Prioritizing Security in Startups

Startups are celebrated for their talent, resources, and forward-thinking approach. While cybersecurity hasn't traditionally been a deal-breaker in investment discussions, it's evident that a cyber incident can have a devastating impact on a promising but vulnerable startup. Both investors and founders are increasingly recognizing the seriousness of this risk.

The majority of businesses in the information services sector are startups. However, most of them prioritize raising capital above purchasing cyber insurance, which can be disastrous if clients or businesses depend on it.

Bob Ackerman, founder and managing director of early-stage venture capital firm AllegisCyber, explains: "In a stage-zero startup, security might not be the most pressing concern. Questions like 'Is this a good idea?', 'Can this team execute?', and 'Is there a viable business here?' take precedence. However, as organizations gain traction and reach critical mass, the costs of neglecting cybersecurity rise significantly."

Case Study

Startups like security camera company Verkada are not immune to cyberattacks and breaches. In March 2021, Verkada experienced a significant security breach where attackers gained access to live feeds from thousands of security cameras. This incident highlights that startups can face substantial cybersecurity risks, similar to any small or midsize company. While resource allocation and finances can be challenging, startups often prioritize rapid growth over expenses that don't directly contribute to it. This can lead to deprioritizing cybersecurity measures, which poses significant risks.

Why Startup Founders Should Prioritize Cybersecurity Early On

1. Protect Your Intellectual Property: Startups often have unique ideas and innovations at the core of their business. Implementing cybersecurity measures helps safeguard these intellectual assets from theft or unauthorized access.
2. Build Trust with Customers: In today's digital landscape, customers are increasingly concerned about data privacy and security. Demonstrating a commitment to cybersecurity can build trust and attract more business.
3. Avoid Regulatory Fines: Many industries have strict data privacy and security regulations. Failing to comply with these regulations can result in hefty fines and legal consequences.
4. Mitigate Financial Loss: A data breach can lead to significant financial losses, including legal fees, public relations costs, and lost revenue.
5. Prevent Disruption: Cyberattacks can disrupt operations, leading to downtime and reduced productivity.

When to Start Thinking About Cybersecurity

• From the Beginning: Cybersecurity should be a core consideration from a startup's inception. Integrate security into your business plan and product development process.
• When Raising Funding: Investors are likely to inquire about your cybersecurity measures. Having a solid plan can increase your chances of securing funding.
• When Launching a Product: Before launching, ensure your product has adequate security measures to protect user data.
• When Growing Your Customer Base: As your customer base expands, so does the potential risk of a data breach. Invest in cybersecurity to protect your customers' data.

At SIGMA, we're with you from the beginning through your growth journey. We offer business plans tailored to startups and their development needs. For more information, visit: https://sigma-it.net/enterprises/