process.
What sets today’s leading digital data rooms apart is the ability to prepare early with purpose-built project management tools, surface insights with AI analytics, boost efficiency with automation, and simplify every stage of the deal from end to end.
From the early days of disrupting the physical data room, Ansarada’s Deals solution is now an end-to-end transaction management platform, managing and digitizing data across the deal lifecycle, from deal marketing through to post-deal integration. Critically for advisors, this includes a free preparation stage using Deal Workflow for deals, which allows them to prepare their clients faster, and much earlier on, at no cost until the deal goes live.
Along with all the standard digital data room capabilities, Ansarada Deals has its own unique set of benefits, including:
- Remotely control and self-destruct files at any point
- Prepare for free using purpose-built project management workflows and checklists
- Benefit from AI deal tools, including AI insights from Bidder Engagement scoring and Smart Sort data room structuring
- Benefit from best-practice transactional templates built off the learning of 24,000+ previous deals
- Facilitate Q&A centrally through an in-built system and sync securely with your email inbox
- Generate a quote and a free digital data room
Ansarada’s digital data room goes even further in simplifying deal processes, starting from VDR quote procurement, so that companies and their advisors can benefit from the highest tier of speed and security from day one.
Create your own digital data room in minutes
The shift to online has created an expectation of services on-demand, and digital data rooms are no different. Ansarada is the first provider to offer an online data room quote builder so advisors can create their own quotes and generate a free digital data doom in minutes. This cuts out an estimated three hours of admin work every single deal. Usage fees only start once an external guest is invited into the room, and plans can be changed at any point before that, using the built-in data gauge to monitor and estimate data usage.
Now you can accelerate the deal from the earliest stage. Set up your digital data room and start uploading your documents straight away.