The Significance of Commencing Compliance Early for Startups

Updated
August 22, 2023

At any given moment, business leaders are faced with a multitude of concerns, encompassing securing new funding, establishing a market presence, attracting and retaining employees, expanding operations, and reaching a broader customer base. Among these pressing challenges, compliance often takes a backseat initially. However, it is crucial for leaders to realize the significance of compliance in scaling their companies and achieving their objectives. This holds particularly true for smaller companies encountering a formidable compliance hurdle.

Postponing compliance indefinitely is not a viable option for businesses. The importance of compliance is growing as companies expand, necessitating adherence to government regulations, regional or industry standards, and voluntary frameworks. Potential partners and vendors now expect businesses to prioritize security, especially with the escalating volume of sensitive data being handled even by small businesses and the increasing frequency and cost of data breaches. Moreover, as cloud usage becomes ubiquitous across industries, compliance frameworks such as SOC 2 and ISO 27001 are nearly obligatory. Startups can no longer adopt a laissez-faire approach, deferring compliance matters. Instead, compliance must be given top priority.

Developing the Right Mindset From The Beginning

Numerous justifications exist for disregarding compliance. Entrepreneurs, particularly early-stage startup founders, often seek to disrupt existing industries and create new segments. Compliance, on the other hand, represents established regulations and order, typically imposed by external authorities. Similarly, founders may be tempted to postpone compliance concerns, assuming they can be addressed later, if at all, once their business grows.

Regrettably, this mindset has led many business leaders to underestimate the significance of compliance, regarding it as a mere formality to be fulfilled. However, this perception does not align with the reality of today's crucial compliance standards and frameworks. Regulations such as the EU's General Data Protection Regulation (GDPR) or the California Privacy Rights Act (CPRA) for data protection are not one-time obligations that can be checked off and forgotten. Similarly, SOC 2 audits do not occur in isolation. Consider, for instance, if healthcare providers were only required to demonstrate compliance with the Health Insurance Portability and Accountability Act (HIPAA) once. Would you trust them to maintain it?

The essence of contemporary compliance standards lies in a fundamental element: trust. Rather than perceiving compliance as a mere checklist item, it should be recognized as a vital means to establish and uphold trust within the marketplace, irrespective of a business's age or size. A pristine SOC 2 report does more to demonstrate a company's commitment to data security than any amount of marketing rhetoric. Compliance standards and attestations serve as tangible and verifiable evidence that trust has been earned over time.

Determining the Right Timing

When should businesses embark on their compliance journey? The concise answer is that it is never too early. At a minimum, startups should be cognizant of the essential compliance standards applicable to their jurisdictions and industries. Businesses operating in the cloud recognize the eventual need for maintaining a commendable SOC 2 attestation. Those operating or planning to expand internationally may eventually require ISO 27001 certification. Certain frameworks, such as CPRA, may only pertain to businesses of a specific size, granting startups some respite for the time being. Nonetheless, those with expansion plans should be aware of the standards they may need to meet in the future.

Entrepreneurs are well acquainted with the concept of "tech debt." Startups often prioritize speed and convenience over scalability. While this approach proves advantageous in the initial stage of their company lifecycle, it necessitates sacrifices when systems later require updates or replacement to accommodate a growing business's evolving needs and requirements.

The same principle applies to compliance debt. The more businesses disregard compliance standards, the greater the investment of time, effort, and resources required to rectify the situation. Unfortunately, conforming to modern data privacy and security frameworks can be particularly arduous if no groundwork has been laid beforehand. It may entail reconfiguring entire data storage systems, establishing data access policies, and integrating new security tools with existing systems. Moreover, companies will need to train their employees on these new systems and processes while "untraining" them from obsolete security practices. Facilitating such a significant cultural shift incurs considerable costs and time commitments for businesses of all sizes. Incorporating compliance into the foundation of the business can alleviate these challenges.

Although temporarily shelving compliance to focus on swift business development may yield positive short-term outcomes, the eventual consequences cannot be evaded. Whether the investment is made early or delayed, it is always worthwhile. After all, the penalties associated with noncompliance, including fines, damage to reputation, and loss of business, are significantly more severe.

Technological Evolution For Compliance

The landscape of compliance for startups has dramatically shifted in recent years. It was once justifiable for these organizations to circumvent the complexity of compliance due to limited resources. However, today's technological advancements, particularly in the era of automation, mean that businesses can now effortlessly assess their security alignment against various compliance standards and swiftly rectify any potential non-compliance issues.

For startups operating with limited resources, this technological evolution is revolutionizing how they manage compliance. Early-stage incorporation of these automated platforms allows them to continuously evaluate and upgrade their security measures in accordance with the ever-changing compliance standards. This proactive approach not only ensures the readiness of the organization for audits but also significantly reduces the magnitude of any required adjustments.

Furthermore, the real-time monitoring facilitated by these platforms provides company leaders with an understanding of the stipulations associated with different compliance frameworks. Historically, comprehending the preparatory steps for an audit has posed a significant challenge for smaller businesses. For instance, while a business might recognize the need for a SOC 2 report, it may not fully understand the extensive controls associated with the Trust Services Criteria. 

The typical approach of hiring a consultant to navigate these controls is both costly and time-consuming. The new automated compliance solutions such as Drata eliminate this burden by delineating the required controls and facilitating their effective implementation and evidence collection for future audits. Drata streamlines the entire compliance process, from inception to audit readiness and beyond, while offering expert support from security and compliance professionals. The Drata platform is developed by experienced experts in the field and eliminates the need for startups to possess extensive compliance and security knowledge. Featuring over 75 native integrations, founders can effortlessly integrate their technology stack and automate the collection of evidence and testing procedures.

Wrapping Up

Trust longevity is a fundamental component of business relationships, and businesses, regardless of their size, must demonstrate their commitment to secure and effective data-handling practices. The process of achieving compliance with various frameworks or regulations should typically start at least a year before the actual audit. Therefore, having a system in place for constant measurement against these requirements can significantly streamline the preparation and attainment of a successful attestation. Early automation of the compliance process enables businesses to navigate this journey confidently without the unnecessary expenditure of resources.

The path to compliance, like cybersecurity, is not a destination but an ongoing voyage. Compliance frameworks are perpetually evolving, new ones are continually emerging, and businesses must adapt and grow alongside them. The incorporation of automated compliance processes is a transformative solution for startups. No longer a grueling task, compliance becomes a seamless and vital aspect of a business's growth journey from inception onwards.

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