SECURITY Safe alternative to Dropbox in Due Diligence

Why should I pay for VDR when I can use Dropbox?’ – our clients ask this question sometimes. Yet the answer is not that straight. Dropbox and Virtual Data Room are, after all, two completely different systems created to satisfy different business needs. So, yes, Dropbox might be better suited to meet some of them, but there are tasks I wouldn’t dare undertake using it.

In short:

• Dropbox is a good tool for storing large files and sharing them
• Dropbox is not dedicated to sharing highly sensitive documents
• As an alternative, Virtual Data Room is a solution that provides full data security and control, and may be cheaper than Dropbox

Dropbox is a system that allows collaboration on documents, mainly internally within an organization. Team members can share and synchronize the work of the entire staff with it, which is a plus. Dropbox is a good solution for sharing current company documents such as presentations, agendas, meeting notes, sales offers, photos etc. It is also a perfect alternative to email, as far as sending large files is concerned. Dropbox safety is a compromise between usability and data protection (more on that later), so it is better to use the platform for sending insensitive files. The simplest way to put it would be:

Use cases

• Teamwork
• Cooperation between branches within one company
• Implementation of various types of projects with low requirements for confidentiality
• An alternative to sending large files via email
• A central repository of corporate documents

In contrast, a Virtual Data Room is a system created for sharing confidential data outside the company, which will prove as a perfect alternative to Dropbox. The comprehensive approach to data protection, which goes far beyond IT solutions, differs greatly from Dropbox’s safety measures, assuring top confidentiality of exchanged information.You can read more about it in the article “Virtual Data Room – Everything you need to know”.

Use cases:

• Due diligence
• Mergers and acquisitions (sale of a company, assets or an organized part of an enterprise)
• Issue of shares (IPO or SPO)
• Sales of commercial real estate (office buildings, shopping centers, hotels)
• Audit (legal, financial, pharmaceutical)
• Sharing confidential documents with an advisor, lawyer, or auditor
• Project implementation with an external partner
• Joint Venture
• Contract Management
• Sales or licensing of pharmaceutical production
• Credit negotiations with a bank or a bank consortium
• Sales of debt portfolios

„Virtual Data Room is designed to make file sharing safe and to ensure that it is not possible to modify their content.”

„Dropbox is designed to make file sharing easy, collaborative, but not exactly safe.”

Although I represent a VDR provider, it is not my intention to discourage you from using Dropbox. I am convinced that this tool is able to meet the needs of many businesses and individual practices. When I worked at an advertising agency, I used Dropbox myself to transfer large graphic files. But these files were of low business relevance – speed and the ease of transfer where the most crucial in that case. And Dropbox seemed to work pretty well. However, with my current knowledge, I would never decide to use Dropbox to transfer sensitive data, let alone implementing it in such processes as company sales, Due Diligence or audit. Why?

No matter the purpose of the system, looking at pricing policy, Dropbox has become a more costly solution if we use it for a project where 15+ user accounts are needed. In 2022, the price of Dropbox Business Plus for 15 users amounts to EUR 360 per month, while FORDATA VDR costs EUR 199 per month. So while facing a project that involves sharing of confidential information, I don’t think using the San Francisco platform is worth the risk. The alleged Dropbox safety may simply prove too weak.

Article updated 26.01.2024.