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How to Setup a Virtual Data Room in 4 Easy Steps

Marsha Lewis
VP of Marketing at DealRoom
Marsha Lewis
VP of Marketing at DealRoom

A virtual data room can add significant value to the M&A process.

Far from being just a data storage tool, the best platforms perform a number of different roles.

For example, DealRoom’s lifecycle management platform with built-in virtual data room doubles as an M&A project management tool, allowing users to look at workflows, communicate through direct messages with other members of the team, and to generate tasks for others in the group. 

Btw, you can scroll down if you have been already familiar with datarooms and where they are used.

For those who are not familiar with the tool, we will start from the beginning. For those who already know we recommend scroll down or start 30-day free trial of FirmRoom's data room right away.

What is a data room? 

A data room (interchangeable with ‘dataroom’ or ‘virtual data room’) is a virtual space on the cloud that is used for storing, securing, and sharing data. This data is usually, but not necessarily confidential.

The term ‘data room’ comes from early generations of the concept, when files - usually belonging to financial or scientific organizations that held vast amounts of data - were stored on private physical servers that  were given their own room (i.e. the data room).

How does it benefit its users?

Statista estimates that by 2025, 181 zettabytes of data will be created, captured, copied, and consumed globally.

At almost three times the corresponding figure for 2020, it becomes obvious why more storage is required.

Most of this data is generated by companies and organizations, who, recognizing the power of valuable data, have begun collecting and consuming it in far larger quantities, creating a need for virtual data rooms.

It is important to note, however, that data storage is just one of the benefits of virtual data rooms.

The dataroom is also used for:

  • document exchange,
  • file sharing,
  • communication between parties privy to vast amounts of information (as email is inadequate for sharing large amounts of data),
  • due diligence,
  • and even project management.

As a highly general rule, the more data storage and exchange required, the more value that a virtual data room can add.

dataroom

What options of datarooms are there?

There are now literally hundreds of datarooms on the market, with many simply taking data provided by Amazon and Google servers, and creating their own branding around that.

This is an unfortunate commoditization of what is an extremely valuable tool for business. If data is valuable, it should be treated as such.

DealRoom recently conducted research into this market and has compiled a ‘comparison of the best data rooms’ list for anyone considering investing in a virtual data room.

data room comparison

Who uses virtual data rooms?

Readers may well be familiar with the now commonly seen trope: “every company is a data company.

To this extent, every company can benefit from datarooms. The ability to store, organize, categorize, share, and ultimately leverage data for value (the goal of ‘every’ firm now) is something that the virtual data room is specialized in.

But within this broad church, there are a few companies that tend to turn to virtual data rooms more than others.

The most common of these tends to be from the finance industry, where transactions involve huge quantities of information being exchanged between various parties (for example, in M&A or IPOs).

The same also holds true for engineering firms that tend to exchange information with dozens of separate contractors on large projects, and even governmental bodies, where the addition of a data room can allow departments to interact with each others’ data through a commonly held data room.

But regardless of which provider you choose for your virtual data room, you will need to follow these steps to activate your VDR:

Virtual data room how to guide

1. Select a virtual data room provider

Before you can start document storage or due diligence, you need to pick a virtual data room provider.

Due to the many providers out there, it’s important to do research on the pros and cons of each.

You can use virtual data room vendor review sites and VDR comparison charts to educate yourself on the options and see which one best meets your team’s needs.

If you don't want to struggle trying different providers, we recommend to try a FirmRoom's data room 30-day free trial.

It is not expensive and include:

  • Unlimited admins and users per room
  • 10 GB of storage for the basic plan
  • All the most commonly used data room features.
  • And it is easy to setup

Depending on the provider, once you choose them, you can immediately contact customer support to receive help and training. 

Once you select your virtual data room provider, you will need to set up your room and invite users.

sign up for virtual data room trial

2. Create groups and add new users

Creating groups and adding new users to a virtual data room is simple.

In this article, we will cover how to create groups, add new users, set permissions, upload documents, and create folders with FirmRoom data room.

With FirmRoom, the “Groups” tab is where administrators can set file and other permissions. Administrators can also view the specific members in each group.

Users that are not admins only see the members of the groups that they have access to.

To add new users, all you have to do is type in their email address. The user will receive an email invite and add in all their own information.

To add a new group, simply hit the “+” next to “Groups” and type in the group name. You can also copy, rename, and delete groups.

add groups and members to virtual data room

3. Set Permissions 

All permissions for the room are located within the “Groups” tab. Common permissions include file or folder, admin, membership, group, and more.

Note that all file permissions are set on a group level.

For file permissions, there are four options to choose from including view, download, download original, and edit:

  • View - users can only view files with a watermark
  • Download - users can download and print watermarked files
  • Download Original - users can view, download, and print original unwatermarked files
  • Edit - users can move, upload, overwrite, delete, and rename files and folders, as well as edit the index
set permissions in a virtual data room

As soon as you upload files, the file permissions tab pops open. This is where you chose from view, download, download original, and edit.

