Typically it is a virtual data space that provides easy access to sensitive documents via a web-based site or secure agent applications. It is used most often for M&A transactions and asset management. Due diligence, IPOs, and joint venture investments are also popular applications.

For example, life science firms need to communicate with investors and share information on everything from the results of clinical trials and HIPAA compliance to licensing intellectual property and keeping patient files. This kind of data sharing requires an abundance of transparency, so the VDR makes sure that every document is available to the appropriate people and that it can be identified when it’s being used or modified.

In the legal world there are a lot of paperwork that can impede communication between lawyers and clients. Many law firms utilize virtual data rooms in order to track and organize important documents.

Other industries also use VDRs in the same manner they do, whether to conduct research and development, or to collaborate with contractors during construction of a building, or for the delivery of services. All of these situations require the storage and transmission of huge amounts of data. This is why a well-designed data space can provide the tools needed to accomplish efficiently and securely. This includes audit trails and versioning, which identify who made changes to the document and when. This is extremely useful when trying to prove that certain comments or edits were authored by a particular person that is typical in certain professional settings.