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Venture capital firms often deal with highly sensitive data from companies, including confidential strategic and financial information. The handling of money and management of substantial financial assets is core to their business.
At the same time, cyber incidents are on the rise. Recent examples include an attack on Advanced Technology Ventures or an apparent incident at Sequoia. These real-world breaches highlight the urgent need for small VC teams to strengthen their digital defences. In this guide, we'll explore why cybersecurity is crucial for your firm and provide concrete steps to improve it.
Many small VC teams operate under the misconception that cybercriminals are only interested in larger firms. While you hear much more about incidents involving larger firms, it's the smaller teams that experience the highest number of breaches according to experienced LPs.
Unlike random private hacks, cybercriminals invest time in studying processes and crafting elaborate attacks. You don't have to be a well-known brand to become a target. So, how can you protect yourself?
In cybersecurity, consistency is key. Begin with small, manageable steps instead of burdening your team with a 20-page manual and quarterly assessments from the outset. Simple, consistently applied measures can offer substantial protection. The fast-paced nature of venture capital means people often just want to get things done. Overcomplicating policies and processes may lead to non-compliance. Therefore, simplicity is important.
Designate someone within your team to oversee cybersecurity. This person doesn't need to be a tech expert but should be accountable for implementing and maintaining security measures. This should help to ensure that processes are consistently followed after they are set up. Be mindful this might not be an easy task.
Don't reinvent the wheel. Study recommendations and adopt proven strategies from other firms. There's a wealth of information available that can guide your efforts like here and here.
Also your insurance provider can offer valuable insights into cybersecurity measures, as their incentives are aligned with yours.
Additionally, don't hesitate to consult with IT and cybersecurity companies. Conversations with sales reps can already provide useful information on best practices, regardless of wether you end up buying the service or not. And maybe they actually convince you to work with them.
One of the simplest yet most effective measures is to use secure password management tools and implement two-factor authentication (2FA). This adds an extra layer of security, making it more difficult for unauthorized users to gain access.
Phishing attacks are one of the most common ways for cybercriminals to gain access. To guard against these threats, it's essential to regularly train your team to recognise and react to fake emails and other attempts. Implementing phishing penetration tests, which simulate attacks to identify vulnerabilities, has become a market standard. These tests not only identify weaknesses but also maintain ongoing awareness of the issue.
It's crucial to have a response plan in place for potential cyber incidents before they happen. This plan should outline who to contact when you encounter suspicious activity. Make sure all team members know where to find this information. Having such a plan also ensures you can quickly and (relatively) calmly respond, which is key to controlling the damage in case of an incident.
By starting with simple measures and assigning responsibility, you can set yourself up for improving your cyber posture. Train your team to fight off phishing attempts and have a worst-case scenario guideline ready if needed. Remember, this is an ongoing process, and consistency is key to maintaining strong defences.
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