26 . 01 . 2024

SECURITY Safe alternative to Dropbox in Due Diligence

26 . 01 . 2024

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

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:

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

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”.

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.”

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?

Dropbox security is limited
Dropbox offers a "read-only" feature, but in reality, it does not prevent the file from being downloaded.
Data Rooms provide file security, preventing them from being saved to disk or printed. Users only have preview access and cannot copy text.
In Due Diligence, especially concerning the company selling process, losing control over who has access to critical information is unacceptable. It impacts the final valuation, and if it falls into the hands of competitors, it affects the company's competitive position, etc.
The key role of Support team
Contacting Dropbox's technical support can be difficult. Technical issues can affect both administrators and users.
In the case of Due Diligence, consider using a solution that provides access to technical support in Polish, 24 hours a day, 7 days a week.
Companies' policies regarding their employees' access to external systems (such as SaaS) are restrictive, especially in the financial, energy, and Telco industries.
Virtual Data Room specialists can effectively collaborate with company IT departments.
Additional consequences of the inability to access technical support:
- prolonged Due Diligence duration,
- loss of access to vital information,
- inability to negotiate transaction terms,
- loss of transaction opportunities.
Dropbox and VDR encryption is similar, but does not protect the same
Dropbox lacks typical Data Room features such as granting permissions per file, comprehensive file search, and detailed user activity reporting.
File protection in Dropbox is less comprehensive than in VDR, which may lead to a higher risk of data breaches.
In VDR, files are encrypted with a 256-bit EV SSL certificate, while Dropbox uses AES encryption but does not provide an equally high level of security.
Dropbox does not offer detailed user activity reporting.
In Dropbox, deleting an account does not immediately remove data from the server.
Let’s take care of the user interface
Dropbox has a simple and intuitive interface for users.
The synchronization feature allows for automatic file transfer from the computer to Dropbox.
Manually uploading data to VDR ensures that all files have been loaded, which may not be certain with automatic synchronization, which does not always work 100%.

What do the costs look like?

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.

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Together with the #FORDATAteam, I plan and coordinate all sales and marketing initiatives. My passions, such as sports and travel, influence our approach - we always emphasize building international relationships and teamwork.

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