Never mind risk vs. reward or strength of management, venture capitalists are turning an analytical eye to data security issues when evaluating potential investments, according to Margaret Utterback of Quarles & Brady. For evidence of this shift, look no further than Andreessen Horowitz’s hire of Ted Ullyot, the former general counsel of Facebook, to a key role at the VC shop.
“Data security—and possible data breaches—are now such significant business concerns that VCs couldn’t do responsible due diligence if they didn’t consider security issues when performing valuation analyses,” Utterback says. For instance, if the target company hasn’t been storing data correctly, funders will factor potential liability and bad press into their valuations.
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