26, July 2021

Virtual Data Rooms or Dropbox: Which Is Right for Your Business?

Virtual Data Rooms or Dropbox

If your business is looking into digital file-sharing solutions, you’ll have at least two options: virtual data rooms and Dropbox. Both platforms have their pluses and drawbacks, but it can be difficult to know which one is right for your company.

While Dropbox has worked well for day-to-day business for many organizations, it is not always appropriate for your needs. If you’re looking for a better fit, consider investing in a virtual data room subscription.

Read on for more information.

What are the differences between a virtual data room and Dropbox?

When deciding between a virtual data room or Dropbox for your company, you would do well to understand what each does best. In fact, there are two key differentiating factors.

Difference in purpose

Dropbox is designed to make file sharing easy for customers. This was the reason Dropbox was invented in the first place. If you want to share a large file, simply upload it to the Dropbox server. If you want to have backup files online, add them to your Dropbox folder. 

On the other hand, virtual data rooms were designed to make file sharing more secure. Dropbox may be great for your personal sharing solutions, but virtual data rooms afford an extra level of security. Data rooms allow for elaborate permission structures at all times, while Dropbox only protects your document during the transfer process. Once shared with another party, Dropbox plays no more part in keeping the files safe and secure.

Difference in work organization

Additionally, both platforms are organized differently. For example, virtual data rooms are separate projects created specifically for time-sensitive transactions. Companies also use virtual data rooms as corporate repositories instead of the outdated physical data rooms of yesteryear. Meanwhile, Dropbox collects everything into one folder, which allows the user to access their data in one location.

Finally, virtual data rooms also provide a service alongside their platform Dropbox merely provides the platform. Virtual data rooms often come with a dedicated team to help conduct your transactions. This proactive approach is useful for most companies who use virtual data rooms for M&A transactions, as the data room team ensures all parties have access to sensitive documents promptly to meet transaction deadlines.

When should your business use Dropbox?

Dropbox is a fantastic platform for any business that needs to share much information quickly. The included features lend themselves to the viral dissemination of information. 

The service offers basic file upload, file download, storage, and sharing capabilities. Additionally, Dropbox offers an easy-to-use solution for all your file sharing needs if your business does not need to share sensitive files with remote workers or third-party organizations.

When should your business use virtual data rooms?

As aforementioned, while Dropbox is easy to use, the platform does not provide the same security protocols as a robust virtual data room.

We recommend using VDR platforms whenever you need to store or share sensitive information. This includes client lists, financial records, employee files, cap reports, and any document records. Using a virtual data room lets your colleagues, clients, and stakeholders know that you take the protection and organization of sensitive information very seriously. 

Any reputable virtual data room will offer the same user-friendly sharing features as Dropbox. However, the platform can also be used by businesses that enjoy greater control over productivity, transparency, and privacy. 

As such, a virtual data room should be used by companies that require:

  • Indexing
  • Bulk upload/download
  • Audit log
  • Watermarking
  • Permission-based user roles (view only, no printing, etc.)
  • Two-factor authentication
  • Customizable NDA

Some areas of business (mergers and acquisitions and risk management) use virtual data rooms as their go-to file sharing platform. We would also suggest a virtual data room platform for any company that shares information governed by privacy laws, such as medical information covered by the HIPAA or consumer data covered by the GDPR. A virtual data room ensures this data is only sent to those who are authorized to access it.

Conclusion

As you can see, choosing between a virtual data room and Dropbox is not clear-cut. It depends on the features you require and whether it’s worth subscribing to a virtual data room. If you simply need to share files with many users quickly, Dropbox will do everything you need and more. If you need a greater level of transparency and security, virtual data rooms should be your go-to option.

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