A data room is an online repository that lets users securely share sensitive files and documents. These include confidential documents, financial information and legal documents. Data rooms are used for M&A transactions or due diligence. They are also used for day-to-day operations.

Once a business has identified the data that should be contained in its data room, it must determine how to structure that information into subfolders and folders to facilitate navigation. It is also recommended to include a description to every document to provide greater clarity. This will allow investors to get the information they need quickly and will reduce the time spent reading irrelevant documents.

The next step is creating a list of the data room users and assigning each the appropriate access level. This is usually dependent on the person’s role and responsibility. As roles change, it’s important to review and update permissions regularly.

Additionally, the data room should have the capability of short messaging or comments to allow investors to discuss documents with each other without leaving the platform. This is crucial during due diligence and can help improve the process of reviewing.

Once a dataroom is set up and ready for be used, it can be opened and used by authorized users. This covers both internal data room and external stakeholders, such as potential buyers. It is important to monitor the use of data to ensure that founders can recognize and address any concerns.