Why Do Data Rooms Have to be So Complicated (and Expensive)?

Suppose you’re a data room user or have recently explored the data room market. If so, you’re probably familiar with the two or three biggest legacy data room providers, which have been around for years and make up a large part of that market. And if you’ve priced the offerings of those legacy providers, you know that data rooms can be extremely costly.

The pricing also tends to be somewhat cryptic, with out-of-pocket costs that increase rapidly based on how many pages you upload, how many people you provide access to, and several other features. This approach to pricing leaves many people wondering why secure data room technology has to be so complicated and, frankly, so expensive.

The Origins of Secure Data Rooms

It’s interesting to look back more than a decade at the origins of secure data rooms. Companies developed the big, enterprise-level data rooms at a time when technology infrastructure was very costly because virtually every aspect of it had to be custom-built. Often that required even creating the building blocks of secure data rooms from scratch.

For example, giving data rooms the level of security the market demanded required firms to build expensive technology stacks. In addition, browsers were far less secure–as was the internet in general–so firms had to take measures to account for potential gaps in other pieces of the security puzzle.

The result was significant capital outlays by a few big software providers, and companies were left trying to recoup large investments by charging high prices to their customers. Plus, pricing got complicated when these providers recognized that there was a real cost associated with, for instance, uploading another 100 pages to a server. As a result, companies decided to “nickel and dime” clients to cover that cost—and then some!

Secure Data Rooms: A Challenging Business When Not Approached the Right Way

One of the big data room providers that have been around for years still has never been profitable and carries a large amount of debt. The reason they’re facing those financial challenges is that to turn a profit at their scale would require many firms each paying them a lot of money.

And a significant part of their debt is from building their own technology stacks and developing their infrastructure from the ground up. Those efforts were successful, to a degree, but at what cost? When wrestling with that kind of debt, there’s little revenue left over for funding a cutting-edge research and development (R&D) program.

Today’s Secure Data Rooms and the Availability of Infrastructure

No question about it: Providers of today’s secure data rooms have benefitted from the efforts of legacy companies. We can leverage technology they developed or refined at a much lower cost than they faced when creating it.

The cost of storage, for example, has gone down dramatically in the last decade, as has the price of enterprise-grade security in the cloud. So now it’s possible to provide a comparable level of protection without having to incur the costs of creating that infrastructure, and storage is so cheap that the cost of storing an additional 100 or even 1,000 pages is negligible.

Secure Data Rooms and Online Behavior

Another change we’ve seen is that the way people share information and interact with one another is significantly different today. Most of us don’t think twice about sending information, shopping, or banking online.

In the financial sector, there remains a need for robust security features. But if we look around at how the internet functions and how people work today, there simply are fewer worries about security. Perhaps this is because there is a little bit of security “baked into” all the tools and platforms we use, so, at some level, we feel that our overall level of digital safety is relatively high.   

Consequently, many data room users continue to pay for expensive security features that may not be relevant or necessary for their business. They do this because they don’t know that there is a system available that is just as secure (if not more so) while also being significantly less expensive.

Our ShareSecure product is a secure data room that meets those criteria. If you’re using a legacy data room—or aren’t yet using any data room—you owe it to yourself, your coworkers, and your stakeholders to check it out and schedule a demo.

A traditional crm was built for general ‘customer’ scenarios

Software platforms have made the world a better place by making work a better place. Indeed the world is better off when people enjoy their jobs even marginally more, and workplace applications on big CRM platforms like Salesforce.com have done that and much more.

But the potential that platforms like these offer presents diminishing returns: once the platform provider has engineered too many industry specific components into its platform, its usefulness for other industries begins to be threatened, and with that so do the usefulness of the component tools built into the platform.

So it is with the CRM category that Salesforce.com has defined: it is generic enough to work for many industries, and yet still offers the potential for others to round off the edges and nail more vertically-oriented and extremely tailored software solutions.

