Setting up a virtual data room in 5 steps

Accenture’s research has found that 74% of CEOs consider technology a source of competitive advantage. Yet, a few companies integrate technology to accelerate deals and manage highly confidential files, such as virtual data rooms, smoothly. As much as 96% of companies struggle to adopt new software. 

In this article, we provide an A-Z guide to a virtual data room setup so that your team can start using the software frustration-free. You will learn about the five steps to configure the data room properly with detailed instructions and visuals.

Why is a data room helpful for you?

A virtual data room (VDR) is a secure workspace for data-intensive business activities with extensive security and collaboration features. Businesses use virtual data room services for many activities, including but not limited to the following:

• Business transactions. A VDR connects multiple parties in a secure environment with dedicated M&A workflows. It simplifies contract management, document reviews, negotiations, and communications.
• Due diligence. VDRs facilitate the due diligence process with custom agreements, built-in file redaction, version control, task workflows, and granular access control. A data room allows due diligence teams to view files, manage sensitive documents, exchange due diligence checklists, and track issues in one system.
• Data management. VDRs offer bulk file and user management tools to support online collaboration, project management, licensing, and other data-intensive tasks.

Core features of VDR software

Below is the selection of the main features modern virtual data room providers offer to ensure smooth and secure deal or project management.

Security	Multifactor authentication Built-in file redaction Role-based access Information rights management (IRM) AES data encryption at rest and in transit
Data management	Online document viewer Full-text search Optical character recognition (OCR) Drag and drop upload/download Bulk actions Automatic index numbering
Collaboration	Customizable Q&A workflows Task workflows In-app messaging, comments, and discussions System notifications
Reporting	User activity tracking Full audit trail Customizable drill-down reports Scheduled auto-generated reports

5 steps of data room setup: Start-to-finish guide

By 2026, 75% of companies will embrace digital technologies and cloud solutions, including virtual workspaces and virtual data rooms, according to Gartner. However, you can get a competitive edge early with five simple steps:

1. Select the best VDR provider
2. Create an admin account
3. Configure the data room
4. Upload files and folders
5. Set permissions

1. Select the best VDR provider

You need to select a reliable, secure, and scalable VDR solution. Selecting the right product will ensure a friendly user experience and productivity boost. You can consider the following criteria while selecting a virtual data room provider:

• Cost structure. Many data room providers offer flat-rate, per-page, or per-user pricing. The flat-rate pricing is the best approach overall as it suits all types of projects.
• Scalability. Ensure a selected data room allows for extra projects, users, administrators, and document storage.
• Zero-trust security. Robust security features prevent unauthorized access and minimize data breach possibilities.
• Information rights management (IRM). IRM tools enable full control of access to sensitive files, including remote access revocation and instant data wipe. 
• Integration capabilities. Consider which VDR integrations will be useful in your workflows.
• Security compliance. Consider ISO 27001, GDPR, HIPAA, CCPA, SOC 1/2/3, and other certificates.
• Document management. Prioritize bulk drag-and-drop actions, full-text search, automated indexing, and other capabilities for managing large data volumes. 

1.1. Best VDR selection practices

To ensure you choose the best virtual data room software for your business needs, follow these four best practices. 

Trial period	Subscribe to a free trial period to test VDR features and capabilities first-hand. Prioritize data room providers that unlock all available features during a free trial period.
Customer support test	Check the response time of email, phone, and live chat support. Ask a technical support team for help during a free trial period.
Customer feedback test	Check your VDR provider on Capterra, SoftwareAdvice, GetApp, and other reliable review websites. Check VDR review articles. Prioritize VDR providers with high scores and a high review count.
Terms and conditions research	Research the VDR provider’s terms of use and privacy policy. Check the user agreement for hidden fees and other pitfalls.

2. Create an admin account

To set up a data room and invite users, you need to create an administrator account with unlimited rights. Follow the general steps to create an administrator account (applicable to any VDR).

2.1. Register an account

1. Go to the VDR website and press the sign-up button.
2. Input personal information in the registration menu.
3. Check the terms of use and privacy policy boxes.