File permissions can be adjusted at any time.

set permissions in a data room when upload documents

In addition to file and request permissions, administrators can also set permissions for group members, parent folders, and more.

They can give a specific group administrator access, hide members from each other, allow regular users to invite new users, and more.

additional permissions in a data room

4. Add Documents and Files

The document tab's content empowers teams to transform, retrieve, and classify documents and folders all within one platform.

Benefit from various virtual data room features such as:

  • bulk upload,
  • built-in document view, s
  • mart search,
  • drag-and-drop and more.

The convenient built-in Excel and document viewer gives users file visibility, without ever having to leave the platform.

To upload new documents and files, users head over to the “Documents” tab. Users can then bulk upload documents using drag and drop, and the system will maintain the file & folder structure inside the VDR when uploading.

Even though many VDR platforms have the same set up format, not every provider offers the same extra features, customer service options, and pricing.

A note for M&A practitioners looking for a virtual data room

We are well aware that due diligence is the most information-heavy component of the M&A process.

As specialists in platforms and tools for M&A, we are also aware that you need to choose the software for your M&A process carefully.

Our suggestion is to look for software with built-in diligence management capabilities like DealRoom.

This will allow the process - which has a tendency to drag, given the multiple parties involved - to progress faster, generating value for all parties involved.

Outlining the benefits of DealRoom's M&A project management tool

A typical M&A process has several moving parts, with both sides of the transaction requesting, exchanging, analyzing, and assessing information throughout the process.

The tools used for due diligence need to reflect this.

A component M&A software should include the following:

1. Diligence management with requests 

Unless the VDR has diligence management with requests, it can become very easy to lose track of what information the buy-side has requested.

Even on a competent tool like Slack, this can get lost in the information maelstrom.

DealRoom allows you to always refer back to what’s required, and whether it has been delivered.

diligence tracker

2. Convenient progress tracking 

When tasks are underway, they can become something of a black box.

The standard response, “I’m taking care of it,” could mean that the task is anywhere between 1% and 99% complete.

With progress tracking, everybody knows the task’s timeline, as well as creating an impetus for the task owner to finish as soon as possible. 

progress tracking

3. Built-in pre-built diligence templates

Imagine this: You’re in the middle of a complex transaction, and you ask yourself:

“is there anything else that I should be asking?”

That’s a nagging doubt that all M&A practitioners will be accustomed to.

That’s why it helps to have the built-in due diligence templates for individual industries provided by DealRoom.

M&A templates

4. Project management capabilities

Enabling you to conveniently work with your team and third parties on a deal.

request a demo

A virtual data room can add significant value to the M&A process.

Far from being just a data storage tool, the best platforms perform a number of different roles.

For example, DealRoom’s lifecycle management platform with built-in virtual data room doubles as an M&A project management tool, allowing users to look at workflows, communicate through direct messages with other members of the team, and to generate tasks for others in the group. 

Btw, you can scroll down if you have been already familiar with datarooms and where they are used.

For those who are not familiar with the tool, we will start from the beginning. For those who already know we recommend scroll down or start 30-day free trial of FirmRoom's data room right away.

What is a data room? 

A data room (interchangeable with ‘dataroom’ or ‘virtual data room’) is a virtual space on the cloud that is used for storing, securing, and sharing data. This data is usually, but not necessarily confidential.

The term ‘data room’ comes from early generations of the concept, when files - usually belonging to financial or scientific organizations that held vast amounts of data - were stored on private physical servers that  were given their own room (i.e. the data room).

How does it benefit its users?

Statista estimates that by 2025, 181 zettabytes of data will be created, captured, copied, and consumed globally.

At almost three times the corresponding figure for 2020, it becomes obvious why more storage is required.

Most of this data is generated by companies and organizations, who, recognizing the power of valuable data, have begun collecting and consuming it in far larger quantities, creating a need for virtual data rooms.

It is important to note, however, that data storage is just one of the benefits of virtual data rooms.

The dataroom is also used for:

  • document exchange,
  • file sharing,
  • communication between parties privy to vast amounts of information (as email is inadequate for sharing large amounts of data),
  • due diligence,
  • and even project management.

As a highly general rule, the more data storage and exchange required, the more value that a virtual data room can add.

dataroom

What options of datarooms are there?

There are now literally hundreds of datarooms on the market, with many simply taking data provided by Amazon and Google servers, and creating their own branding around that.

This is an unfortunate commoditization of what is an extremely valuable tool for business. If data is valuable, it should be treated as such.

DealRoom recently conducted research into this market and has compiled a ‘comparison of the best data rooms’ list for anyone considering investing in a virtual data room.

data room comparison

Who uses virtual data rooms?

Readers may well be familiar with the now commonly seen trope: “every company is a data company.

To this extent, every company can benefit from datarooms. The ability to store, organize, categorize, share, and ultimately leverage data for value (the goal of ‘every’ firm now) is something that the virtual data room is specialized in.

