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Data Room vs Dropbox: Comparison

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

 Everyone has heard of Dropbox, and most of you reading this probably have it installed on your computer from one time or another when someone asked you to engage in file sharing this way

This is exactly what it was designed for - easy, free, user friendly sharing of files that is accessible to all. But, if you’re a business, should you be relying on Dropbox instead of a data room specifically designed for your needs?

What is a Data Room?

A virtual data room is an online, cloud-based storage center for sensitive documentation.

The use of data rooms allows users to share business information with clients, investors, and company leadership in a controlled environment so that only the intended audiences have access.

This improves collaboration, and allows all those involved to contribute to the process securely with easy remote access to data and data sharing on a realtime basis.

 What is Dropbox?

Dropbox is a cloud storage platform for documents, photos, and information. Each user downloads a Dropbox folder on their computer, and the contents of the folder are continuously synced with other users using the network. Files are updated on a live basis, ensuring that the files are up to date in all locations and devices.

It was founded as a cloud storage offering and as it was one of the first cloud storage platforms, it established a name for itself among personal, commercial, and educational users with over half a billion users,

File Sharing vs Virtual Data Room: What is the Difference?

File sharing services, such as Dropbox, were designed for quick, efficient file sharing from anywhere, to be used by anyone in the general public.

This platform allows for creation of one folder, where access is granted based on permission settings decided by the admin.

Virtual data rooms were designed with businesses in mind and have more specific features and security plugins to ensure efficient, secure sharing and workflow. It is possible to create groups with multiple folders, so that viewing of information and documents is restricted.

File management is much more effective and organized with the use of data rooms, and more simple and convenient to use and learn than other softwares may be.

At FirmRoom, we have seen that the use of the task management system to assign tasks to users inside the data room ensures ease and accessibility of use by any level of professional, from clinical researcher to CEO.

Data Room vs Dropbox: Comparison

Pros of Dropbox include offline usage, access to deleted files, and the wide availability and ease of use.

Cons of Dropbox include lack of organizational options, lack of context in an M&A setting, and less advanced sharing capabilities.

On the other hand, pros of virtual data rooms include high levels of security, increased capabilities for collaboration, increased organizational options, and specificity of functioning.

Cons of virtual data rooms include the higher cost and the associated learning curve.  

1. Security

Dropbox is meant mainly for file storage and sharing; therefore, the security mechanisms are the bare minimum. It is a variation of a personal drive. It does not use 2 factor identification, and there is a single password for access to anything.

It does, however, include features such as expiring links and download permissions, as well as disaster-proof files. Dropbox offers 256 bit AES security, which, however, didn't stop hackers from accessing data stored on its platform in the past.

Data rooms, on the other hand, have security as their top priority, as they are specifically designed for storage of confidential material.

Data security is the top priority at FirmRoom. FirmRoom offers features such as SOC 2 Certification, ISO 27001 Certification, SSAE 16Certification, and Data Center Security

Using FirmRoom, it is also possible to assign specific access permissions based on the role of the person and what they should be allowed to see based on their responsibilities.

This allows those involved with the company itself to make changes to the documents, while restricting those outside the company to view only access.

2. Features

Dropbox and data rooms offer similar features, the purpose

Control of Documents

Dropbox requires a passcode, an email verification request, and a list of approved viewers and domains to ensure that only those allowed have access to critical documents. Dropbox also sets expiration dates, and turns on / off the ability to download. FirmRoom offers these features, with the addition of setting hierarchies for folders, so that different levels of seniority can be assigned to each user without them knowing. Permissions such as view-only can be set.

 User Management

With Dropbox, it is possible to invite and share documents between users. FirmRoom allows the creation of groups and organizes users into them, granting specific permissions for each group.

 Collaboration

Dropbox has integrations with MicrosoftOffice, to enable editing of more than one file at a time, as well as Slack andZoom. FirmRoom offers integrations with Office and Slack as well.

 Document Indexing

Dropbox does not allow document indexing, editing, or the ability to hide these from parties involved. FirmRoom has these functionalities, and the ability for project managers to see the status of a project.

 Content Organization and Presentation

Virtual data rooms enable enhanced organization of documents in the form of folder structures or tags. This helps the team efficiently locate and access documents as well as have specific access to some folders but not all. Dropbox brings all content and information together in one folder. This leads to slightly fewer organizational capabilities and potential difficulty in locating documents.

Document Preparation and Review

Virtual data room users can easily set up and maintain documentation, administrative setup, and maintenance tasks while allowing for changes to permissions, policies, and organization. Dropbox offers the ability to set team to-dos, headings with deadlines, and agendas.

“Smart” technology

With the smart analytics at FirmRoom, it is possible to track every step of progress throughout any business process, allowing for streamlining and synchronization. Dropbox offers smart content suggestions, a tool designed to allow collaboration with team members. They also integrate notifications for progress updates, as well as a recent activity view to provide insights into the team.

 Access

Dropbox allows users to store and access files from anywhere, including computers, phones, or tablets, even offline. Virtual data rooms do not offer the ability to work offline, but do allow for worldwide access, facilitating mergers and acquisitions.

What Should You Use?

To summarize all of this information, Dropbox and data rooms, while both essentially cloud storage systems, were made for different purposes.

When sharing public information, sending personal photos, or documents to friends and family, Dropbox is the tool to use.

But for sensitive, confidential information, Dropbox was simply not designed for this; a virtual data room like FirmRoom is best for these.

FirmRoom was created for the sharing of financial information, storage of confidential legal information, managing of mergers and acquisitions, and managing of the IPO pipeline. For these and other business endeavours, FirmRoom is the tool to use.

Try FirmRoom for free