Embroker, a digital insurance platform simplifying the insurance process for businesses, has released its “2024 Cyber Risk Index: Startup Edition,” revealing a steady rise in cyber insurance adoption with a focus on simplicity, resilience, and investor appeal in a shifting cyber risk landscape.
Nearly all startups now carry cyber insurance, with a growing preference for simplified policies. This year, 48% of startups added cyber coverage to their existing insurance plans, up from just 22% in 2023.
Meanwhile, only 7% opted for the most comprehensive coverage in 2024, a significant drop from 27% in 2023, which was the most common approach last year.
While AI remains a major concern for founders, technologies like 5G networks, robotics, and Internet of Things (IoT) devices are currently generating even greater cybersecurity concerns.
In its third year, the report highlights how VC-backed startups are adapting their cybersecurity strategies, shedding light on the challenges, emerging risks, and shifts that are defining today’s startup landscape.
Cyber insurance has become a crucial asset for startups seeking to build investor trust and fuel growth. This year, 93% of startups reported having cyber coverage, up from 90% in 2023 and 86% in 2022.
More than 40% of founders said that cyber insurance has helped secure funding, emphasising its role as a strategic business tool rather than just a risk mitigation measure. Other key benefits include providing additional services to respond to cyberattacks (41%) and meeting the requirements of customers and vendors (41%).
“As cyber threats grow more complex, startups are demonstrating an impressive commitment to proactive risk management,” added 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 increasingly rely on cyber protections to mitigate them. The top external factors driving investments in cyber security for startups include foreign relations tensions (31%), managing a hybrid/remote workforce (29%), and a rise in domestic ransomware attacks (27%).
The threat landscape continues to evolve, with 81% of founders reporting they’ve experienced a cyber attack, up from 78% in 2023 and 67% in 2022. Despite this, confidence in their cyber coverage is at an all-time high, with 93% of founders believing their insurance would offer at least partial protection in the event of a breach, a rise from 87% in 2023.
Confidence in full coverage has also significantly increased year-over-year, rising from 30% in 2022 to 55% in 2023, and now to 66% in 2024.
This growing assurance may be linked to investments in stronger cybersecurity resources—most founders now report having a dedicated team or vendor, and 94% believe their teams are well-equipped to handle AI-driven risks.
The data also shows a decline in external mandates for cyber coverage, suggesting that founders have more control over their cybersecurity decisions.
Only 39% of founders reported having investor-mandated cyber insurance in 2024, a drop from 48% in 2023. Similarly, the percentage of founders citing customer contracts as a driving factor for coverage has decreased significantly, from 48% in 2023 to just 26% this year.
This shift reflects growing trust in founders’ ability to choose the best protections for their unique risks, though the influence of last year’s SEC cybersecurity rules may also be encouraging startups to improve their governance.
For the few without cyber insurance, the primary reason has shifted—46% now cite overly strict requirements, nearly double the 27% in 2023 and 14% in 2022.
The cost issue has become less of a barrier, dropping from 36% in 2023 to 29% in 2024. Founders are increasingly recognising the importance of cyber insurance, with only 7% citing “not needing coverage” as the reason for not having it, down from 16% in 2023 and 32% in 2022.
AI-driven concerns remain at the forefront, with 75% of founders expressing worries about reputational harm from AI-generated deepfakes and disinformation.
However, overall confidence in handling AI threats has increased, with 82% of startups feeling equipped to manage or recover from AI-related cyber risks, up from 76% in 2023. Many startups have allocated budgets for addressing AI risks, with 81% conducting risk assessments to identify potential AI-related threats, which likely contributes to their heightened sense of preparedness.
Despite these concerns, AI ranks lower on the list of top risks. The emerging technologies that founders see as the greatest cybersecurity threats include 5G networks, robotics, IoT devices, and biometric authentication systems, underscoring the multifaceted digital risks facing startups in 2024.
