At any given time, you’ll find most early-stage founders oscillating between a number of these existential questions:
How do I grow profitably? How can I scale operations efficiently?
How do I find and keep the best employees? How much runway is left?
What’s not typically front of mind for a founder though? Cybersecurity.
As a result, foundational security practices too often are treated as an afterthought for early stage startups.
And, while you might think that threat actors only focus on large enterprises with massive amounts of data to steal or funds to ransom, the reality is that 51% of startups don’t have a cybersecurity program, and threat actors know this. Startups are a much easier target for them than the big companies with teams full of security experts.
In fact, cybersecurity is an important topic that startup advisor Burkland Associates addresses with their clients. "Maintaining proper cybersecurity coverage is an often overlooked but essential component in the long-term success of our clients at Burkland. Our CFOs routinely recommend proper cybersecurity posture as means of safeguarding against ever-increasing cyber risks to sensitive business data, regulatory compliance, and business disruptions." says Ramon Simms, Managing Director of Burkland's CFO practice.
And it’s not just hackers taking notice of what controls startups have in place. Prospective customers, partners, investors, regulators, and insurers are all keeping a close eye on your cybersecurity controls.
So, let’s explore why investing in a proactive cybersecurity program can help you improve win rates, make fund raises easier, avoid regulatory fines, and receive cheaper insurance premiums. Oh, and reduce the risk of costly data breaches.
Large enterprise companies can't risk doing business with unsecured startups, especially when more and more breaches are happening via third-party vendors.
If you have your eyes on winning a big customer or partner, know that they will almost certainly ask you to evidence your cybersecurity practices. This will likely come in the form of a questionnaire, shared in a beastly Excel file, with lots of tabs and hundreds of questions. And this usually gets sent to you late in the sales cycle, after you’ve already invested lots of time and energy into winning the opportunity.
So get ahead of it. Invest in the cybersecurity program now so you’re prepared for the questions later. And avoid your hard-earned deals crumbling at the eleventh hour.
It’s a tough market to raise a round of venture funding right now. One thing that will make it even tougher is not having a proactive cybersecurity program.
VC firms know that cyberattacks on small companies continue to climb. In fact, 61% of small and medium sized businesses were victims of an attack in the last year. So when they’re evaluating which companies to invest in, they’re going to look more favorably on the ones that have put the foundational cybersecurity practices into place. It’s not uncommon for a data breach or ransomware attack to be a business-ending event, and that’s a risk that investors are looking to avoid.
So, if you ever decide to raise a round, amongst the inquiries about TAM, product-market fit, and pricing strategy, you’ll also get some questions about MFA, employee training, and data protection policies. Be prepared to answer them!
Ensuring compliance with data security regulations is critical for startups, especially those in the fintech, insurtech and healthtech spaces.
For instance, fintech startups are often subject to oversight by the Financial Industry Regulatory Authority (FINRA) which has requirements and guidelines around conducting ongoing risk assessments, implementing incident response plans, and managing cyber risk associated with third party vendors.
Healthtech companies that have access to private health information (PHI) are regulated by HIPAA. Penalties for violating HIPAA rules can range from $100 to $50,000 per violation, depending on the level of negligence.
Companies that operate in Europe or handle European citizens’ data are subject to GDPR (General Data Protection Regulation). GDPR fines can reach up to 4% of the company’s annual revenue.
It's crucial for startups to prioritize compliance and invest in robust cybersecurity measures early on to avoid these hefty fines and the reputational damage that comes with them.
With the increase in popularity of cyber liability policies over the last half decade, many companies incorrectly assume that if they are covered by cyber insurance, they don’t need a cybersecurity program. But insurance isn’t meant to be your front-line defense, it’s a backstop to help you in a worst case scenario.
With Q1 2024 being the worst quarter for ransomware claims on record, insurance premiums will likely be on the rise in the coming months. One way to reduce what you pay is to have a proactive cybersecurity program in place. Cyber preparedness has been directly tied to lower insurance premium increases in sectors like healthcare.
Stronger cybersecurity controls will also unlock better coverage for you. Carriers will view you as less risky and more apt to reduce the number exclusions on your policy, or increase your limits for things like ransomware and business interruption.
The first step on any cybersecurity journey is understanding where your company is most vulnerable. Book a free Cyber Risk Assessment with Havoc Shield to uncover where you should be prioritizing your efforts for the most impact.