No doubt data rooms are a boon to the financial services industry. Just a few readers will remember physical data rooms. Documents stacked to the ceiling, security at the door. Thankfully, the advent of virtual data rooms has disrupted the industry. And eased capital markets processes.
However, users still describe data rooms as a necessary evil. Often uninspiring and sometimes archaic features (e.g. pricing) have caused frustration amongst users.
Based on our constant conversations with clients, we summed up what we love and what we think needs improving when it comes to data rooms.
1. Improve: Branding
User Experience is central to business strategy. So why compromise on branding? Interrupting a marketing process in order to log into a separate website with completely different branding is clunky for investors. Worse still, potential investors often drop off along the way.
What a missed opportunity for advisors unable to stamp their brand on that service!
2. Love: Real-time insights
The best innovation in the data room space over the last 30 years. The ability to track every single click, download and view-time is unbelievably useful for advisors. Remember counting on elusive phone call to gauge signs of interest?
The level of detail of data tracked and stored has changed the way advisors run their deals. They can immediately see which investors are taking the deal seriously and when is best to follow up with a call.
3. Improve: Losing valuable data
Retrieving all that data is a dream. But the irony is, when the deal closes it all disappears! Many data rooms gobble up investors’ data, leaving the data room providers with powerful insights… and you with nothing.
The next step in data room evolution is to give advisors a historical view of investor engagement, across all deals. A whole new angle when looking to understand your investors.
4. Love: Comfort in the knowledge our data is secure
Everyone knows email isn’t a secure way to disseminate sensitive data. Data rooms, especially those hosted in the cloud, provide that crucial level of access and security.
This cannot be overstated. In the private capital markets in particular, trust is central to any transaction. Advisors need secure technology in order to maintain the trust of their clients and investors.
5. Improve: Yet another platform, just for a data room
A lot of data rooms stand alone. In the deal distribution process, data rooms are separated from the rest of the fundraising process. Not only is this poor user experience, but also a missed opportunity.
Insights cannot be collated and compared across the various steps in the distribution process. For example, any information gained from distributing the investment memo cannot be compared to interactions recorded through the data room. Back to Excel spreadsheets to collect the data!
6. Love: Being up-to-date, all the time
In the private markets, the value of accessing entirely up-to-date information cannot be overstated.
While private deals don’t move as fast as their public counterparts, information must be distributed in a co-ordinated manner and completely accurate. When stepping into a data room, documents are always up to date. No old PDFs from the bottom of an inbox!
7. Improve: Archaic pricing
Possibly the worst hangover from the analogue world of data rooms is the mechanisms used to price them. Before the advent of virtual data rooms, providers would make physical copies of physical documents. This gave rise to a ‘price per page’ strategy. Even in the early days, the cost of storing additional pages was substantial.
Oddly, this pricing is still used in some of today’s virtual data rooms. However, pricing no longer reflects the structural costs of offering this technology. Large data room invoices have little bearing on their usage. Invoices of over £10,000 for a single transaction are not unusual – and disproportionate to the service provided.
Why are most data rooms still expensive? Well: the issuer usually covers the cost. Upon close, data room fees are often added to the invoice along with other expenses.
In a world where clients are increasingly looking for value for money, we think that advisors suggesting technology-driven, cost-effective solutions for third party services – such as data rooms – will ultimately be rewarded by winning more mandates.
Look out for Data Room 2.0: a solution that meets investors’ needs and also understands the end user’s experience. And is priced fairly of course.