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.
Both tools are online cloud platforms that allow to create a central file repository that is available to selected users 24/7 through browsers, all around the world. What distinguishes them is the purpose for which they were created. This purpose determines the range of platform functionalities, design of features, security approach (sic!) and the range of services that are offered to customers within a given price range. Let’s take a closer look at both solutions.
What is Dropbox and when to use it?
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:
- 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
What is Virtual Data Room and when to use it?
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”.
- 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.”
Dropbox vs Virtual Data Room – pros and cons
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?
OBSERVATION #1: Dropbox security is limited
The key functionality of data rooms is the ability to protect stored files so that the users are unable to save a document or print it. They are only allowed to view it. Moreover, users cannot select a fragment of text and copy it or take screenshots (e.g. with Print Screen). These are key security features which make it impossible to “move” information outside the data room. Dropbox does not provide such possibilities. Sure, it has a read-only option but, in fact, it is just a marketing phrase. Enabling the read-only option does block the possibility to edit the file, but it leaves the door open to downloading the document. In the end, the function does not protect sensitive information. If users can download files to their drives, it means they can use them as they want and show them to anyone. As information owners, we lose control over the downloaded file. In Due Diligence, especially if it involves selling of a company, lack of control over who has access to key information is a plain disaster. A situation like that has impact on the final valuation and if the confidential information gets to competition – it will affect business advantage of the company.
OBSERVATION #2: The key role of Support team
Have you ever tried calling Dropbox Support? I have. With no luck, unfortunately. And technical difficulties can affect anyone – you, the administrator, and the people invited to your project. Furthermore, you may not realize how restrictive companies’ policies regarding employee access to external systems are (Dropbox and Data Room are such systems), especially in the financial, energy, Telco and other industries. VDR providers know how to get along with the IT departments of these companies and can quickly overcome complications. When using Dropbox, you have to accept the risk and keep in mind that the user – a single employee or the whole company (e.g. investor’s) for that matter – might not have access to the system and the data put in it because it violates company’s policy. Most likely, no one will help you solve this issue.
OBSERVATION #3: Dropbox and VDR encryption is similar, but does not protect the same
Due to the fact that it was designed for a different reason than a data room, Dropbox does not have many features typical for such systems which make Due Diligence analysis easier. Cases in point being the inability to grant access per file (in Dropbox we can grant permissions per folder), ineffective file browser, limited reporting on what happens to the files and on users’ activity (in data room reports are one of the key functionalities of the system – the administrator can see details of even the smallest activity in the system: who uploaded documents or deleted them, who and for how long viewed which file, and there are also comparative sheets at hand that enable to evaluate the level of interest of the investors, and more). Furthermore, there is a difference between how two platforms protect the files on the level of usability. Data loaded to VDR is encrypted using EV SLL 256-bit certificate and thoroughly secured against information leaks and data interference. Dropbox’s encryption of files is as high (AES key) but it leaves many backdoors open that allow data interference. It can be saved to hard drive and reuploaded with the same name, and deleting your account does not mean instant removal of the stored data.
“I remember the situation when the Investor blamed our client for not providing specific files in VDR. This information was so important that without it the value of the Company was much underestimated. Thanks to the reports available in VDR, we discovered that the files were actually uploaded (with details such as specific time and the user who uploaded them). Other reports showed that the Investor simply did not notice them and no one opened the files. If it hadn’t been for that insight, the Investor’s objections would have cost our client more than one million EUR.”
Michał from #FORDATAteam
OBSERVATION #4: Let’s take care of the user interface
Undoubtedly, Dropbox has advantages too. It has a nice and user-friendly interface. For those who are not afraid of “losing control”, synchronization is also an interesting feature. The system allows us to create a single folder on a computer where we can put files and they are automatically uploaded into Dropbox. In VDR, data upload has to be done manually but it gives a guarantee that no file will accidentally go where it shouldn’t (which can happen during synchronization). Additionally, we are certain that we have uploaded all the files that were supposed to go into data room (I know that synchronization, not only in Dropbox, does not always work 100% correct). 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 Advanced for 15 users amounts to EUR 225 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.
Preparing for Due Diligence? Buy a self-service version of FORDATA VDR and do it proficiently!BUT NOW Buy a self-service version of FORDATA VDR
Did you like the article?
Do you want to exchange knowledge or ask a question?
Write to me : Aleksandra Prusator page opens in new window
01 . Cloud data encryption - what to know before choosing a provider?
Technically and practically speaking, all popular cloud-based tools are securely encrypted. In fact, this means that we do not have to worry about the problem of data encryption…
02 . Can Microsoft One Drive or Google Drive replace VDR?
There are a lot of filesharing applications, virtual disks and tools for collaboration on documents available on the software…
03 . Cybersecurity - what should companies pay attention to?
Entrepreneurs today look at remote work without fear, although many could not imagine effective work outside the office earlier this year. The pandemic proved that…
04 . Flexible office - how to respond to new needs?
Companies have returned to offices with new needs. Entrepreneurs are starting to look for flexible rental models thanks…
05 . How to black out text in a PDF document correctly?
Document redaction has many faces – it may turn out that overwriting of the text in our document, which at first glance looks…
06 . Are your email attachments safe?
The modern office cannot function without email. According to the Radicati group, a statistical employee receives 121 messages per…
07 . GPG standard – a word on encrypting confidential data
Some users want it 101% safe. If the files we share via cloud services really need that extra layer of protection, encrypting them with a GPG standard might be a good idea.
08 . Safe cloud and the user – a marriage of convenience
According to a report on cloud computing prepared by McAfee, up to 87% of the companies surveyed believe that…
09 . Rules of Safety Policy in FORDATA VDR
10 . Dropbox security - what should your business know?
Dropbox makes collaboration and sharing of documents easier but is the platform secure enough for our company to process confidential information with it? What to…
11 . Fake software aggregators – how to identify them?
Business owners and experts usually don’t have time to check every new piece of software, including data rooms, and som…
12 . Cloud Data Storage And File Security
The internet has become a common thing in companies’ lives. The enormity of dedicated services, fast transfers and increasing mobility…
13 . FORDATA wins the 2019 Premium Usability and Rising Star Award
FORDATA has earned the prestigious 2019 Premium Usability and Rising Star Award from FinancesOnline, a popular B2B software…
14 . Due Diligence audit using Virtual Data Room - security in your company
The process of sharing confidential information can be greatly improved by using Virtual Data Room. Preparing for an audit?
15 . What is electronic data repository?
16 . 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…
17 . FORDATA recognized with 2 IT Security Software Awards!
FORDATA Virtual Data Room was waiting for this day to happen and it finally came! FORDATA got Two Awards through…
18 . Virtual Data Room: Everything you need to know
What is a virtual data room? What benefits can we achieve by using the system in merger and acquisition transactions?
19 . How can we help you with Due Diligence?
Time plays a major role in M&A transactions. Even the smallest improvement that saves time needed to prepare and perform Due Diligence…