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How important is cybersecurity? It’s no secret that founders have a lot of worries. Venture capitalists are no longer writing big checks, we are in the midst of a recession, and pandemic hangovers have created operational difficulties across the board. We surveyed over 400 venture capital-backed startups to find out how they are coping with the current economic headwinds and how concerned they are about cybersecurity and other challenges they face for our new Cybersecurity Report: Startup Edition.
Cybersecurity concerns are on the rise
Notably, the survey results show that more than two-thirds (68%) of founders have experienced a cyberattack on one of their businesses. This probably explains why the majority (86%) of the founders said they had some sort of cyber insurance protection. But even with a policy in place, 71% said they were considering additional cyber defenses and tools for 2023.
Cybersecurity concerns among founders are on the rise, with almost a third (31%) more concerned about cybersecurity threats than a year ago. In fact, 14% more founders believe they will be attacked than at the same time last year (from 36% in 2021 to 50% in 2022).
The high percentage of startups with cyber insurance can be attributed in part to pressure from investors and/or board members, with almost half (49%) citing cyber security protection as required by one or both of these organizations. However, not only internal factors force founders to overestimate their cyber risks. The founders report that external factors such as global events have a noticeable impact. When purchasing cyber insurance, the founders cite their decisions as most motivated by (a) international tensions (40%), (b) media coverage of other company data breaches (35%), and (c) hybrid system management. / remote workforce (32%).
We have actually seen this happen with our own clients. Shortly after the start of the war in Ukraine, we saw a 50 percent increase in cyber policy filings. It also shows how current events affect business decisions in real time. Given increased coverage of the war between Russia and Ukraine, the founders feared possible Russian retaliatory cyberattacks on US infrastructure and business.
Is cyber risk on the rise?
Read our 2022 Cyber Risk Index Report to find out what companies are worried about, how they are protecting themselves, and what the future holds.
Download report
Startups are serious about cyber insurance
Most startups have substantial cyber insurance coverage but are not sure how much risk is actually covered. Of the founders who said their company had cyber insurance (86%), more than 52% described their type of coverage as “tailored to our needs” or “the most complete” package available. However, half of the cyber insurance startups said their current policies only partially cover their risks in the event of an attack or hack. In addition, among those surveyed who do not have cyberthreat insurance, cost was cited as the main reason for this (44%). (Is this like you? Our team can help you find cyber insurance at a price that’s right for your business.)
Looking to 2023 and beyond
As the founders look forward to 2023, the effects of inflation (32%), cyberattacks (27%) and supply chain issues (26%) are their biggest concern. This represents a shift from earlier this year. In our February 2022 Startup Risk Index report, the founders listed three top concerns: inflation, supply chain issues, and competition. At the time, cybersecurity didn’t really matter.
But now, the top three “non-negotiable investment areas” for the coming year are: product innovation (32%), cybersecurity protection (31%), and hardware upgrades (30%). This confirms that the founders are focused on better protecting and strengthening their company’s infrastructure and equipment.
To learn more about how founders view cybersecurity in their business, download our Cybersecurity Report: Beginner’s Edition.
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