The cornerstone of many modern tech startups is data. From names and email addresses to IP addresses and GPS locations, if your company collects users personal information, you assume an important legal responsibility for how that information is handled and protected.

Founders are understandably focused on product development and growth, but they should not underestimate the legal responsibilities that come with collecting, handling, and storing the personal data of users.

Most startups begin with small internal teams that rarely include a legal professional, but while some privacy laws only apply after certain thresholds are met, data privacy compliance begins for many startups as soon as they begin collecting personal information. Organizations shouldn't assume they're exempt, simply because they're small. 

The good news is that you don't have to hire an in-house legal team to make privacy compliance a central part of the work you do. A data privacy lawyer for startups can help by providing invaluable guidance to ensure that a company takes data privacy seriously, and minimizes startup data privacy legal risks.

What is a Data Privacy Lawyer for Startups?

Data privacy lawyers for startups help new businesses understand their legal obligations in how they collect, use, store, share, and protect the personal data of users. 

The natural inclination of many startups is to collect as much data as possible about their users. Names, email, phone numbers, home addresses, IP addresses are all commonly collected, but in recent times, companies are gathering biometric data and health information, financial information, and even photos. With every piece of data a company collects, stores, or uses comes a responsibility to protect it. 

It's not just a moral responsibility. There are privacy laws in the United States and internationally that require businesses to manage personal data responsibility. That responsibility is growing. 

The rapid adoption of artificial intelligence technologies has also made data privacy even more complex. Startups using AI rely on large datasets to train models, but not all data can be legally collected for that purpose. 

Data privacy lawyers help startups understand what types of data they can collect, how they can be used, and what disclosures or consent may be required under privacy laws.

Companies that suffer a data breach or privacy violation can face fines into the millions of dollars, exposure to class-action lawsuits, and reputational damage.

That's where data privacy attorneys for tech startups play a valuable role. They help startups answer essential questions like “can we collect this data?”, “do we need consent?”, and even “should we collect this data?”

Many startups invest in cybersecurity, but that only protects their platforms technically. Legal counsel plays an important role in protecting the company from legal exposure if a data breach occurs. Depending on the industry they serve, startups may need to comply with laws such as HIPAA, CCPA/CPRA, and COPPA, as well as international regulations like GDPR.

Privacy lawyers help startups formulate plans around how to respond to a data breach, how to report it to regulators and customers, and how to minimize the reputational damage that can result from a breach.

Five Common Startup Data Privacy Legal Risks

Despite the large amounts of data that startups collect, data privacy compliance is sometimes treated as an afterthought. Without a conscious effort to protect data, startups face significant legal risks around data privacy. 

Below are five of the biggest data privacy legal risks startups face without the help of a data privacy compliance attorney.

Collecting Too Much Data

A startup builds an app and at sign-up they ask the user for their full name, birthday, phone number, email address, access to their contacts, their GPS location, and even photos on their device.

But functionally, the app only needs an email address.

Overcollecting data creates unnecessary legal exposure for a startup. Many data privacy laws emphasize data minimization, the idea that companies should only collect data that is needed for their product to function. 

Inadequate or Missing Privacy Policies

Startups often use templated privacy policies in their early stages to quickly get a policy in place. But these don't usually provide an accurate description of the types of data that is being collected, how it will be used, or where it will be stored. Privacy policies need to be tailored to the specifics of the information being collected by the company. 

Collecting Data Without Proper Consent

Some startups automatically collect data without proper consent. They may automatically subscribe users to their marketing emails, pre-check consent boxes, or collect location data without proper disclosure. Different jurisdictions have differing requirements for consent, which a data privacy lawyer for startups can help you identify. Collecting undisclosed forms of information can expose a company to claims of deceptive business practices and privacy violations. 

Data Breaches

One of the biggest risks comes from data breaches. When the personal data of customers is exposed, companies can face regulatory investigations, fines, and potential lawsuits. Depending on the applicable laws, they may also have a legal obligation to notify regulators and affected users within a specific timeframe. A data breach can also raise investor concerns, potentially jeopardize contracts with third parties, and bring reputational damage to a company that can take years to recover from.