2.2. Create a password

1. In the next menu, generate a strong password consisting of upper and lower case letters, digits, and special characters.
2. Confirm the password.
3. Click Start a free trial or Register an account, depending on your VDR solution. 

2.3. Enable multi-factor authentication (MFA)

3. Configure the data room

Please note that data room configuration peculiarities may differ from provider to provider and depend on the particular data room’s capabilities. Below, you can check the best data room configuration practices for optimal user experience with most data room providers.

3.1. Enable index numbering

Index numbering is when each document gets a unique identification number (index number). It facilitates retrieval, organization, and reference of sensitive data during online due diligence, business negotiations, contract reviews, and other tasks.

Once you enable automatic indexing, you can click Update file structure. This will update the index once you upload files, rename files, or move them from parent folders to subfolders and vice versa.

✅ Instructions for enabling automatic index numbering:

1. Go to the Settings menu in the top right corner and select the General tab.
2. Find “Automatic indexing” and click Edit.
3. Turn on automatic indexing.
4. Click Apply.

3.2. Add document labels

Many VDRs allow users to assign specific tags (document labels) to confidential documents for better categorization and quick search. Financial documents and other files within the data room will have labels depending on your data room structure.

Example: Let’s assume you have unapproved financial statements from the finance department of your organization in North America. You may assign the following labels to, let’s say, a financial report: “North America” — refers to the location“Finance” — refers to the department“Pending Approval” — refers to the approval status

A well-designed data room will have a customizable labeling system, allowing you to classify files under as many categories as you need. 

✅ Instructions for configuring document labels:

1. Go to the Settings menu and select the Document Labels tab.
2. Find “Document Labels” and click Edit.
3. Click Add Labels to add label groups and individual labels in respective input fields.
4. Click Apply.

3.3. Configure sign-in security

Configuring security settings at the start allows you to protect your workspace from unauthorized access early. Many data rooms have dedicated sign-in security settings for more control of who can log in to the data room. This goes separately from document permissions, which we will talk about later in this article.

✅ Instructions for configuring sign-in security:

1. Go to the Settings menu and select the Security tab.
2. In the Security tab, find “Sign-In Security”, and click Edit.
3. Check the Enable box next to “two-step verification.”
4. Add allowed email domains and IP addresses in the respective input fields next to “allowed domains” and “allowed IP addresses.”
5. In the Security tab, find “Email Verification,” and click Edit.
6. Select from the confirmation frequency options next to “confirm access to email.”
7. Exclude email addresses and email domains from confirmation in the input fields next to “trusted emails” and “trusted domains.” Leave empty if you want all email addresses to confirm access.
8. Click Apply.

3.5. Add terms of use

Data rooms allow companies to enforce custom agreements within collaborative projects. It helps keep users accountable and improve legal compliance. You can make it so that users cannot access the data room without accepting your terms of use. 

✅ Instructions for enabling custom agreements:

1. Go to the Settings menu and select the Terms of Use tab.
2. Find “Project Terms of Use” and click Edit.
3. Select “on first login” or “on each login” next to “accept terms of use.”
4. Select an agreement type next to “Terms of use header.” You can choose between preconfigured headers or add a custom header.
5. Click Edit next to “Terms of use text.”
6. Add the agreement in the text editor.
7. Click Done.
8. Click Apply.

4. Upload files and folders

It’s easy to organize documents in the data room. You can upload as many files as you need using drag-and-drop functionality. You can also upload a pre-made folder structure containing all the documents from your personal computer.

4.1. Upload individual files

✅ Instructions for uploading files:

1. Log in to the data room and click on the Documents tab at the top of the screen.
2. Click Upload.
3. Click Choose Files in the Upload window.
4. Choose documents from your device and click Upload.
5. Click Done.

