What Are SOC 2 And ISO 27001? A Simple Guide For Startup Founders

As startups grow and begin working with larger businesses, data security tends to become an increasingly important part of winning new customers. Potential clients may ask whether a company has SOC 2 or ISO 27001 certification before agreeing to work with it, and if you don’t know the answer (or even what the question means), that can be incredibly daunting.

Thus, plenty of founders without a technical background tend to be a little lost in attempting to deal with this issue.

Now, both SOC 2 and ISO 27001 help businesses demonstrate that they take information security very seriously. Understanding the difference can help founders decide whether either is worth pursuing as their business grows.

What Is SOC 2?

SOC 2 is basically a way for businesses to show customers how they protect information. Tech companies often handle sensitive information on behalf of their customers, which might include employee records, financial details or customer data. As a result, businesses need to know that the companies they work with have measures in place to keep this information safe.

So an SOC 2 helps provide that reassurance. An independent auditor assesses a company’s security measures and produces a report explaining how well they meet the relevant requirements. This can include looking at who has access to information, how the company protects its systems and what happens if a security problem occurs.

There are two main types of SOC 2 reports. A Type I report assesses a company’s security measures at a particular point in time, whereas a Type II report also looks at whether those measures have been working effectively over a period of time.

As a result, which report a business needs will depend on what its customers expect.

What Is ISO 27001?

ISO 27001 is an international standard that helps businesses manage information security and reduce the risk of data breaches. It focuses on how a company identifies security risks, protects information and keeps its security practices up to date. This could involve deciding who can access sensitive information, training employees to handle data safely and establishing a plan for responding to security incidents.

Businesses can be independently assessed and certified against the standard, and this gives customers evidence that the company has a structured approach to managing information security.

Neither SOC 2 nor ISO 27001 guarantees that a business will never experience a security problem, but they do both help demonstrate that it has measures in place to manage risks.

What’s The Difference Between SOC 2 And ISO 27001?

Both help businesses demonstrate that they take information security seriously, but they work in different ways. SOC 2 is particularly common among technology companies selling services to other businesses, especially in the US, while ISO 27001 is recognised internationally and is used across a wide range of industries. The main difference is that SOC 2 results in an auditor’s report, while ISO 27001 can lead to formal certification.

Some businesses pursue both, particularly if they work with customers in different markets, while others focus on whichever one their customers require.

Does Your Startup Need Them?

Not every startup needs SOC 2 or ISO 27001, it really depends on the specific context. For an early-stage business with a small customer base, obtaining a report or certification might not be an immediate priority. However, as a company grows and starts working with larger customers, the situation can change.

Larger businesses often have security requirements that their suppliers must meet. If you’re trying to win an important contract, a potential customer might ask for a SOC 2 report or ISO 27001 certification before agreeing to work with you.

Without the right documentation, you could struggle to win that business, even if your product is a good fit. And this is why founders should find out what their customers expect before investing time and money in the process. It’s also worth considering whether the businesses you hope to work with in the future are likely to require either standard, because that could completely change what you end up doing.

How Can Your Startup Get Started?

You don’t need formal certification to start improving your company’s security, nor should you wait for that before you start. Rather, you should begin with the basics. Make sure sensitive information is only accessible to the people who need it, use strong passwords and additional login protection, keep software up to date and have a plan for dealing with security incidents.

You should also check how the other companies you use handle your information, because that’s a really important factor too. If a customer asks for SOC 2 or ISO 27001, you can then assess what’s required and identify any gaps in your current approach. Depending on your needs, you may want to work with a specialist to help prepare for an assessment or certification.

Both processes take time and resources, so it’s worth understanding the requirements before committing to either.

The Best Way To Prepare Your Startup for Growth

SOC 2 and ISO 27001 might sound like technical subjects, but they address a straightforward business concern which is how you can demonstrate that your company takes information security seriously. Both of these options can help build trust with customers, particularly larger businesses that need to assess the risks of working with external suppliers. However, neither is automatically necessary for every startup.

The best thing to do when faced with this dilemma is to focus on protecting the information your business handles, find out what potential customers expect and consider formal reports or certification when they make sense for your business. Understanding these standards early can help you prepare for the demands of future growth.