Written by Sabrina Beširević of Zentury Media Europe on behalf of INCOGNI.

Data privacy is quickly becoming one of the most important factors for investors. From regulatory measures to growing consumer awareness, no matter the business, data privacy is a part of it. Modern investors see strong data privacy not as a bonus to a service, but as an integral part of each business that ensures their long-term value. 

When it comes to startups this has created a unique space where a focus on data privacy has become a competitive advantage. By strengthening data privacy systems startups enhance investor confidence and increase their business value. This process significantly improves the chances to succeed, but also serves to prepare a business for the long run. To understand the value of data privacy let’s explore its presence for investors and how it can benefit businesses in the modern competitive market.

Why investors prioritize data privacy 

Investors evaluate businesses based on different factors before deciding whether to fund them or not. Previously, elements such as traction and market size were key factors to consider; however, the market has changed. With growing concerns about data privacy, individuals are constantly looking for ways to gain more control over their information, including turning to companies that remove information from the internet. This highlights the importance of data privacy for users, which is also reflected for investors. With that said, let’s take a look at precisely why data privacy matters to investors: 

1. Privacy risks impact valuations 

Data breaches are becoming increasingly prominent, especially in the field of startups. These attacks can be so impactful that they can crush startups before they even take off, because of the reputational and financial damage they inflict once they occur. 

As a result, investors are wary of startups with weak data privacy and security, as a single breach can overturn their investment in an instant. Startups that wish to be competitive need to establish a strong privacy framework to minimize the risk of breaches. In turn, this will make them a very compelling investment opportunity. 

2. Regulatory compliance reduces legal risks 

Startups just like businesses must comply with data protection regulations in their region. These regulations require startups to handle user data responsibly and diligently. Startups face legal issues and hefty fines if they do not meet the standards set by the regulations. 

For investors, this is crucial as it plays an important role in the success of a startup. The best way to reduce the risk of legal complications as a startup is to establish effective monitoring policies for legal compliance. 

3. Long-term stability and scalability 

For investors, a startup must have a well-established foundation and clear principles. These traits will allow a startup to be prepared for major overhauls or trend shifts in their industry. This will prevent any future operational disruptions and make the startup sustainable in the long run. So no matter what data-driven business models it encounters the business will be ready to effectively navigate it. 

Each of these elements tells investors a lot about a startup and can be a key point in their decision-making. If a startup effectively implements these systems they are more likely to finalize deals and establish their business. Nonetheless, even if some investors pull out, these startups gain many benefits from leveraging data privacy.

The benefits Of data privacy For startups 

Startups improve many aspects of their businesses besides drawing in investors with their data privacy methods. The most prominent benefit is the improved trust they foster within consumers thanks to data privacy. For startups trust and a loyal consumer base is everything, as it is what will set the foundation for their business. By focusing on clear communication and transparency in data handling, startups can quickly build trust with their consumers. 

However, a startup can also use data privacy as a growth strategy. This is possible because startups with data privacy integrated into their business model have a market advantage. Startups in this position can easily set themselves apart from their competition and increase investor interest. Expanding into regulated markets or improving their merger potential are only two examples of the different paths the growth strategy might take from here. Each strategy has its place and can future-proof a business while increasing investor confidence from the start. 

As time goes on data privacy will only become more important for investors and startups alike. With new tools and technologies on the rise, the field is sure to change as data privacy becomes a greater strategic asset. Startups that proactively apply strong data security practices would be more prepared to handle compliance issues as global data privacy laws become more strict. 

Because consumers are becoming pickier about which businesses they trust with their information, this proactive strategy can also result in a stronger brand reputation. In the end, implementing data privacy into a startup’s business plan is no longer an option; instead, it is a strategic requirement.

[Image – CC Lukas on Pexels]