What Are Data Rooms?

https://11dataroom.com/the-ultimate-guide-to-creating-a-virtual-data-room/

A data room is a secure digital repository that allows sharing of sensitive business documents during high-risk transactions. They are used for mergers and acquisitions (M&A) as well as initial public offerings (IPOs), fundraising, legal processes, and any other business transactions that require strict documentation and confidentiality.

A virtual data room enables you to consolidate critical financial, legal, and operational information to provide quick, simple access to potential investors and other stakeholders. Due diligence is made much more efficient and effective.

The most common use-case of the data room is M&A. Companies that are trying to sell their business could upload confidential information such as revenue projections, IP documentation and other important documents into the room. This information can be shared among interested parties. This reduces the amount of paperwork, travel and time required. It also ensures the right people have access to the right information.

There are a variety of ways to structure the data room. However, the most important thing is to be organized and include all the documents required in the transaction. When raising capital, as an example startups could include an investment summary and pitch in the data room to ensure the due diligence process for the investor as efficient as it can be. Most data rooms offer the ability to grant access to users with granular permissions including two-factor authentication, as well as reports that allow administrators to monitor user activity and prevent inappropriate distribution of sensitive documents. Most data rooms allow users to collaborate and share documents with other team members.