Compliance 101 for Startup Founders
Apr 3, 2025
Startups are known for their fast pace, ambiguity, and bold vision. Between product sprints and go-to-market efforts, there is yet one area that often gets overlooked until the pressure kicks in: compliance. In their early days, startups might understandably over-index on their short-term priorities to survive.
However, as startups gain traction and start engaging mid/upmarket clients or big-name VCs, they might then be asked the dreaded questions: What compliance measures have you been taking? Have you started taking any steps towards SOC2? (applicable to US-targeting startups)
What Investors and Enterprises Really Want to Know
Based on the vertical and geographical base of the startup, the compliance pressure may come at different stages (post-Seed, post-Series A, etc.).
For investors, compliance is an important hygiene factor that will be questioned as startups move upmarket, so they want to bet on startups who are preparing for those questions in advance and are well-positioned to win those deals.
For mid/upmarket software buyers, compliance, in its essence, is not solely a corporate checklist. It is a systematic way for them to gauge whether their sensitive data will be handled with care and get reassurance that they won’t face any financial or reputational risks due to any mishandlings.
As investor and enterprise objectives imply, compliance clearance aims to ensure that the organizational systems’ (e.g., processes, tools, etc.) are protected with checks and balances that ensure customers’ sensitive data will not get compromised.
Once startups provide that reassurance, they can unlock significant increases in their sales performance. For example, insurtech startup Micruity has reported that they have experienced a 300% increase in won deals after going through the SOC2 process and having an off-the-shelf compliance report that they can share with prospective customers in advance.
However, these compliance processes put a disproportionate burden on early-stage startups that are operating with extremely limited resources. For a startup that is still experiencing founder-led growth and needs to win the next midmarket deal to stay afloat, pouring months and tens of thousands of dollars into the SOC2 process is no easy feat.
Ironically, SOC2’s benefits are more procedural than practical. However, given its monopolistic influence among enterprise procurement teams, the status quo has remained unchallenged. Despite SOC2’s outdated standards, founders do not yet have the alternative solution or the bargaining power to challenge the status quo. Thus, it is no surprise that founders sigh when they hear the words compliance or SOC2.
The Cost of Non-Compliance
It is true that compliance is expensive, but non-compliance can come with a heavier cost. According to a study by Wilbur Labs, 18% of startup failures can be attributed to regulatory and compliance issues. On a similar note, in regulation-heavy industries such as healthtech or fintech, compliance mistakes can lead to multi-million-dollar penalties or even shutdowns. The fragility of fintech business models can be seen by the fact that 75% of backed fintech startups eventually fail, often due to regulatory setbacks.
Even for startups that can skew failure, non-compliance can lead to significant damages in customer and investor trust. In the blink of an eye, startups can find themselves at a point of no return.
How DSALTA Can Help
DSALTA draws on a dynamic and community-powered framework to provide compliance clearance in hours, not months. The streamlined clearance brings a modern twist to traditional frameworks by running AI governance controls, and in addition, comes at a much more startup-friendly price compared to its alternatives.
You might be wondering how enterprises are going to break their long-standing habits and adopt a modern open-sourced framework for a sensitive topic such as compliance. We hear your concern but rest assured—this framework was built and vetted by the very peers of the procurement leaders on your prospective customers’ teams. DSALTA allows your customers' teams to review your security posture not just once during procurement, but at any time throughout the relationship. This enables random checks and provides stronger assurance.
Compliance doesn't have to be slow, painful, or expensive. At DSALTA we take care of compliance and pull it from your worry list so you can focus on building your product without any distraction. Book a DSALTA demo today and see how early-stage startups stay ahead of their peers.
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