A History of Virtual Data Rooms

Virtual data room solutions are secure cloud-based platforms for document storage and distribution. They help businesses conduct high-value transactions, protect sensitive data, and review legal documents.

The data rooms are a secure space for storing and sharing documents during due diligence processes. Here is the history of VDRs:

Early Periods of Physical Data Rooms and Mergers and Acquisitions Processes

Data rooms came into existence in the 19th century. This period was best known as “The Greater Merger Movement,” as it was the time when businesses started to acquire and merge. This led to the need for a secure place for hard copies of critical paperwork — physical data rooms.

People doing mergers and acquisitions (M&As) soon realized how valuable physical data rooms were in storing sensitive documents. The data rooms had filing cabinets with large amounts of confidential information printed on paper.

Businesses saw data rooms as highly-secure bank vaults due to the sensitivity of the documents stored. They devised strict security rules to control the accessibility and sharing of these documents.

While physical data rooms were a great innovation, they led to major risks and difficulties. Storing such confidential information in a single location didn’t guarantee 100% security. The data rooms were vulnerable to the risk of fire and theft.

Virtual Data Rooms and Technological Evolution

Due to the threats involved with the use of physical data rooms, change was needed. The search for more secure data storage solutions began in the 1960s and 1970s. These years brought major technological evolutions that led to digital storage solutions.

The technological evolutions started bearing fruits in 1984 when Sony launched the compact disc–read-only memory (CD-ROM). This new trend marked the switch from physical data rooms to digital storage solutions. Sony’s CD-ROM had massive storage capacity, making storing large amounts of data easier.

Flash drives and external hard drives came next. They had improved storage abilities and performed more securely than the CD-ROMs, resulting in their replacement. The CD-ROMs, flash drives, and external hard drives still had certain risks like corruption and data loss due to physical damage. It was necessary to keep exploring technological advances to perfect the storage of confidential data.

In 1996, a law clerk realized that sensitive information can get stored and reviewed digitally rather than in files and binders. That’s when George Favaloro of Compaq Computers invented “Cloud Computing.

The Beginning of Online Data Rooms and Data Security

Around ten years after Mr. Favaloro’s invention, new tech giants like Google started using the technology. The invention’s benefits started becoming clearer to the world, and other companies like IBM, Microsoft, and Amazon jumped on board. This new technology transformed M&A transactions by improving the speed and security of a business’s ability to access critical documents.

Virtual data room solutions didn’t get used immediately as they faced various challenges. Some of the problems included low document speed and security.

The Present and Future of Online Data Rooms

Digital data rooms are the norm for many businesses and can be key in every due diligence process today. They can reform business transactions by providing access to information from anywhere using any device.

With the integration of artificial intelligence and machine learning, data rooms are on the path to perfection. The technology powering online data rooms continues to grow as more innovations arise. It provides the highest levels of security for the data stored while increasing speed.

VDRs are now used in online meeting rooms and platforms for all parties involved in a high-value or sensitive deal. They offer security protocols to control how individuals access, open, use, and share stored documents.

Virtual data room applications continue to expand, going beyond M&A processes. They now include equity, lending, and investment transactions. Key VDR users are investment banks, financial institutions, and law firms, including customers from industries such as:

  • Energy
  • Pharmaceutical
  • Biotech
  • Telecommunication

Get the Safest Virtual Data Room Today

Data rooms have drastically changed since the 19th century. They began as physical rooms with cabinets for storing documents for M&A processes. With technological advancements, CD-ROMs, flash drives, and external hard discs came into existence.

Next in the lineup were cloud computing and virtual data room solutions. They are secure, efficient, and versatile platforms for businesses and organizations to share and store sensitive documents.A History of Virtual Data Rooms

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