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BEST INDUSTRIES 2013

Leading Corporate Users to the Cloud

ShareVault knew that for privacy obsessed financial firms to take to the cloud, its solution better be air-tight.

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Transforming an old business model into something tech-forward and relevant to the digital economy is no easy feat, particularly for a small business.

But that's just what ShareVault, of Los Gatos, California set out to do when it launched in 2006. The provider of virtual data room services--online repositories for huge volumes of sensitive data--is part of a burgeoning industry where start-ups are using cloud-based technology and light, nimble software platforms to to let users share, simultaneously update, and create work flows around numerous, large document files virtually.

"Document management, sharing, and collaboration are a really large and significant market, and [they are] a really big deal and a big trend," says Richard Andersen, the chief executive of ShareVault.

VDRs work by letting corporate users store and access lots of documents in the cloud, in a totally secure environment. They're good for sensitive transactions where huge amounts of information have to change hands, such as in private equity mergers and acquisitions, initial public offerings, audits, and legal cases.

Since the transactions can be extremely sensitive and complicated, VDRs let users set levels of control that determine who sees what. Many of the virtual data rooms provide tracking services too, so in a merger or acquisition scenario, if you're selling your company, you can see which parties are most interested in particular parts of the business.

ShareVault and other providers have spotted an important opportunity, as companies seek to eliminate paper and move as much information online as possible. The virtual data room industry, which is slightly more than a decade old, did an estimated $600 million in revenue in 2012, and that's expected to grow to $1.2 trillion by 2017, according to research company IBIS, a research company in Santa Monica, California.

Andersen held management positions at Apple, eBay, Ernst & Young, and Virtual Gate Technologies, picking up expertise in areas like enterprise software and online marketplaces.

ShareVault's first important customer was technology heavyweight Sun Microsystems, of Santa Clara, California, which began using ShareVault's VDR to evaluate potential acquisitions starting in 2006. Sun returned in 2010 when it sold itself to Oracle.

By working with Sun and listening to managers who oversaw document flows for such transactions, ShareVault developed a wishlist of features. That included creating a drag-and-drop publishing feature that could be used on any operating system. It also developed a method for handling PDF conversions automatically, and within the cloud. It also figured out how to simplify the search and browse component for documents.

Growth, though, hit a snag during the financial crisis, when the volume of mergers and acquisitions plummeted. So ShareVault switched tactics, and began providing its document sharing capabilities in the distressed debt market, Andersen says.

Today the company works with 10,000 companies, and has been used in $10 billion of transactions.

Still, he faces stiff competition from big companies like Merrill Corp., R.R. Donnelley, and IntraLinks. These providers started out decades ago with actual physical rooms where two parties on the opposite side of a business transaction could go to review critical paper documents.

While these large companies control 80 percent of the market, industry experts agree with Andersen's assessment that new, smaller entrants like ShareVault, FileShare, and Box.net have an advantage. While the old-school companies were early to the market, their "legacy systems" focused on more limited file-server platforms, which don’t have sophisticated tracking and sharing capabilities.

Andersen says ShareVault has been able to distinguish itself from the competition by branching out into less traditional VDR services, including online work collaboration, workflow management and foreign language translations of documents for large global companies involved in deals.

"[Our customers] are virtually any company that needs to share information with third parties," Andersen says.

That's a shift from the old world of traditional VDR services, where customers didn't offer much repeat business, since they mostly trafficked in events like private equity deals, which are typically one shot deals. Though one-time deals can also be lucrative, because customers can pay as much as 85 cents per page for documents stored in the cloud, repeat customers are even better.

"The digitization of business information is a massive trend, and documents are core to the way that businesses, and professionals in business, communicate," Andersen says.

IMAGE: grittycitygirl/Flickr
Last updated: Apr 4, 2013

JEREMY QUITTNER is a staff writer for Inc. magazine and Inc.com. He previously covered technology for American Banker and entrepreneurship for BusinessWeek.
@JeremyQuittner




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