Investors are taking serious note of data security breaches in start-up ventures. Some have gone to the extent of asking experts to conduct a ‘stress test’ on cyber defenses and the framework of companies in the pre-investment phase. Many are treating security of data as one parameter for investment, apart from metrics such as the business opportunity and its scalability, and the quality of the founding team.
“Investors take security breaches very seriously, as it highlights the vulnerabilities which can impact the core pillars of businesses,” notes Mukul Shrivastava, partner, fraud investigation & dispute services, EY. In cases where customer data gets leaked, it reduces confidence in the business operations and makes the company susceptible to customer action, he adds.