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Trust + Enterprise clients = Million dollar deals.

This article targets executives who have completed early financing rounds. Your product has reached market fit, and you are selling to small to medium businesses. At this point, Series B is in your rear-view mirror (or will be soon) and you’re already setting your sites on a growing base of Enterprise clients.

At each of these critical milestones, most entrepreneurs pause for a minute to reassess their circumstances and celebrate. But at every landing on the stairway to their ultimate goals (whatever those goals may be—long-term growth, a public offering, or an ultimate sale or merger) business owners will also need to make sure they’re achieving compliance with relevant regulations.

Why does this matter? Because the larger the enterprise client you target, the more scrutinized your business will be. Enterprise clients have to answer to their shareholders in a different way that you do, and their #1 goal is to protect themselves.

A shared commitment to trust, integrity, and respect for sensitive data starts from the ground up, and building this culture is a process that starts on day one.

This is especially important if your business takes responsibility for sensitive customer data. The SOC-2 standard has become the de-facto compliance program that Enterprise clients lean on. SOC-2 requires company leaders to prevent data breaches, respond properly after breaches occur, and install alerts and tracking systems that reveal the who, when, and why behind any access gained to privileged files.

Being SOC-2 compliant means there is a process for everything your employees do, and everything is auditable. You may have the best internal security team, if your processes aren’t documented and auditable they aren’t trustable.

Here are some of the pitfalls you might encounter if you wait too long:

Delays and lost opportunities

Documenting your processes can be much more time consuming than you imagine. Getting consensus is difficult, and the larger the business the more difficult it becomes.

We observe 2 different types of businesses:

  • The ones that think ahead and start compliance early, as a parallel track to their product development.
  • The ones that decide to become compliant when the Enterprise client is knocking at their door.

Knowing that it takes anywhere from 6-18 months to be ready for an audit, which one do you think misses out on most business opportunities?

Holdups at Series C (if you make it)

A startup in the Bay Area generally has a runway of 18 months with each round of funding. Each round serves a purpose, which at a high level plays out like this for SaaS businesses:

  • Seed: MVP
  • Series A: Turn MVP into a valuable product with fit.
  • Series B: Consolidate team, reach $1-10M in ARR
  • Series C: Accelerate growth $10-100M ARR
Would you rather close $10k deals or $100k deals to get to $10M ARR?

A SOC-2 Type II report is your gateway to the larger deals, but knowing that it can take 12-18 months to get to it, the incentive to start early is huge.

An insufficient culture of compliance

A shared commitment to trust, integrity, and respect for sensitive data starts from the ground up, and building this culture is a process that starts on day one. Before company owners begin an extensive hiring process, they should recognize that established SOC-2 compliance sends a strong message that will influence the culture at every stage of the company’s growth. The longer hiring managers put this off, the harder it will be to ingrain this principle in new staff members.

Curious to see where you are in your compliance journey? Check out our guide.

Martin CozziMarana, Inc