✅ Instructions for files using drag-and-drop:

1. Click Upload within the Documents tab.
2. Open the folder with the necessary files on your PC.
3. Click on the white space in the folder and hold.
4. Drag the pointer to fit the necessary files in the selection area.
5. Left-click on any of the selected files and hold to drag them to the Upload window in the data room.
6. Release the left-click mouse button to drop files into the Upload window.
7. Click Upload, then click Done.

4.2. Upload an entire folder structure

You can also upload the pre-made folder structure from your PC.

✅ Instructions for uploading the entire folder structure:

1. Click Upload within the Documents tab.
2. Locate the necessary folder structure on your device.
3. Click on the white space in the file manager and hold.
4. Drag the pointer to capture the folders in the selection area.
5. Left-click on any of the selected folders and hold to drag them to the Upload window in the data room.
6. Release the left-click mouse button to drop the files in the data room’s Upload window.

5. Set permissions

To assign permissions and grant access to files, you need to invite users. With robust sign-in security measures in place, you will have peace of mind when inviting users to the data room. Follow the steps below to populate your VDR.

5.1. Create groups

Most data rooms divide users by roles, such as individual users, collaborative users, restricted administrators, and full administrators. Some data rooms provide more user roles, such as printers, downloaders, viewers, creators, etc. User roles have predefined access permissions.

User role	User permissions
Individual user	Access permitted content Access permitted workflows Manage private notes
Collaborative user	Access permitted content Access permitted workflows Manage public notes See user activity of collaborative groups
Restricted administrator	Manage permitted content Manage permitted users Manage group notes
Full administrator	View all access logs Manage all content Manage all users Manage all workflows Manage all settings

✅ Instructions for creating user groups:

1. Log in to the data room and locate the Users tab at the top of the screen.
2. Click New Group.
3. Select “Users” and enter the group name in the respective input field.
4. For collaborative users, choose “Collaboration with” and “Access to Reports” under “Collaboration settings.”
5. Assign permissions to the VDR content. Most data rooms have three to eight levels of permissions, such as upload, download, view, edit, print, etc.
6. Apply security settings. Depending on your choice, the group will have immediate access, access until a certain date or until you enable the group.
7. Create a group.

✅ Instructions for creating administrator groups:

1. Click New Group under the Users tab.
2. Select “Administrators” and enter the group name in the respective input field.
3. For Restricted administrators, select administrable groups.
4. Under “Access to selected groups,” check “view” and “manage” settings.
5. Apply access permissions.
6. Apply security settings.
7. Click Create.

5.2. Invite users to the data room

You can invite users into the groups you created. Invited users inherit access permissions of the respective groups. This way, there is no need to manage access controls for each user individually.

✅ Instructions for inviting users to the data room:

1. Locate the Users tab at the top of the screen.
2. Select the user group you want to populate and click the add user icon.
3. Enter email addresses in the input field under “Add new users to [name of the group].”
4. You can also add personal details and use Excel templates for bulk invitations in some data rooms.
5. Apply security settings similarly to user groups.
6. Enable two-step verification.
7. Choose document notification options.
8. Choose the invitation language.
9. Invite users.

How to overcome the main challenge of setting up a data room?

The lack of digital skills is the number one challenge when setting up a virtual data room. While 92% of all jobs require software skills, only one-third of employees have sufficient digital proficiency. Regarding VDR, you can follow these three practices to overcome adoption challenges:

• Subscribe to VDR training. VDR providers offer onboarding support as part of subscription plans, including live training with VDR experts.
• Use VDR documentation. VDR providers have dedicated help centers with how-to articles on different aspects of VDR software.
• Watch VDR configuration videos. VDR providers often have dedicated YouTube channels with educational content or provide it in their dedicated Help Center on the official website.

The bottom line

• VDRs facilitate many business activities, from mergers and acquisitions to due diligence and day-to-day sensitive information management.
• To choose a data room, you need to consider its cost structure, security features, security compliance, integrations, and scalability.
• Here is the optimal order to set up a VDR: Create an admin account ➜ configure the data room ➜ upload files and folders ➜ set permissions.
• You can accelerate this process by subscribing to VDR training, using help centers, and watching how-to videos.