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What’s the Difference between a Data Room & Virtual Data Room?


Businesses throughout the globe rely on data rooms to store sensitive documents.

Some business owners still use traditional data rooms, but it seems like more companies than ever before are employing a virtual data room instead.

Having a secure location where employees can store and share confidential files can prove highly beneficial. Having a secure data room will help reduce the risk of sensitive files being exposed. A data room can store thousands of confidential documents for reporting and analytical purposes. Only certain people will be given access to the data room. 

Traditional Data Room

A traditional data room is a secured repository, which is often used to store confidential documents. Lots of businesses store legally binding sensitive files in a data room, but it can also be used for sharing, editing and reviewing too.

Some physical data rooms are located within the building where the company operates from. If third parties need to access the room, the company will have to give them the green light before they are allowed in. Most physical data rooms are monitored throughout the day to prevent someone from gaining access who doesn’t have authorization.

Virtual Data Room

Technology plays a major role in most businesses today. Just like a physical data room, a virtual data room is used to store confidential files, however, it is on the internet. It is a cloud based solution that allows people to access it from any location.

The ongoing pandemic has encouraged businesses to employ a VDR. With lots of folks working from remote locations, virtual data rooms allow people to store, edit and access the cloud based room from home.

These days, VDRs seem to be replacing a lot of physical data rooms. There are several reasons why VDRs can benefit companies such as:

  • Improve work efficiency
  • Improve security protocols
  • Easily accessible
  • The business will be able to track each person who uses the VDR
  • Mergers and acquisitions
  • Due diligence
  • IPO
  • Fundraising
  • Banking
  • Real estate

A physical data room can cost a company a lot of money. Some physical data rooms require 24 hour security to ensure the confidential files don’t fall into the hands of the wrong person. Virtual data rooms are a much cheaper alternative. Well known companies that operate VDRs like provide a highly secure and affordable service. Even small sized companies working off a tight budget are able to afford VDRs.

Setting Up a VDR

If all of a company’s files have been digitized, a virtual data room can be set up in a short space of time. Companies who decide to set up a physical data room are often forced to rent an office or convert an already existing office in the building where they operate from into a physical data room. Devoting space to secure files can cost the business a large sum of money, and maintaining security can prove challenging.

Because there are often thousands of legally binding files stored in a physical data room, businesses sometimes have to employ a person to organize all the files and folders. All of these extra expenditures can be avoided by investing in a VDR. Physically organizing each of the files and folders can consume a lot of time. Employees often find themselves spending months setting up a physical data room. Because it takes up so much of their time, they might be unable to work on their other daily tasks.

Employing a VDR is a straightforward task. You won’t need to hire others to organize the files, because the system will take care of everything.


Even if a company makes a highly secure physical data room, most business owners worry about someone accessing the sensitive files. People have managed to access even the most secure buildings on the planet, so the threat of someone accessing confidential files stored in a physical data room is real.

Reputable VDRs are designed to keep sensitive files secure. Business owners are able to give authorization to anybody they like, and they can keep a record of each person who enters the room. You will be able to decide who can access certain files, and who can make edits. This gives business owners a lot more control of what goes on inside their VDR.

However, some VDRs are more secure than others. Before employing a VDR, don’t forget to read reviews about the different services available. With cybercriminal activity on the rise, it’s worth your while finding a system that provides you with the highest security possible.

Identifying a VDR that best fits your company can prove challenging. A lot of VDRs readily available allow new users the opportunity to try out a trial version. These demos are often free of charge, and they give potential customers the chance to see what the system is like.

Security is of vital importance, so you will want to invest in a VDR that has built a good reputation for keeping files secure. Compromised files can damage a business, and it can affect deals. It’s highly recommended that businesses avoid using a VDR that is not ISO27081 compliant.

What Type of VDR does your Business Need?

Before investing in a VDR, ask yourself these questions:

  • How much storage does your company need? If you plan on storing a lot of large-sized files, you might need a lot of storage.
  • What type of documents will you be storing?
  • Which of the company’s employees will be using the data room?
  • Why are you employing a VDR? Is it for storing confidential files, or for other reasons?
  • How will the VDR affect your business?
  • Budget: There are several VDRs out there, and they all seem to vary in price. Before splashing the company’s cash, you will want to know how much you are able to spend on a VDR. Luckily, there are several VDRs available that don’t cost a lot of money.

Consider organizing a meeting with those who will be working with files stored in the data room. They might have some ideas on what is needed, and how it can improve your business.

Sharing Files

Storing confidential files is one of the benefits of employing a VDR, but sharing sensitive documents is also an advantage. A reliable VDR will allow users to share documents with one another without leaving them exposed.

There are several ways a business can improve its security on a VDR. You will be able to change the settings easily, so you can give certain people access to certain files. You can stop people from editing files, and copying them too. Business owners are in full control over the system.


A VDR provides a business with transparency. If a company is looking for new investors, or they are applying for a loan, the files and folders stored in the room can help keep track of the work carried out by the business.

Persuading potential investors to invest in your company will be a lot easier when you have easy access to all of the legally binding documents in the company. You can give an investor access to certain files, to encourage them to put money into your company.

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