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Building a Data Room: 5 Simple Steps for 2024

Kison Patel
Kison Patel

Kison Patel is the Founder and CEO of DealRoom, a Chicago-based diligence management software that uses Agile principles to innovate and modernize the finance industry. As a former M&A advisor with over a decade of experience, Kison developed DealRoom after seeing first hand a number of deep-seated, industry-wide structural issues and inefficiencies.

CEO and Founder of M&A Science and FirmRoom

Building a data room can seem intimidating.

While data rooms have numerous benefits for businesses of all industries, figuring out how to structure and set up a data room from scratch takes time.

But if you have been researching how to create a data room, look no further! We’ve broken the process down into five simple steps. Following is the process how to build your data room.

5 steps to build a data room

Step 1: Determine the Purpose of the Data Room 

Identify which documents will be stored in the virtual data room and how they will be used. For example, for a data room for M&A, all documents involved in due diligence should be included in the data room setup.

All parties involved in a transaction will have different documents they need to store and view. As another example, for startups looking to IPO, documents related to financial statements and liabilities should be stored in the data room for the reference of investors.

Essentially, you can’t start setting up your data room unless you know why you’re using one in the first place. Take the time to build the data room properly so that you can invite users in with an organized game plan.  

Step 2: Find a Suitable VDR Provider 

When choosing a data room, it's important to consider features that fit your purpose.

While in this article, we touch on the most requested features, for a complete comparison, see our VDR providers comparison page.

Here, the top eleven VDR providers are compared on every feature, from industry use case to document heat-mapping. 

User Interface

When setting up a data room, make sure that it’s easy to use and understand. Plus, you won’t want to spend time training every party involved with the deal on how to navigate the data room when you could be using that time to complete diligence.

Some data rooms have outdated, slow interfaces that do not present that face that you want to put forward to investors. 


When choosing a virtual data room, the pricing structure is an important consideration.

Look for a data room that uses flat-rate pricing options that charge either monthly or annually, and include unlimited data, users, and overage charge protection.

This is superior to the traditional per-page pricing which lends itself to overage charges and extra fees due to file types that are data heavy, such as audio, music, and high resolution pictures.  


Permissions refers to who is allowed to access each piece of information in the data room. Features regarding permissions vary based on the data room provider, but as we always say, the more the merrier!

Look for a data room that allows permissions settings down to the document level with granular, clear permissioning by group. 


Virtual data rooms utilize analytics to predict engagement levels and proactively address any potential problems.

The best providers have easy-to-use reporting with detailed audit log reports and report visuals, and allow administrators to see who is viewing documents, downloading or bulk downloading, and logging in. 

Storage Size

At this point, while you may not know exactly how many documents you will be storing in the data room, you will have an idea of the potential data room structure and how much space you anticipate needing.

Choose a virtual data room that can accommodate that without the fear of running out of space. 

Step 3: Create a Folder Structure 

The structure of your data room is a pivotal part of the building process. As the primary use of data rooms is to compile a large amount of information and provide access to said information to multiple parties, make sure that your data room is organized and easy to understand.

A proper document structure helps acquirers organize their data to clarify and validate key deal components in an easy-to-use manner.

First, start by determining which main folders will comprise the data room index, such as “Finance” and “Marketing.” Then, within these folders, create subfolders and topics to further organize the main folders.

For example, for the aforementioned “Finance” folder, a sub folder could be “Audited statements” and “Unaudited statements.” While this will look different for every team and potentially even every deal, consider your team structure and previous workflows that have worked well for your team. 

Additionally, you download our data room index template here.

Step 4: Create Groups and Set Permissions 

Once you have set up your data room structure, the next step is to create groups and allow specific permissions for each one. Creating a group is simple; type in the email address of the user you want to invite and wait for them to receive the email.

They can then enter the data room and set up their profile. Before they enter, however, you can choose the level of permissions that you want to allow for that group.

With a data room such as FirmRoom, the options include view only, download (watermarked files), download original (unwatermarked files), and edit. Permissions can also be configured so that users either can or cannot invite other users, see users in the data room, and have administrative access.

Decide what each group should have access to based on their level of involvement with the specific documents and their role within the company. Permissions can be set and changed at any time, even after documents have been uploaded. 

Step 5: Decide Which Documents to Upload 

The last step in creating your data room is adding the data. Go through your documents and planned data room structure, and determine which documents are necessary for the deal that you are working on. When uploading documents, make sure that you maintain a level of organization, as a cluttered data room is just as bad as a cluttered file cabinet. With bulk upload features, you can drag and drop documents and folders into the data room quickly and efficiently. Once you have uploaded your documents, smart search and a built-in document viewer makes it easy to find and view files without leaving the data room. 


By following these five steps, you will find it simple to build your data room and reap the benefits.

Frequently Asked Questions (FAQs)

Built by experienced deal makers, FirmRoom’s VDR offers features and security required by the Fortune 500, regardless of the transaction that needs to be supported. Start a free trial today and enjoy more rapid and successful deal outcomes. 

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Key takeaways

Contact M&A Science to learn more