Virtual Data Rooms vs. File Sharing Platforms

Mar 18, 2022

4 min

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Thanks to the technological developments of the 21st century, access to the internet is almost worldwide. As a result, we can communicate on a much wider scale, and owing to this new possibility, business can be conducted from anywhere in the world. However, companies cannot complete complex deals verbally, nor are they legally binding. Therefore, supporting documents must accompany these business transactions. 

In that case,  what is the difference between sharing documents via a file-sharing service and a virtual data room? Which one should you choose when dealing with business documents?

What is a file-sharing service?

A file-sharing service allows users to store their files in an online file repository. A file-sharing platform facilitates the sending and receiving of files and collaboration among users via the internet. This means that the space is available for the user to upload and download files within the limitations of their service. Cloud storage is an alternative to on-site server storage in a business setting. Google Drive, Dropbox, and other file sharing services enable users to store their files in the cloud. Some people might be using a simple file cloud service for their data storage needs, but that solution is far from optimal.

What is a virtual data room?

Some companies create online file repositories suitable for business use thanks to their additional security features and tools that enable better file management. Those file repositories are called virtual data rooms, and can be used in an M&A transaction process, R&D departments, and anywhere else where secure file sharing is needed. Unfortunately, unlike a cloud storage service, a free virtual data room doesn’t exist, but many VDR providers offer free trials. 

Virtual data room vs. file-sharing platforms 

Both of these solutions have their own advantages, and by comparing them, we can illustrate their use cases.

Virtual data roomFile sharing platform
SecurityBuilt around securityBuilt around convenience
ManagementTemplates and AI assistanceQuick access, but lack of structure
Accessibility There is a variety of security and permission settings that make this process much easierAnyone with a link has access to the documents
SupportMost providers offer 24/7 supportNo support suite for clients

The Cost difference 

There is a significant cost difference with both types of service. Some file-sharing sites have a free transfer limit, which allows anybody to check out what they offer. Their operations are based on a freemium model. They are usually perfect for storing pictures, movies, and anything that could take up unnecessary space on a hard drive.

On the other hand, virtual data rooms enable additional security and tools designed with business in mind. Virtual data room costs are higher than file sharing suites, and subscription models range from a couple of dollars a month to thousands of dollars annually, depending on business needs. Virtual data rooms for due diligence fall under those special needs categories.

The level of data security 

The main difference between a virtual data room and a cloud-sharing solution lies in the function they fulfill. File sharing platforms capitalize on accessibility and a freemium model that encourages people to use their cloud storage solution for their file-sharing needs. 

On the other hand, the security of VDR software is what data room providers pride themselves on. Their  mission is to support businesses through data security. They do not cater to the everyday user but to companies that deal with complex transactions. This is why they create special algorithms to ensure bank-grade security. Because of this added level of protection, data rooms are best known for their secure file sharing capabilities.

Why do businesses need a virtual data room?

Data room software is designed for conducting business. It is a suite that will help any company share their documents safely and encourage teamwork and cooperation among departments and third parties. 

M&A, due diligence, and other document-heavy processes can all be accompanied by this software solution. An online storage space specially dedicated to those complicated business processes can save time and money. This special cloud storage service presents itself much better than solutions such as Google Drive or Dropbox. The virtual data room market is quite big, and any business owner can find a solution that fits their needs. Additionally, data room set up is a simple, stress-free process, especially with the help supplied by the provider.

What does a file-sharing platform do best?

Millions of people depend on Google Drive to store pictures of loved ones or Dropbox for sharing designs with clients. File sharing platforms were created as alternatives to internal or external hard drives because companies are aware that many of our interactions are done through the internet. For example, sharing moments, watching the same movies, and allowing someone to look at your own poetry can all be done through a file-sharing service.

In the world of cloud storage, we can distinguish between two main types of file sharing —  file-sharing platforms and virtual data rooms. One is created with accessibility and private life in mind, while the other is designed around security and deal-making. Using each platform in the manner for which it was intended helps streamline personal and business interactions.