Importance of Data Security for Startups

By on September 5, 2016

By Gabriel Tedde−

Many people come up with good ideas or inventions that can be turned into marketable products and services, but often the difference between a part-time home business and a true commercial start-up company comes down to obtaining the necessary financing. Lenders may come in many forms, but all of them will want detailed information on the product, the borrower, and businesses plans. All of this is sensitive information that if leaked or stolen, could not only ruin the deal but break the startup before it even gets off the ground.

Data Value

To fully understand why keeping business information secure is crucial, entrepreneurs need to understand both the value of all the information pertaining to their business plans and the full consequences of such information being compromised. Companies that already have employees may have records of sensitive data such as salary, insurance, pensions, 401Ks, and social security numbers. Previous customers may have entered your system as credit card numbers and home addresses. All of this financial information, by law, must be protected against fraud and identity theft. Failure to meet federal guidelines can result in large fines. The nature of the business plan itself may include intellectual property such as product designs and specifications which could be of great interest to competitors. Even copyrighted materials can be stolen, altered, and put to good use by rivals, as can marketing plans, advertising graphics, and business procedures.

Data Loss

These days nearly all information is processed electronically and stored or transmitted across networks. Hackers and creators of spyware and malware know their business, especially the weaknesses in common software platforms, and it is an ongoing challenge to stay ahead of them and keep our data safe. When hackers gain access to your systems it’s called a data breach. Even when breaches are identified, it’s often hard to determine just what information they might have gotten away with. No company wants to announce that it may have given up access to hundreds or thousands of customer accounts. The possible lawsuits, fines, and public embarrassment could cost millions and put struggling entrepreneurs out of business. 

Many new companies think they are still “under the radar” and not likely to be hacked. Nothing is further from the truth. Every company is looking to grow it’s band and customer base to get recognition. New business usually means press releases and other information that hackers may be looking for. Smaller businesses tend to have lighter security and therefore are more tempting targets. Especially when you’re still trying to get your startup off the ground and bring it to the next level, you want all of your financing issues to be as confidential and secure as possible. This is where a virtual data room can help.

What is a VDR?

A virtual data room (VDR) is a secure online repository for the storing and sharing of documents. Traditionally, when confidential transactions took place, such as conducting mergers and acquisitions, a private room was reserved where all parties or legal representatives could meet in private to review vital information such as financial documents. With the development of Internet technology, this process can now be conducted through a VDR. Since a virtual environment saves interested parties the trouble and expense of traveling and transporting confidential documents, it’s now become the norm for such transactions. 

How it’s Used

Typically the VDR is set up as a website on an extranet – a private network which is set up by a vendor and accessible from the Web, but which has limited access. Clients needing the use of a VDR can prepare and upload documents necessary for full disclosure to a secure repository. Bidders, buyers, or other interested parties are given secure login credentials to view the documents which may be restricted so that the viewer can’t forward or copy them. Often there is a scheduled or limited period for accessing the documents. This login can be revoked at any time if one party declines the offer or otherwise violates the terms of the arrangement.

In the digital era of viruses, inspired hackers, and stiff competition, it’s important that every company protect itself from day one.

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Importance of Data Security for Startups