Embroker has released the Cyber Risk Index: Startup Edition, which is based on a survey of 400+ VC-backed startup founders. The findings show that, despite the significant economic headwinds that startups are currently facing – from a difficult fundraising landscape to inflation woes and difficult operational decisions – founders remain laser-focused on advancing their cybersecurity protections now and in the future.
“Through strategic partnerships with cyber security vendors and coupling policies with ongoing risk mitigation tools, insurance providers have been able to increasingly support clients in this effort.”
Cybersecurity threats and concerns are increasing.
Notably, survey results show that more than two-thirds (68%) of founders have experienced a cyber attack on one of their businesses, which may explain why the majority (86%) of founders surveyed have some form of cyber insurance in place. Furthermore, 71% are considering additional cyber protections and tools for 2023, indicating that they are dissatisfied with their current level of protection. This reinforces startups’ growing sense of urgency in reducing and managing their cyber vulnerabilities.
Concern and awareness about cybersecurity threats are increasing among founders, with nearly one-third (31%) more concerned than a year ago.
Furthermore, their expectations for the likelihood of a cyber attack increased from 36% in 2021 to 50% in 2022, a 14% increase year on year.
Data from Embroker’s shopped cyber policies also demonstrates how current events are driving real-time investment shifts, with a 50% increase from Q1 to Q2 in 2022. This increase coincides with increased coverage of the Russian-Ukrainian conflict, as well as concern about potential Russian retaliatory cyber attacks on U.S. infrastructure and businesses.
Decisions are influenced by social factors
The high percentage of startups with cyber insurance can be attributed to investor and/or board member pressures, as nearly half (49%) cite cybersecurity insurance as required by one or both of these entities. However, it’s not just internal factors that are prompting founders to reconsider their cyber risk. External factors such as global events are also having a significant impact on the commercial insurance industry. When it comes to purchasing cyber insurance, founders are most motivated by (a.) foreign relations tensions (40%), (b.) media coverage on other company data breaches (35%), and (c.) managing a hybrid/remote workforce (32%).
Startups take cyber insurance seriously
The majority of startups have significant cyber insurance coverage but are unsure how much risk is truly covered. Over 52% of founders who said their company has cyber insurance (86%), described it as “customized to our needs” or “the most comprehensive” package available. Despite this, half of the startups with cyber insurance stated that their current policy would only cover a portion of their risk in the event of an attack or breach. Furthermore, cost was cited as the primary reason for those who did not have cyber insurance (44%).
“As the financial and reputational costs of dealing with cyber security incidents continue to rise,” said David Derigiotis, Chief Insurance Officer at Embroker, “businesses large and small are decidedly incentivized to invest in their digital security and risk management strategy.” “Through strategic partnerships with cyber security vendors and coupling policies with ongoing risk mitigation tools, insurance providers have been able to increasingly support clients in this effort.”
Looking ahead to 2023 and beyond
In 2023, founders are most concerned about the effects of inflation (32%), cyber attacks (27%), and supply chain challenges (26%). Product innovation (32%), cybersecurity protection (31%), and equipment upgrades (30%) are the top three “non-negotiable areas of investment” for the coming year. This demonstrates how serious founders are about better protecting and securing their company’s infrastructure and equipment.
Download the full report here or visit www.embroker.com to learn more about how startup founders are