What is a Data Room?


A data room is a kind of virtual storage solution that offers secure storage for documents. It also comes with a host of features to aid with due diligence. These include annotation tools that allow for granular permissions, activity tracking and watermarking.

Data rooms are commonly used to provide security documents to clients (SOC 2 documents or compliance certificates) to help with due diligence. Sharing this information with other parties before the deal is completed is a great strategy to accelerate the due diligence process, and also reduce the risk.

Traditionally, companies have used email to share SOC 2 docs and other documents. While this works, it is inefficient and leads to version control issues. It’s also vulnerable with email attacks increasing, which can lead to compromised inboxes, stolen credentials and the phishing exploits.

Many secure file-sharing and storage options such as Box or Dropbox allow access to documents from any device and at any location. They offer a high degree of security, but the majority of people and businesses need more. Documents that are sensitive and are used to raise funds, due diligence or negotiating deals must be stored in software that has higher levels of protection.

The most important question to ask any «secure data room’ is, does it prevent authorized users from sharing documents with non-authorized users? Unfortunately, the answer is almost always «no». The majority of secure data rooms do not limit the number of times the same user credentials may be used to login to the system. It is easy for users to reuse logins from their own devices, or copy and paste the link into a browser on a friend’s computer.