Cybersecurity is a top concern for many venture capital-backed startups, according to the Cyber Risk Index: Startup Edition 2022 report from commercial insurance platform provider Embroker.
Key takeaways from the report include:
- 31% of startup founders said they are more concerned about cybersecurity than they were a year ago.
- 50% said they believe their business will suffer a cyberattack.
- 68% said their business has experienced a cyberattack.
- 86% have some cyber insurance protections in place; but even with these protections in place, 71% said they are considering adding additional cyber protections and tools in 2023.
Startup founders may be more likely to invest in cyber insurance or upgrade their cyber coverage in 2023, Embroker indicated. Previously, Embroker reported a 50% increase in shopped cyber policies between the first and second quarters of 2022.
Embroker also noted that this uptick coincided with increased news coverage of the war between Russia and Ukraine — and concerns regarding potential retaliatory cyberattacks from Russia against U.S. infrastructure and businesses.
What Motivates Startups to Buy Cyber Insurance?
Pressure from investors and board members (49%) was ranked as the top reason why startups purchase cyber insurance protections, according to Embroker's report.
Other factors that drive startups to buy cyber insurance include:
- Tensions around foreign relations (40%)
- Media coverage on other business data breaches (35%)
- The need to manage a hybrid or remote workforce (32%)
Approximately 52% of startup founders with cyber insurance described their coverage as "customized to our needs" or "the most comprehensive" package available, Embroker's report revealed. Comparatively, roughly half of startups with cyber insurance indicated that their current policy would only partially cover them following a cyberattack or data breach.
Meanwhile, cost (44%) was the top reason why startups choose not to purchase cyber insurance, Embroker's report indicated. Yet, with a clear understanding of cyber insurance, startups can find coverage that aligns with their budgets.
Top Concerns for Startup Founders in 2023
Startup founders named inflation (32%), cyberattacks (27%) and supply chain challenges (26%) as their concerns for 2023, Embroker's report showed. Furthermore, they cited product innovation (32%), cybersecurity protection (31%) and equipment upgrades (30%) as their top three "non-negotiable areas of investment" in 2023.
Going forward, startups and other businesses are "incentivized to invest in their digital security and risk management strategy," Embroker Chief Insurance Officer David Derigiotis said.
Cyber insurance providers can help these businesses limit the risk of cyberattacks and data breaches. Also, these businesses can partner with MSSPs and utilize security services and tools to keep pace with emerging cyber threats.
