Decorative pattern

Why Virtual Data Rooms are a better choice for companies than generic file sharing services

October 2022

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Virtual Data Rooms have become closely associated with important business transactions and corporate deals, especially fundraising for companies seeking investment and M&A deals where companies merge or acquire each other. The competencies that Virtual Data Rooms provide in the way documents are prepared, stored, managed and made available to interested parties have vastly improved the efficiency and productivity of business activity of this type.

Many companies are seeing the benefits of using virtual Data Rooms for a wide range of other business activities, especially where confidential and sensitive information is involved. However, some companies persist in relying on generic file share systems (GFSS) to store and manage their confidential corporate information. The main reason for this is that GFSS are generally free or available at low cost. This can prove to be a false economy: the rudimentary features of GFSS fall far short of the security and management tools provided by Virtual Data Rooms.

Virtual Data Rooms provide advanced security, control, and reporting functionality that GFSS do not offer for businesses. There are ongoing concerns that the limited control and security capabilities of GFSS increase the chances of a data breach, which can be disastrous for the reputation, ambitions, and value of a company.


What is a Virtual Data Room?

A Virtual Data Room is a secure, online repository of data that enables a company to share sensitive and confidential files and information with users, from a safe, controlled, permissions-based environment. Users are typically clients, customers, advisers, and employees.


What is a generic file-sharing service?

GFSS enable files to be created and shared and automatically synced across users’ devices. GFSS typically have multi-user access and the ability to edit files but offers little further control. Users are typically individuals for personal use although some companies use GFSS for company business.


Key differences between Virtual Data Rooms and GFSS

Virtual Data Rooms and GFSS have some features in common such as instant access to files and version control, but these are outweighed by the many significant differences. The most fundamental difference is in what they have been designed and developed to do, which determines the type of documents that can be reliably and safely shared by each platform.

Virtual Data Rooms have been developed for secure and efficient business use, for conducting transactions like M&A deals and for a company’s everyday need to manage and share confidential information such as financial, legal and commercial documents and employee information. GFSS are more geared to personal use: the sharing of images, music, personal files and photos, and for non-sensitive corporate files.

The focus of GFSS is on convenience rather than the security of data. They offer some security but not enough to deter today’s cyber criminals. This basic difference in purpose is reflected in the capabilities and functionalities of Virtual Data Rooms and GFSS. We shall look at some of the key differences below.

Security: A crucial difference concerns information security. Virtual Data Rooms provide the highest possible security in order to share sensitive files with clients, team members, business partners, and deal participants, with a deep focus on preventing a data breach. To achieve this, Virtual Data Rooms have developed capabilities that are not found in GFSS. These include user-based content permissions that determine levels of access to individual documents; two-factor authentication; audit trails that show logins to the Data Room, uploads, downloads and deletions; watermarking of documents; data encryption at rest and in transit; NDAs and SLAs that determine activity rights and responsibilities. Compliance with international standards such as ISO270001 guarantee protection from hackers, viruses and third-party malevolence.

Access and Control: Virtual Data Rooms provide far more control over user access and activity than GFSS, which makes information available by a bespoke link and are vulnerable. File-sharing and access permissions are very often set only at folder level rather than on a sub-folder or individual file basis. By comparison, Virtual Data Rooms provide granular tools to manage document permissions, security, and user access on a folder, sub-folder or a file-by-file basis. User activity can be restricted with regards to viewing, copying, downloading, printing, saving, sharing, and modifying documents without permission. Real-time notifications are sent when documents are uploaded and amended.

Tracking: Virtual Data Rooms have advanced monitoring and reporting capabilities that GFSS don’t have. This enables the close monitoring of user activity inside the Data Room such as who has been in there and when, how often and how long for, what they looked at and how long they lingered on a specific page. This can provide crucial insight during a business transaction and negotiations but is also very useful when a company makes important information available to employees. Data Room technology provides activity reports so that this information can be collated and analysed.

Customer service: GFSS tend to provide basic FAQ resources to resolve problems and issues which might not prove to be sufficiently helpful. The next level of contacting a help desk can result in a long wait for a response to a specific question. Virtual Data Rooms are supported by both an interactive and a physical customer service team that provide assistance during specific projects, such as M&A or fundraising due diligence, and for day-to-day processes of storing, sharing and managing company information. Training is provided to make Data Room administrators as knowledgeable and self-sufficient as possible.



The decision whether to invest in a Virtual Data Room or a generic file-sharing service depends on the needs and expectations of the company. If the requirement is for individual, personal use where data security is not a major issue, GFSS can be a suitable tool. However, if a company is frequently storing and sharing confidential financial, operational, legal and employee information, a Virtual Data Room is essential to keep this information safe, together with processes and tools that enable efficient management and control. A Virtual Data Room provides the necessary levels of security, reporting and communication that GFSS does not.

This is imperative when it is the company’s own information being stored, shared and managed. It becomes even more critical when the company is storing and sharing confidential customer and client information. Using a Virtual Data Room demonstrates a commitment to employees, customers, and clients that the security and preservation of their sensitive information is of the utmost importance.

You can visit our website to learn more about Perivan’s market-leading Data Room, Engage. If you would like to see how Engage can solve your Data Room needs, contact the Perivan team who can arrange a demo and answer your questions.





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