Startups are inherently risky. Product/market fit, staffing, supply chain management, finances and funding, and burnout — it’s no wonder 75% of VC-funded startups fail. Emerging security threats add another complex layer of risk, and both the prevalence and impact of data breaches are growing fast.
Last year, the total number of data breaches rose by more than 68% and the average cost of a breach jumped by 10%. Cyberattacks are a growing trend that shows no sign of slowing down. And it’s not just enterprise companies that are affected: 43% of cyberattacks target small businesses.
There are compelling legal and monetary reasons to prioritize security and compliance from your company’s inception onwards. Security frameworks exist to keep your business secure and prevent these costly data breaches.
The benefits of a strong security posture are clear, but those benefits stretch far beyond certifications and cyberattack defenses. Compliance is also one of the most important accelerators for your growth trajectory — one that the vast majority of early-stage startups overlook.
Security and compliance is a 20x growth lever for startups
Compliance acts as an accelerator for sales and revenue growth, internal processes and scalability, and funding and acquisition opportunities.
From a sales and revenue perspective, a strong security posture or proven compliance with a framework like SOC 2 or ISO 27001 is often a prerequisite for more lucrative deals. Potential customers expect their software as a service (SaaS) vendors to have a SOC 2 report in hand before signing a contract, making compliance table stakes for growing startups.
Having achieved certification also speeds up the sales cycle and lubricates your sales engine by removing security concerns as a roadblock. Compliant early-stage startups are better positioned to move upmarket faster, build customer confidence and loyalty, and differentiate from non-compliant competitors.
According to PwC’s 2022 Trust in Data Report, one benefit of strong data security is increased revenue: “By virtually every metric, organizations with more mature information governance practices are better positioned to achieve revenue growth and gain stakeholder trust.”
Aside from avoiding costly breaches and fulfilling legal and contractual obligations, implementing security best practices helps growing businesses create streamlined, scalable internal processes. Compliance activities keep you aware of critical business risks, identify redundancies in your software and procedures, and ensure your staff is properly trained to protect sensitive information.
Take the General Data Protection Regulation (GDPR) as an example. This legislation mandates that organizations that handle the personal information of EU residents must enact measures to securely store, process, and dispose of this data. A byproduct of becoming compliant with GDPR requirements is that organizations implement more efficient data management processes and policies, which results in improved data quality and more informed decision making.
Security and compliance are also assuming a more prominent role as a board- and investor-level issue. Company stakeholders want to see founders that understand their organization’s risk posture and are actively building security strategies to support it.
Simply put, startups must have a robust security model to attract VC funding and acquisitions. Venture capitalists and acquiring organizations are focused on the need to limit their legal and reputational risk. They are also acutely aware of the role a mature security program and continuous compliance play as business enablers for the companies in their portfolios.
An increasing number of VCs and angels are doing their due diligence into a company’s privacy and security practices when making investment decisions. While VCs are reviewing a founder’s pitch deck or business plan, they’re evaluating the level of risk the potential investment presents. What legal, regulatory, or compliance issues might be unaddressed?
A strong security and compliance posture helps founders build confidence with stakeholders and eliminate any doubts or objections. They can respond in sufficient detail when asked about data security and privacy during earnings calls and investor meetings.
A robust security posture leads to higher sales, customer acquisition, and funding.
From onus to opportunity: Reframing compliance for early-stage startups
According to conventional wisdom, startup growth is driven by factors like product/market fit, market growth, and customer acquisition. Security and compliance are too often seen as a chore or a distraction from what really matters in growing a business.
Founders who view security in this light risk overlooking its real value. Compliance isn’t just a certificate companies can present to a customer or a badge to post on the company website. It’s the key to unlocking growth across multiple fronts: competitor differentiation, market expansion, customer acquisition, internal scalability, and fundraising opportunities. It’s the 20x growth lever just waiting to be pulled.