International Privacy Laws

Because many startups launch globally from the very beginning, they may be subject to data privacy laws in other countries. Even if a company is based in California, when they have users from other countries, they may be subject to privacy laws in multiple jurisdictions. 

How a Data Privacy Lawyer Protects Startups

The best time to work with a data privacy lawyer for startups isn't after a data breach. It's before a company launches, enters an international market, or releases a new feature that collects user data.

Addressing potential privacy issues before they become violations is far less expensive, and less stressful, than waiting for a breach to occur. 

Identify Data Privacy Risks Before Launch

Startups can benefit from a data privacy lawyer's help before the product ever reaches consumers by proactively identifying data privacy risks. A lawyer will ask questions about the types of data being collected, why it is being collected, and if it is necessary for the product's functionality. This process helps with data minimization. 

Draft Privacy Documents

Rather than using templated privacy agreements, a data privacy attorney for tech startups can draft privacy policies, terms of service, cookie policies, and data processing agreements that match the actual practices of the company.

Data Privacy Compliance

An attorney can also provide startups with data privacy compliance advice. A startup may be simultaneously responsible for compliance with data privacy laws in multiple countries and regions. An attorney helps startups create policies that meet applicable privacy laws, while balancing the company's data needs. 

Review Contracts

Startups work with many different vendors and partners, and they often exchange or process data which both companies may share legal responsibility for. Enterprise customers often review a startup's privacy and security practices, and possibly request contractual commitments to safe data handling before signing a contract. A data privacy lawyer can help startups prepare for this process, and negotiate agreements that support future business growth.

Data Breach Response

When a data breach occurs, a data privacy attorney can advise the company of their user notification and regulatory reporting obligations. They can help them draft customer communications, and preserve evidence for regulators. Consulting with a lawyer on the response to a data breach helps reduce the company's legal exposure.

Support Fundraising & Business Growth

When startups seek fundraising, pursue an acquisition, or begin selling to larger enterprise customers, investors and prospective clients will conduct due diligence on the company's privacy and data handling practices. Weak privacy practices can delay funding, reduce the company's valuation, or jeopardize a partnership. An attorney can help the company prepare for this by ensuring their privacy policies are compliant and that contracts and other documents are in order.

What Can Happen if a Startup Neglects Data Privacy Compliance?

Data privacy compliance may not be at the top of every founder's mind, but the consequences of a data breach or privacy violation are far reaching. 

There are the obvious financial consequences that come from regulatory fines. HIPAA violations range from four to five figures per violation, while the European Union's General Data Protection Regulation (GDPR) fines cap out at €20 million or 4% of a company's annual global revenue. 

Then there's the potential for class-action lawsuits, the expense of notifying users of a breach, and legal fees. Non-compliance can also lead to government investigations into your company. 

If those potential consequences weren't enough to illustrate how devastating a data privacy breach can be, consider the impact one can have not just on your current investors, but future investors as well. The reputational damage of even a single data breach can be felt for years.

Ultimately, founders should not look at data privacy as a burden, but as a competitive advantage. A strong privacy policy and a focus on compliance with relevant data privacy laws helps startups close larger deals, conduct fundraising with less friction, and build customer trust. 

Those benefits go far beyond simply avoiding fines. 

SVTech: Data Privacy Lawyer for Startups and Technology Companies

Working with a data privacy lawyer isn't just about avoiding lawsuits and regulatory fines. Emphasizing strong privacy practices helps startups streamline investor due diligence, satisfy enterprise customers, and build customer trust. 

Startups don't need to become data privacy experts overnight, but the more they prioritize their duties around data collection and handling, the stronger their foundation will be for long-term growth. 

If you're a startup nearing launch, or preparing to enter into foreign markets, don't neglect your data privacy obligations. The consequences of privacy compliance mistakes and data breach are simply too significant to ignore. 

To get your startup ready for launch, consider working with a startup privacy compliance attorney to review your data collection and handling practices and minimize your risk. 

SVTech has been helping startups and technology companies understand and meet their data privacy obligations for more than 20 years. We can help you with proactive legal and data privacy compliance that puts you in position for long-term growth.