Startups’ Confidence in Cyber Protection Hits an All-Time High Amid Growing 2024 Threat Landscape

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SAN FRANCISCO--(BUSINESS WIRE)--Nov 19, 2024--

Embroker, the digital insurance company radically simplifying the insurance buying experience for businesses, today released its “2024 Cyber Risk Index: Startup Edition.” The findings show a consistent year-over-year (YOY) increase in cyber insurance adoption – with a greater focus on simplicity, resilience, and investor appeal in a rapidly evolving cyber risk environment.

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Cyber insurance adoption remains strong: 93% of startups carry cyber insurance this year, an increase from 90% in 2023 and 86% in 2022. (Graphic: Business Wire)

While nearly all startups carry cyber insurance, they increasingly opt for streamlined policies, with 48% simply adding cyber onto their existing insurance packages this year, compared to just 22% in 2023. Additionally, only 7% of startups chose the most comprehensive coverage in 2024, down dramatically from 27% in 2023 – the most common cyber coverage approach last year. And while AI is a very real concern for founders, other technologies like 5G networks, robotics and Internet of Things (IoT) devices are currently driving greater cybersecurity anxieties.

Now in its third year, the report reveals how VC-backed startups are strengthening their approach to cyber protections and offers a clear picture of the hurdles, unique risks and shifts shaping today’s startup world.

Cyber Insurance as a Strategic Growth Tool

Cyber insurance has become a key asset for startups aiming to gain investor confidence and growth. This year, 93% of startups reported having cyber insurance — an increase from 90% in 2023 and 86% in 2022. Over 40% of founders noted that cyber insurance has eased their funding efforts, showcasing its strategic importance beyond mere risk mitigation. Other leading reasons it has helped their business include, “providing us additional services to respond to a cyber attack” (41%) and “meeting the requirements and needs of my customers and vendors” (41%).

“As cyber threats grow more complex, startups are demonstrating an impressive commitment to proactive risk management,” said Andy Lea, Chief Insurance Officer at Embroker. “This year’s Cyber Risk Index underscores a pivotal shift: founders aren’t just using cyber insurance as a safeguard but as a strategic lever to gain investor confidence and market credibility. Moving forward, we anticipate that startups will continue to balance simplicity with strength in their cyber protections, ensuring resourcefulness and resilience in an unpredictable landscape.”

Founders are facing new risks in 2024 and are relying on their cyber protections to cover them. The top external factors driving startups’ cyber protection investments include foreign relations tensions (31%), managing a hybrid/remote workforce (29%), and increasing domestic ransomware attacks (27%).

Growing Confidence and Preparedness Amid Increasing Attacks

The threat landscape continues to intensify, as 81% of founders report having experienced a cyber attack before, increasing from 78% in 2023 and 67% in 2022. Yet faith in their cyber coverage is also at a record high: 93% of founders believe their insurance would at least partially protect them in a breach, up from 87% last year.

Confidence in their policies fully covering their risk has risen even more notably YOY, from 30% in 2022 to 55% in 2023 to 66% of founders this year. This may be partially connected to investment in robust cyber resources – the majority of founders now report having a dedicated cybersecurity team or vendor at their disposal, and 94% believe their teams have the necessary tools to combat AI-driven risks effectively.

Shifting Requirements and Founder Control

The findings also highlight a decline in external mandates for cyber coverage, signaling founders have more license over their cybersecurity decisions. Only 39% of founders report investor-mandated cyber insurance this year, down from 48% in 2023. Additionally, the rate of founders citing that certain customer contracts require it has dropped dramatically YOY, at just 26% in 2024 compared to 48% in 2023. This shift also suggests a greater trust in founders’ ability to choose the protections best suited to their specific risk landscape, though the new SEC cybersecurity rules last year may also be influencing startups to stay on top of their cyber governance.

The few without cyber insurance have a new leading reason this year — 46% say they lack it due to overly strict requirements, nearly doubling from 27% in 2023 and 14% in 2022. This is a notable shift from the past two years when high cost was the number one issue cited — dropping to 29% in 2024 from 36% in 2023. Founders are increasingly aware of the need for cyber insurance. Only seven percent cited “not needing cyber coverage” as their reason for not having it this year, compared to 16% in 2023 and 32% in 2022.

Tensions Around AI and Emerging Tech Risks

As founders navigate AI-driven challenges, three-fourths (75%) report concerns over potential reputational harm from AI-generated deepfakes and disinformation campaigns. However, confidence in handling AI threats has risen overall, with 82% of startups feeling set up to successfully combat or recover from malicious AI, up from 76% last year. This increasing rate of assuredness tracks, given the vast majority have budgets dedicated to addressing AI-related cyber risks. Additionally, 81% say they are conducting risk assessments to identify potential cyber threats posed by AI, another likely reason for this sense of preparedness.

In fact, AI is ranked far down the list of founders’ biggest areas of concern. The emerging technologies they believe pose the greatest cybersecurity risk for their business include 5G networks, robotics, Internet of Things (IoT) devices and biometric authentication systems, highlighting the multi-faceted digital risk environment startups have faced in 2024.

The full report is available on Embroker’s website for download here.

Methodology

For the 2024 Cyber Risk Index: Startup Edition, Embroker surveyed more than 500 VC-backed startup founders in the U.S. in October 2024. The survey was completed online and responses were random, voluntary and anonymous. The report explores the importance of cybersecurity protections — including cyber insurance — to startups, how their perception of cyber risk is changing year-over-year, how they are protecting their businesses from modern emerging risks like malicious AI, and what most influences their decision-making.

About Embroker

Embroker is a digital-first insurance company helping businesses manage risk with a radically simple approach. Embroker is enhancing the legacy and manually intensive technology of the commercial insurance industry with an end-to-end digital insurance platform that intelligently recommends industry-tailored coverage programs, all in minutes. Through Embroker Access, Embroker provides partner agencies and wholesalers with the capability to offer all of Embroker’s industry-leading insurance products to their customers. Founded in 2015, Embroker is headquartered in San Francisco and has raised more than $140M in funding from leading Fintech and Insurtech investors. With a Net Promoter Score (NPS) of 70+, Embroker is also the highest-rated business insurance company in the market. Visit www.embroker.com for more information.

View source version on businesswire.com:https://www.businesswire.com/news/home/20241119107450/en/

CONTACT: Media Contact

Caroline Traylor

104 West for Embroker

[email protected]

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SOURCE: Embroker

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PUB: 11/19/2024 09:00 AM/DISC: 11/19/2024 08:59 AM

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