May 23, 2023

The Best Time to Focus on SOC 2 Compliance: Series B

Devon Lane
Founder and CEO
at Flowbase

For growing SaaS companies, there’s always a lot to think about. How do we go to market? What are our differentiators? When do we evolve our product offering? These are all questions that are top of mind for business leaders. 

Something else that should be top of mind — particularly for SaaS leaders that work with enterprise customers — is SOC 2. While this may seem like a priority for large companies, SOC 2 compliance is also proving to be a differentiating feature for B2B software vendors that store or process data for their customers. Savvy executives know that SOC 2 needs to be on the roadmap, but when is the best time to take on this sizable project? That’s what we want to answer in this post. 

Leveraging stronger financial and reputational footing

The way we see it, a Series B company is ideally positioned to start their SOC 2 compliance journey. With Series B funding secured, business owners have the support of reputable investors and are ready to be taken seriously in a competitive marketplace. They also likely have all the tools they need to establish a pathway to steady and sustainable growth. 

For anyone that’s just completed a Series B round — or is approaching Series B — congratulations! This is an exciting time. You’re earning your stripes and proving that you have what it takes to keep building a successful business. 

These elements of success also tie into added responsibility. At this stage of the business, leaders are more heavily committed to delivering positive results to customers and investors. As such, there are also regulatory bodies that the business needs to stay in line with.

With Series B funding complete, the stakes are higher, so it’s as good a time as any to strengthen the company’s position and increase the list of enterprise clients. However, for a vendor catering to enterprises, increasing sales targets can actually place a lot of burden on the company as a whole. Enterprise procurement teams have long questionnaires and complex processes that can get in the way of a timely sale. 

A compliance strategy can actually help here. So, before diving into expanding your sales efforts, it may be worth taking a breath and reviewing your SOC position.

Pause at Series B to focus on SOC-2 compliance

Achieving SOC 2 compliance sends an important signal to your prospects and customers that you’re taking security seriously. The added benefit? Your report can replace having to fill long security questionnaires, cutting down how much time your sales team spends hunting down answers and pulling other team members from core tasks. The benefits of having a SOC 2 report are extensive — and for companies that are reaching the maturity that comes with Series B funding, these benefits are hard to ignore. 

Series B marks a crucial turning point in the growth of a new business, and it presents a valuable opportunity to stop and think about the strategic efforts that could help the company evolve further and become a vendor of choice for customers. 

The other truth about Series B companies is that as they grow, they’re likely to attract more attention and scrutiny from financial, security, and privacy regulatory bodies. As such, they must be able to withstand this scrutiny if an auditor decides to take a closer look. 

Data security: The best time to tighten the bolts

There are several reasons why the arrival of Series B should push SOC 2 compliance to the top of a company’s to-do list, and most of them come from a simple concept: more moving parts means more can go wrong. Security breaches are almost inevitable —especially in the current threat landscape — but they don’t have to result in total disaster. 

Being compliant with the SOC 2 standard proves to your clients and prospects that your team is highly trained, that you understand your data flow, and that you acknowledge your responsibility as a business to do whatever it takes to protect your (and your clients’) data. SOC 2 also means enacting clear processes, actionable forensics, and detailed audit trails. All of these are far easier to establish with a smaller staff and a customer base of tens or hundreds rather than thousands.

cost-of-compliance.jpeg

 

Lay the groundwork for the next stage

SOC 2 compliance should be well in place before your Series C funding, but if the train is in motion and momentum is taking over, don’t worry. Just pause, get the necessary support, and realize there is no better time to start than today. If your business model requires taking responsibility for sensitive customer data, don’t leave anything to chance. SOC 2 compliance is a bright neon sign that says you are investing in your business and your employees in order to earn your customers and shareholder trust.

Need help getting started? We’re helping companies make the right decision and prioritize SOC 2 compliance. Get in touch.

We’re here to help.

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt.

Get Started
LEARN MORE!
Responsive Components
Responsive Components
Responsive Components
Hey! Have any questions?

Frequently Asked
Questions

What type of compliance standard can you help with?

We help our clients based on their needs. The majority of our contracts involve SOC-2, HIPAA, and most recently GDPR. Feel free to ask us if we can help with your particular case. If we aren't able to, we can most likely recommend you to someone who can.

How long does a SOC 2 engagement usually take?

We move as fast as our clients are able to make progress. Our fastest client to date got their SOC-2 Type I four months after signing our engagement letter. That record is up for grab if you are up for it.

In our experience however, it takes 6-9 months to achieve a SOC-2 Type I,  and 3-6 additional months to obtain a SOC-2 Type II report.

Which standard do you follow for your security policies?

All of our security policies follow the ISO-27001 standard. The Confidentiality, Integrity, and Availability standards cover the range of standards we like to work with for SOC 2.

Why do we have to become SOC 2 compliant if we are relying on AWS which is already compliant?

SOC 2 stands for Service Organization Control, meaning your clients are interested in understanding your controls, not your hosting provider’s control. As part of your vendor assessment we recommend reviewing AWS’ SOC 2 report, but relying on their report is not enough to become SOC 2 compliant.

Who is behind SOC 2?

The American Institute of CPAs. The AICPA is an established and respected organization that provides two forms of audits to companies that demonstrate evidence of a secure data-protection infrastructure. A Type I is a point in time audit that addresses the company’s description of its system, the suitability of the system’s design, and the effectiveness of its internal data controls. A Type II report happens over a period of time and emphasizes design and also focuses on the validity of the company’s controls.

Are SOC 2 reports a legal obligation?

No, but most enterprise level organizations that engage with sensitive data (again, almost all of them) have an obligation to their stakeholders to prove due diligence regarding data security, which means they’ll want to vet their service providers using this tool. SOC 2 can help these prospective service providers set themselves apart from the competition. Just as important, a SOC 2 report represents a meaningful and respected signifier of trust.

What can happen to a company without a SOC 2 report?

A lack of a SOC 2 report won’t result in legal problems, but it can and will limit outside assessments of the company’s commitment to data security. When large-scale clients look for providers, or large-scale backers look for a likely return on their investment, they don’t want concerns about security to stand in the way. Trust is a chain made of links that have each been put the test and have proven their ability to withstand pressure and scrutiny. Company leaders are wise to let SOC 2 auditors apply this pressure so their clients and backers don’t have to.

When is it too late for a SOC 2 audit?

Never. Even companies that have been in business for years but have never obtained a SOC 2 report can—and should—take steps in this direction now. Being compliant with SOC 2 can open the door to a broader base of more significant clients and larger contract opportunities. That being said, startups in the threshold of the marketplace, and new business owners who hope for an eventual public offering, should obtain a SOC 2 report during the development and financing process. By the time the company approaches Series B and C fundraising rounds, a report should be in hand.

How complicated is the auditing process?

The auditing process can be easy, or complicated depending on your level of preparation.

Preparing for the audit can take some time, attention, and the guidance of reliable data security experts. Don’t leave any part of this process to chance. Approach SOC 2 compliance one step at a time, and start by contacting a consulting firm with track record of experience in your area of the marketplace.

Home
Resources
Contact
Raze™ All Rights Reserved, 2022.
Style Guide
Licence
Changelog