For companies that are building to sell, establishing robust information security isn’t just about current protection—it’s a critical factor in maximizing exit value and ensuring a smooth acquisition process. Potential buyers will scrutinize your security practices during due diligence, and gaps or weaknesses can lead to reduced offers or even abandoned deals. If a buyer can acquire your company without concerns related to security, this makes your company a much more appealing target.

Early investment in information security pays dividends down the road, as your company grows. In part, this is because it’s economically more expensive to fix problems after they occur - especially if these problems cause reputational damage, fines, or loss of customers. By implementing infosec measures early on, you avoid the technical debt trap of figuring it out (or fixing it) later, which ensures that you’ll be well-positioned when it comes time for due diligence by a potential acquirer.

That being said, it can be hard for early stage companies to know what’s the right balance of security vs. resource allocation. Let’s explore some key strategies to help you build a strong information security foundation that enhances your company’s value.

Understanding Your Security Baseline

Information security is driven by both internal and external risk preferences and the related security requirements. When determining where to begin with information security, you may want to start with these questions:

1. What’s your own risk tolerance? If you’re a solo founder, you may only need to consider your own preferences; if you’ve got a founding team or have grown more, you likely need to consider the risk preferences of the company as a whole. Keep in mind that your own personal risk tolerance is likely different from your business risk tolerance.

2. What’s driving external security requirements? External security requirements are things like regulations, contractual obligations, customer expectations, and insurance requirements. Some of these factors are more negotiable than others; if you’re working with electronic health information and are subject to the HIPAA Security Rule, there’s no getting around those requirements. On the other hand, if you’re early in your customer acquisition journey, you may be working with smaller or less demanding customers that don’t have the same security requirements that mature enterprise customers do.

3. What’s the most important thing to protect? Identifying critical information assets enables you to focus your likely limited time and resources where it will have the greatest impact. This will likely change over time: for example, if you’re currently focused on developing proprietary software, but don’t have any customers, you may choose to focus your initial infosec efforts on ensuring that access to your repositories is protected and that you establish strong software development lifecycle (SDLC) policies. If your brand is your most important asset, you may want to focus on enhanced security of your social media accounts and guidelines related to public messaging.

Leveraging Security Shortcuts

Well-Known Standards

There’s no need to reinvent the information security wheel. Numerous existing information security frameworks, such as ISO 27001 and SOC 2, provide useful guides for what controls you need to put in place. While relatively inexpensive policy “packages” are broadly available online, these are often generic enough to cover an extremely broad range of businesses, which limits how relevant they may be.

Even if you opt not to go through the certification or audit process (as they can be expensive and time-consuming), if you can demonstrate to a potential buyer that you’ve done the homework of establishing controls that meet these recognizable standards, this positions you well for the security assessments that occur during due diligence. When I sold my first company, we were able to address a significant portion of the security questions by referencing the Statement of Applicability from our ISO 27001 certification.

Best-in-Class Providers

As an advisor, I always recommend using best-in-class providers as a shortcut for good information security controls. Google Workspace, for example, allows organizations to utilize the security expertise and related controls that Google has developed. They have pre-defined security settings that can make it much easier for companies to ensure that they protect their data and their customer’s data.

In most cases, best-in-class providers offer better controls than early stage companies could otherwise implement on their own. Many of the required controls under an information security standard like ISO 27001 can be addressed simply by using these types of providers (though I’ll include the caveat that they may not do so unless they’re properly configured).

Developing a Security-Aware Culture

Creating a positive tone at the top is one of the best (and least expensive) ways to establish strong information security. A founder who leaves their computer unattended at coffee shops, doesn’t use 2-factor authentication, and dismisses concerns about development practices conveys the message to the rest of the company that information security doesn’t matter. Conversely, a CTO who follows best practices for secure development and regularly shares news on vulnerabilities and emerging threats sets the expectation that good infosec practices are the norm.

In an ideal world, you would create comprehensive information security policies early on; more realistically, you will likely initially implement key policies, and scale your policies and procedures as the company grows. In either case, company-wide understanding of applicable policies is key; you can have the best policies and procedures in the world, but if no one reads or complies with them, it’s a moot point.

Managing Third-Party Risk

Most businesses rely on multiple third-party products or services for their own internal functions and as part of the provision of their own products or services. As mentioned previously, selecting vendors with a good information security track record and strong controls can make your own information security management much easier.

When you have multiple vendor options (such as a workspace management provider), I recommend making sure the one that you choose has undergone a SOC 2 audit (ideally Type 2) or is ISO 27001 certified. My hot take is that ISO 27001 certification carries more weight than a SOC 2; having undergone ISO 27001 certification for my own company and helping advisees prepare for and complete SOC 2 audits, it’s pretty clear that the ISO certification is more rigorous. While this kind of signaling alone is not sufficient risk management, it can get you a good chunk of the way there.

Scaling Solutions

It’s easier to justify spending money on solutions that align with your business objectives and that will scale alongside your company. Many SaaS offerings have different product levels that reflect the general trend of more established companies requiring more features (including security). In the case of a communication tool like Slack, it might be sufficient to use the free version for a period of time, before transitioning to the higher tiers that offer more control over compliance (such as custom retention policies or data exports). By investing in tools or products that will meet your needs both now and in the future, you avoid the problem of having to learn new systems as you outgrow your early ones.

Keeping Your Eye on the Prize

Remember, you’re building a company with the goal of achieving a successful exit. In order to do that, your company needs to survive until that exit; information security is essential to keeping your confidential information out of the hands of competitors, building and maintaining your customers’ trust, and avoiding fines or lawsuits. Your company also needs to be an appealing target: having strong information security practices, especially if you’re a tech company, puts you in a strong position and can boost your company’s valuation during negotiations.

Potential buyers are willing to pay a premium for companies that demonstrate mature security practices, as it reduces their risk and integration costs post-acquisition. In essence, good information security doesn’t just protect your company—it can be a key driver in securing a more lucrative exit.

Conclusion

Building robust information security practices from the ground up is not just about protection—it’s about creating value. By implementing these strategies, you’re not only safeguarding your company’s assets and reputation but also positioning yourself as a prime acquisition target. Remember, in the world of tech acquisitions, strong security isn’t just a safeguard—it’s a selling point that can significantly boost your company’s valuation.

In my next (and final) post in the “Built to Sell” series, I’ll be discussing the logistics of the sale of your company. Stay tuned for insights on navigating the complex process of turning your well-built, secure company into a successful exit.