Private capital markets are actually a great demonstration of this dynamic. Where generic CRM platforms simplify — appropriately so — to assume there’s a business, a customer, a sale, and service of that customer, there are a few industry-specific pieces that are missing.

Take for example, that investors become customers by investing through legal entities the GP raises. It’s a subtle but important nuance that just doesn’t make sense at a platform-as-a-service level (because it’s overly complicated for a simple one-time sale that many industries require), but which can easily be added without 10 years or software engineering. Once provided, the rest of the platform’s components become tremendously powerful again and you’re set to take over the world.

As a traditional CRM in our pillars methodology, these nuances must be present to properly account for investors in these legal entities, potential target companies and which are owned by these entities, the context of all interactions with these parties (as well as the appropriate overlap, ie co-investments), and how you’re arriving at finding these opportunities on both sides of the equation, such that you’re able to piece together what’s effective and what’s not. Not just because we say so, but because these are the very relationships and data that are key to the motivation behind a CRM in any industry.

It’s critical, too, that the valuable publicly-available information that helps to enrich CRM systems and save users painful steps of entering it themselves is fully-integrated at the platform level.

Again, look no further than the 3,000+ pre-built integrations that Salesforce.com — the creator of the CRM platform concept — has at a platform level to do so, and which only exists by way of holding just short of overly-specifying certain industry workflows that would present challenges to properly integrate.

Stakeholder reporting and communication (investor relations) draws on a range of datasets

The traditional “customer service” model of CRM systems once again makes overly-simplified assumptions about the customer relationship when applied to private capital markets.

In fifteen years I personally have yet to hear the terms “warranty” or “service call” in this market because it’s just not the same. But make no mistake, as uncomfortable as it may be to say aloud, customer service is more important now than ever and it’s constantly happening; the industry is, after all, considered to be a financial “service”.

As it turns out, that service is primarily information-based — it’s driven by data and takes the form of reports and analysis that drive decisions, and then end up again in investor-facing reports and analysis.

The foundational elements of a private capital markets CRM must be built such that they accommodate this data (like we discussed above), but so too that it can accommodate additional supporting data that investors (customers!) need in the context of service.

Oftentimes this supporting data — financial metrics and time-based values, for example — is believed not to meet the traditional definition of CRM and the natural thought is “well, better do this in Excel!”.

While I happen to believe Excel is still the greatest software application ever built, its introduction to this value chain we’ve discussed herein actually creates the problem many firms suffer from: key data needed to provide customer service (again: effectively the entirety of a firm’s reports and analysis) is now in disparate systems and detached.

Both of those dynamics are important and distinct: not only is this supplemental data disparate, but when brought together there is no logical association that can be made between the two data sets.

Allow me, then, to make the point very simply: not only can this financial and time-based value data (you may be thinking about is as “portfolio monitoring” or “accounting”) be a part of a CRM, it is arguably the most important part of a CRM because it’s at the core of what providing service to the customer entails — information that comes out of data!

Firms need a digital method to engage stakeholders (ie investor portals)

Investor portals are not new; in fact, for many of us — including myself — they conjure up horrifying nightmares in which we’re aimlessly guessing at folders to find the newest document we need.

So in lies the opportunity: not only have the portals we’ve come to hate not simplified the process of acquiring information, they’ve failed to create an entirely new experience that is “customer service” driven.

To be fair, this is not a B2C market where you’d be long out of business for not having focused on customer service and thus the customer’s technology-driven experience. But don’t expect to be around too much longer if you aren’t thinking about this shift.

Today’s institutional investors increasingly expect this same consumer-like experience, and a massive opportunity is being missed by not providing it. It’s not about providing them the experience they desire; it’s more about the ability to measure engagement that is had in return.

Put simply: what’s keeping the market from providing this experience is the availability of the information that’s required to create the service that provides the experience.

If you’ve hung in this long, you know that by focusing on your CRM, you have the data that’s required to manage the customer relationship and the technology-driven experience through which that information is shared to create a differentiated and opportunistic customer experience.

investor communications