“You’re working to get a footing in the market and to get brand recognition. A cyber issue at this stage can be catastrophic and completely derail all the work you’ve done.”

• Investors are becoming more aware of cyber risk as a factor in business risk. They are more
  intent on figuring out in advance whether the business and its founders are equipped to handle those situations.
• For SaaS-based applications, it’s important to know who is developing the code and how they
  are protecting that code, how they are protecting user identities and data, how they are securing cloud services and networks, and how they are managing access. Tools can evaluate and rate the security of the technical environment.

“Investors often overlook cyber risk. More importantly, entrepreneurs do, too. As founders, they have 10,000 things they’re trying to do to get something off the ground, and security is often the last thing on their minds.”

As founder and general partner of Vertical404, a preseed venture capital firm and accelerator, Antoine Woods looks for companies that are beyond the ideation stage. Vertical404 seeks investments in businesses that have launched a product and gained some level of market traction. “We make fifteen investments per year,” Woods explains. “Ten of those are through our startup accelerator, which focuses on companies led by black and Latinx founders. The remaining five investments are made outside the program.” All our investments focus specifically on software-as-a-service (SaaS) companies that service finance, health, education, and the future of work.”
Woods sees the cyber risk of his investments as directly related to what the startup needs to accomplish at this early stage to become successful. “We’re dealing with early-stage companies,” he emphasizes. “Consumers buy products for two reasons: The product solves a problem or the consumer loves the brand. When you’re a new company, however, the brand doesn’t exist.”

This is an excerpt from 7 Experts on Evaluating and Managing Cyber Risk for Investors.  This eBook was generously sponsored by BlueVoyant.