The virtual data room market has been among the fastest-growing industries. The dataroom software industry was valued at 1.05 billion in 2017. What’s more, the future is even better as the experts projected the data room market to hit the $3.66 billion figure by 2027.
Virtual data rooms are online data management solutions that gained prominence in the early 2010s. However, it was the Covid-19 pandemic that helped the global corporate world explore the benefits of digital data room software.
What is online data room software? What triggered such remarkable growth of the VDR industry? Which industries are benefiting from virtual data room services, and who can use data room technology? Here are the answers.
Table of Contents
What is a virtual data room?
A virtual or online data room is a cloud-based document repository for all types of businesses where they can safely store, organize, manage, share, exchange, edit, and distribute corporate data.
VDRs are not just document management platforms — they boast a variety of tools for digital communication and modern-day dealmaking.
Using a virtual data room, users can share massive volumes of data, organize online business meetings, and manage complex financial and corporate undertakings such as mergers, acquisitions, real estate deals, joint ventures, strategic corporate partnerships, litigation, asset trading, and private equity transactions.
Role of virtual data rooms in different industries
“The data room market is growing, and that growth is fast-paced. It is great to see that more and more data room vendors are providing top-tier solutions to everyone. The diversity is what makes virtual data rooms a superior data management solution,” says Terry Snyder, Co-Founder of datarooms-review.com — a platform providing independent virtual data room reviews and comparisons.
While data rooms are universal solutions that can be used in all data-sensitive use cases, they primarily serve the financial, healthcare, and legal industries. Let’s see what challenges they solve.
Financial industry
The financial sector has been the biggest consumer of online data room technology. That’s mainly due to data room employment in transactions like M&As, fundraising, initial public offerings, etc.
Using a virtual data room, dealmakers conduct the due diligence process online. Data rooms act as a central platform for investors, private equities, board members, legal advisors, dealmakers, shareholders, and fundraisers.
Healthcare industry
The healthcare and life sciences industry has greatly benefitted from virtual data rooms. Healthcare institutes use data rooms to safeguard confidential data like customer details. What’s more, data rooms are regularly employed for M&As in the healthcare sector.
Apart from that, other common data room uses in the life sciences industry include clinical trials, biotech licensing, initial public offerings, IP management, regulatory communications, regulatory compliance, and IP licensing deals.
Legal industry
The legal community is amongst the biggest use cases of a data room. Online data rooms for their routine data management and internal/external communication needs.
Legal advisors in M&As use data rooms for due diligence and communication throughout the transaction. Similarly, corporate lawyers also use data room services for regular collaboration with their clients.
Other notable VDR consumers include telecommunications, IT, investment bankers, and commercial real estate companies.
Factors affecting virtual data room market growth
The growth of the data room market can be credited to multiple triggers, but two of them played a massive role.
Increased M&A activity
The last few years have recorded an extraordinary incline in M&A activities around the world, especially during the Covid-19 era. Covid-19 brought lockdowns and economic turmoil, which created room for unexpected M&A activity, especially in the healthcare sector.
The situation created a high demand for online deal management tools to facilitate hundreds of M&A transactions globally, and virtual data rooms emerged as a top deal management solution.
Data rooms made sure that dealmakers could perform most of the functions online without traveling to other states or countries.
Cyber security
The transformation from traditional business routes to online channels started to catch fire in the 21st century, but the Covd-19 era proved to be a decisive phase. Businesses were forced to go online due to mandatory Covid lockdowns.
Going digital had its risks, as it also brought cybercriminals into the play. It is important to note that there were hundreds and thousands of data breaches affecting billions of records in the last few years.
The biggest challenge for decision-makers was to create online workspaces for their employees and provide digital protection as well.
Virtual data rooms played an important role in creating highly secure digital workplaces for businesses. Key industry players like iDeals, Intralinks, DealRoom, Merrill, and Caplinked offered innovative solutions to safeguard all types of data shared during deals.
Final words
The virtual data room market has been growing at an exceptional rate and is already a billion-dollar industry. VDR technology has facilitated multiple industries, including real estate, oil, and energy, while primarily serving the financial, healthcare, and legal sectors.
Among the factors that affect VDR’s rise are increased M&A activity and growing cybersecurity threats, which make the use of virtual data rooms not an option, but a necessity.
