How to choose the right virtual data room provider

virtual data rooms

Virtual data rooms are arguably the most important technology used during mergers and acquisitions, since they are the primary means by which buyers, sellers, and their advisers exchange critical documents. Whether it’s for due diligence, or anything else between finding a buyer and closing, a virtual data room keeps documents secure and organized. This lets deals move more quickly, and prevents data breaches and oversights that can lead to legislation down the line.

There are many factors that go into choosing the right virtual data room, and the process can be overwhelming without the right information. Fortunately, understanding VDRs is a lot simpler than it might seem at first. Let’s start by going over the features to  look for. 

Common Virtual Data Room Features

Features vary from one virtual data room provider to another. However, there are several standard functionalities that should come with any type of VDR.

Standard Features

  • Customizable folder permissions – Where consumer-grade document sharing services allow folders to be shared or private, VDRs let administrators choose which specific users can see a file and how much information they can access.
  • Customizable document permissions – Similar to folder permissions, VDRs allow different levels of access to documents for different parties in a project.
  • Document expire – Documents can be made available for a set amount of time, and access can be revoked if anything changes.
  • Watermarking – Documents can be watermarked to avoid unwanted replication and distribution.
  • Monitor user activity – Administrators can see which users have accessed which documents, leaving no questions about security and project activity.
  • Customized branding – Lets a company add its own logo to the VDR interface.
  • Project archiving – When the project is over, a VDR will keep a record of all documents and activity for future reference.

Specialty Features

On top of the above, some VDRs offer more features to increase ease and usability, and others have special interfaces that are tailored to common project types.

  • Q&A – A module for improving and expediting the Q&A process during an M&A deal.
  • Bulk upload and download – Add documents and users in one go instead of individually, and download documents (if granted access) in bulk.
  • Reporting and analytics – See more about user activity, data room usage, document exchane, etc.
  • API integration – Lets organizations integrate a VDR  into their business systems and modify it to meet their own needs.
  • Interfaces for specific project types – Some VDRs “specialize” in certain functions, such as M&A, legal, real estate, fundraising, etc., and a select few offer support for all of these project types. Less developed data rooms will leave it to the users to tailor the platform to their specific needs.

Three factors to consider when choosing a virtual data room

With a good knowledge of major virtual data room features, and an understanding of what you want to achieve with your VDR, you can start comparing the offerings of different providers. Since good providers generally have most of the above features, this is mainly a matter of understanding how their VDRs work, what kinds of projects they are specialized for, and how company positions themselves and prices their VDR offering.

User interface & provider specialty

Since a lot of VDR features come standard across providers, it’s crucial to think about which VDR has the most intuitive interface and the easiest to use security settings. This is about more than just avoiding headaches: Making an error when using your data room can mean an information breach, and depending on your project, an information breach can hurt your business, lead to litigation, and create numerous other problems. As the comparison below will show, some VDRs have user interfaces that seem stuck in the past, as their parent companies focus on other facets of their business. Make sure a VDR has the features you need, and that it works in way that makes sense to you. A related factor is customer support: Will yoru VDR provider take the time to show you how their system works, and support you throughout your project?

Another important question is: What do you want to accomplish with your VDR? Some providers seem to offer  an all-purpose product, but really focus on a particular VDR use case, such as M&A, real estate, or corporate document sharing. This is underlined by the fact that many VDR providers are actually larger companies that simply have a VDR product offering, and are actually more  focused on other parts of their business. When choosing a VDR, take some time to learn about how other customers have used it, and what the company does (if anything) on top of offering VDRs. In general, it’s best to go with an option that meets your project needs but also has the ability to adapt to any directions you might take down the road.


Of course, the real strength of any virtual data room provider lies in its security. It might seem overwhelming to compare differences in security between providers, but here’s an easy way to think about it.

  • Physical security: Where does a VDR provider store its data? A good provider will use industry-grade data centers with physical security measures like biometric access and fire protections and backup measures like mirror sites and disaster contingency plans.
  • Data security: A good data security provider will offer top-level encryption and meet major security compliances.
  • Feature security: Most data breaches are actually the product of human error, so it’s crucial to make sure your data room provider offers features that make workflow easier and more intuitive.


Last but far from least, there’s price. Any organization wants to achieve their goals while spending as little as possible. Browsing virtual data room providers can be confusing at first because very few of them make their prices public. This is because VDRs are often specialized to the customer’s needs, and the prices can vary quite a bit from one provider to the next and one use case to the next. That said, here are a couple things to keep in mind.

  • What is the pricing model? Some older and bigger VDR providers have developed a habit of charging exorbitant fees to major institutions who are in a position not to notice. This shouldn’t fly in today’s marketplace. Make sure your VDR provider won’t overcharge for creating extra pages and projects, ask about data overage charges up front, and be aware of any hidden fees.
  • It might be cheap, but is it really a VDR? Don’t be tempted by freemium services – they’re nice for a lot of things, but they’re not VDRs. Also be wary of any provider offering exceptionally low prices up front. It  might be a way of masking an inferior product, or it might lead to hidden fee hikes down the road.

As a general rule, if a VDR provider interests you, contact them and book a demo. Their representatives will explain how you can use their VDR for your purposes and will offer the best prices possible.  

Compare virtual data room providers

Now it’s time to start browsing. At MergerTechnology, we’ll be publishing regular comparative reviews of M&A technology, and we started with virtual data rooms. Take a look at our VDR review page here for a list of brands and our assessment of each one.