Oftentimes, when businesses are in the process of raising funds or making important business transactions, they need to exchange confidential documents with third parties. This usually takes place online and is referred to as a data room. A data room is a secure virtual space that allows businesses to share their sensitive data with company website selected third parties, ensuring that no unauthorized third party has access to the data.

Data rooms are used in a variety of high-risk transactions, including mergers and acquisitions (M&A), initial public offerings (IPOs) and capital-raising rounds. These types of events require a thorough investigation of thousands of pages containing sensitive information. This can be a challenge to manage, and exposes the business to security risk.

The best data rooms are designed to be as secure as possible, with a variety of tools, including firewalls, encryption, and multi-factor authentication. A majority of these options allow users to add descriptive meta-data to their documents to enhance their searchability. This allows users to find what they’re seeking.

Users are granted credentials once the data has been uploaded. The data room can be either physical or virtual. Before they can begin to explore the data, users should learn the rules and procedures for the virtual environment as well as sign an agreement on confidentiality. This way, all stakeholders can concentrate on answering crucial questions quickly and easily.