But within this broad church, there are a few companies that tend to turn to virtual data rooms more than others.

The most common of these tends to be from the finance industry, where transactions involve huge quantities of information being exchanged between various parties (for example, in M&A or IPOs).

The same also holds true for engineering firms that tend to exchange information with dozens of separate contractors on large projects, and even governmental bodies, where the addition of a data room can allow departments to interact with each others’ data through a commonly held data room.

But regardless of which provider you choose for your virtual data room, you will need to follow these steps to activate your VDR:

Virtual data room how to guide

1. Select a virtual data room provider

Before you can start document storage or due diligence, you need to pick a virtual data room provider.

Due to the many providers out there, it’s important to do research on the pros and cons of each.

You can use virtual data room vendor review sites and VDR comparison charts to educate yourself on the options and see which one best meets your team’s needs.

If you don't want to struggle trying different providers, we recommend to try a FirmRoom's data room 30-day free trial.

It is not expensive and include:

  • Unlimited admins and users per room
  • 10 GB of storage for the basic plan
  • All the most commonly used data room features.
  • And it is easy to setup

Depending on the provider, once you choose them, you can immediately contact customer support to receive help and training. 

Once you select your virtual data room provider, you will need to set up your room and invite users.

sign up for virtual data room trial

2. Create groups and add new users

Creating groups and adding new users to a virtual data room is simple.

In this article, we will cover how to create groups, add new users, set permissions, upload documents, and create folders with FirmRoom data room.

With FirmRoom, the “Groups” tab is where administrators can set file and other permissions. Administrators can also view the specific members in each group.

Users that are not admins only see the members of the groups that they have access to.

To add new users, all you have to do is type in their email address. The user will receive an email invite and add in all their own information.

To add a new group, simply hit the “+” next to “Groups” and type in the group name. You can also copy, rename, and delete groups.

add groups and members to virtual data room

3. Set Permissions 

All permissions for the room are located within the “Groups” tab. Common permissions include file or folder, admin, membership, group, and more.

Note that all file permissions are set on a group level.

For file permissions, there are four options to choose from including view, download, download original, and edit:

  • View - users can only view files with a watermark
  • Download - users can download and print watermarked files
  • Download Original - users can view, download, and print original unwatermarked files
  • Edit - users can move, upload, overwrite, delete, and rename files and folders, as well as edit the index
set permissions in a virtual data room

As soon as you upload files, the file permissions tab pops open. This is where you chose from view, download, download original, and edit.

File permissions can be adjusted at any time.

set permissions in a data room when upload documents

In addition to file and request permissions, administrators can also set permissions for group members, parent folders, and more.

They can give a specific group administrator access, hide members from each other, allow regular users to invite new users, and more.

additional permissions in a data room

4. Add Documents and Files

The document tab's content empowers teams to transform, retrieve, and classify documents and folders all within one platform.

Benefit from various virtual data room features such as:

  • bulk upload,
  • built-in document view, s
  • mart search,
  • drag-and-drop and more.

The convenient built-in Excel and document viewer gives users file visibility, without ever having to leave the platform.

To upload new documents and files, users head over to the “Documents” tab. Users can then bulk upload documents using drag and drop, and the system will maintain the file & folder structure inside the VDR when uploading.

Even though many VDR platforms have the same set up format, not every provider offers the same extra features, customer service options, and pricing.

A note for M&A practitioners looking for a virtual data room

We are well aware that due diligence is the most information-heavy component of the M&A process.

As specialists in platforms and tools for M&A, we are also aware that you need to choose the software for your M&A process carefully.

Our suggestion is to look for software with built-in diligence management capabilities like DealRoom.

This will allow the process - which has a tendency to drag, given the multiple parties involved - to progress faster, generating value for all parties involved.

Outlining the benefits of DealRoom's M&A project management tool

A typical M&A process has several moving parts, with both sides of the transaction requesting, exchanging, analyzing, and assessing information throughout the process.

The tools used for due diligence need to reflect this.

A component M&A software should include the following:

1. Diligence management with requests 

Unless the VDR has diligence management with requests, it can become very easy to lose track of what information the buy-side has requested.

Even on a competent tool like Slack, this can get lost in the information maelstrom.

DealRoom allows you to always refer back to what’s required, and whether it has been delivered.

diligence tracker

2. Convenient progress tracking 

When tasks are underway, they can become something of a black box.

The standard response, “I’m taking care of it,” could mean that the task is anywhere between 1% and 99% complete.

With progress tracking, everybody knows the task’s timeline, as well as creating an impetus for the task owner to finish as soon as possible. 

progress tracking

3. Built-in pre-built diligence templates

Imagine this: You’re in the middle of a complex transaction, and you ask yourself:

“is there anything else that I should be asking?”

That’s a nagging doubt that all M&A practitioners will be accustomed to.

That’s why it helps to have the built-in due diligence templates for individual industries provided by DealRoom.

M&A templates

4. Project management capabilities

Enabling you to conveniently work with your team and third parties on a deal.

request a demo

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