SOC 2: Basics + Tips from Our CEOs

This month, we're diving into a topic that's on the minds of many founders—and it's front and center for some of our portfolio companies. As security and compliance take the spotlight, customers and prospects are no longer just asking; they’re demanding that their software vendors prove they can be trusted. That's where SOC 2 compliance steps in. But what exactly is it? Do you really need it? And why is it more critical now than ever?

So what is SOC 2?

Like a lot of fun things, SOC 2 originated with CPAs! Established by the American Institute of Certified Public Accountants, it ensures that third-party service providers store and process client data in a secure manner. The journey to compliance is built on the framework of 5 trust principles: Security, Availability, Processing Integrity, Confidentiality, and Privacy. After assessing current practices and identifying gaps within a company's processes and controls in regard to these principles, new practices are implemented, documented and audited on an annual basis. 

So why is it so important? SOC 2 compliance ensures that a company is effectively managing and protecting sensitive data, which is crucial for maintaining trust with customers, mitigating risks and sustaining a competitive edge by showcasing a commitment to best-practices.

Building Customer Trust 

If your company handles or stores customer or partner data, being SOC 2 compliant means you've not only put the right security measures and infrastructure in place but also agreed to undergo regular audits to ensure compliance. This audit process can lead to fines if any violations are discovered, so committing to compliance shows you take your business relationships seriously—nobody wants to be caught in a violation.

"Business moves at the speed of trust" (a quote by Stephen Covey), and this is more relevant than ever. Customers won’t work with you if they believe you're not protecting their data because a breach could hurt them. By investing in securing their data, you build their trust and make it easier to grow your revenue.

Competitive Differentiation

SOC 2 becomes a big differentiator for customers when choosing between two 'like' businesses that have the same or similar offering. When one is compliant and can show their certification, customers are likely to choose the company that takes data protection seriously. This becomes even more crucial in companies swimming up-market as many larger organizations often have stringent requirements for data security and privacy. As a smaller company targeting enterprises, being SOC2 certified levels the playing field in regard to security and compliance, allowing them to compete with larger players and showcase more matured operations.

Mitigating Risk 

SOC 2 compliance is far more than just a checkbox - it’s a crucial step in actively managing and mitigating risk. By adhering to SOC 2 standards, a company implements strict protocols that may not have been on the radar before, helping to build a solid foundation for data security. In an era where open source code and hybrid cloud environments are widespread, SOC 2 compliance helps you navigate the complexities of choosing reliable partners. When selecting a hosting provider or payroll service, you'll prioritize those that are SOC 2 compliant, ensuring that your partners meet rigorous security standards. This approach has a ripple effect. By committing to SOC 2 compliance, you’re also setting a high bar for your own network infrastructure and encouraging a culture of security. 

Insights from Big Band Leaders: Workzone and DocLib

Luckily, two of of our portfolio companies Workzone and DocLib are currently pursuing SOC 2 compliance and are eager share their thoughts on the process so far:

What motivated you to pursue SOC 2 compliance for your business, and how do you believe it will benefit your customers?

Ash Didwania, Workzone CEO: Workzone serves companies in highly regulated industries such as Financial Services and Healthcare. Such companies expect their vendor partners to demonstrate high levels of data security and regulatory compliance both operationally and through their product offerings. Achieving SOC 2 compliance is an industry-accepted standard of demonstrating such readiness. This will enable our customers to trust us with their sensitive data, processes, and systems.

Stephen Rosenthal, DocLib CEO: We consistently work with large manufacturers who abide by strict industry standards in terms of both security and process management. As a part of our efforts to automate financial processes for these customers, we required to undergo extensive reviews on data management, internal process controls, and cybersecurity analysis. A SOC 2 Type 2 report provides a phenomenal vote of confidence for our customer base in our efforts to abide by the highest standards available. They are able to quickly and easily check off the necessary boxes to use our software in their validated systems.

What challenges have you encountered during the SOC 2 compliance process, and how have you addressed them?

Ash Didwania, Workzone CEO: There are 5 key challenges we've faced while undergoing the SOC 2 compliance process:

The process of getting certified is highly resource intensive, requiring significant time and effort investments from the technology and operational teams

Driving change management across the organization in terms of training and adoption of new processes while ensuring the changes don't become distractions in the day-to-day

Record-keeping standards that are more representative of larger organizations

Ongoing monitoring of controls in a manner that is not too manual and can be automated

Establishing incident management policies that are practical in the day-to-day

Using well established third-party tools such Vanta go a long way in addressing some of these challenges while ensuring ongoing compliance.

Stephen Rosenthal, DocLib CEO: We are a small business and the SOC 2 standards are robust and extensive. This required massive allocation of resources over a 12 month period to develop new processes, prepare extensive documentation, and sure up security vulnerabilities. The toughest challenge was to consistently prioritize a proactive shared priority in our business across all departments for an extended period of time.

How do you expect SOC 2 compliance to impact your company’s growth and reputation in the market?

Ash Didwania, Workzone CEO: We believe that SOC 2 compliance will enable us to expand into markets and customers that were previously out of reach due to eligibility requirements. Additionally, SOC 2 compliance brings with it a reputation of security, organization, and trust.  We believe this will go a long way in shortening security audits in the sales process and move us up the reputation ladder in our industry. Lastly, the inherent policies required to remain SOC 2 compliant will help our organization mature significantly from an operational efficiency and risk management perspective.

Stephen Rosenthal, DocLib CEO: We can punch above our weight. There have been multiple occasions where we were completely unable to bid on work simply because of our lack of standards and SOC reports. There have also been instances where customers rolled out a strict requirement to only do business with companies who’ve obtained high marks on a SOC audit. In those cases, we would have simply lost those clients were it not for our report. We are now able to take a swing at large contracts with major companies because of our report. It is a ticket to playing a bigger game by providing the market confidence in our business practices and our approach to providing our software to customers.

Although SOC 2 compliance is a lengthy and demanding process, it is highly rewarding. Not only does it build trust with customers, offer a competitive edge, and mitigate risk, but it is also a key tool in improving retention and bolstering sales. It allows an organization to scale efficiently and effectively without compliance barriers. If you are wondering if becoming SOC 2 compliant is right for your business, we would love to connect and talk further!

THE PLAYLIST (What We're Watching, Reading, and Listening to)

•  The Speed of Trust - Stephen M. R. Covey shows how trust—and the speed at which it is established with clients, employees, and all stakeholders—is the single most critical component of a successful leader and organization

• GTM Continues to Decline - Ongoing study results showing continued struggle in 2024 with delivering growth while managing an increase in go-to-market spend

• This Guy Bought Over 50 SaaS Companies and Raised $100M - Kevin joins The SaaS Academy Podcast and talks drivers of enterprise value, cultural alignment, and the Big Band playbook

IRL (Where You Can Find Us)

• Chris Reedy, our Head of Acquisitions, will be presenting at Main Street Summit October 8-10th. Let us know if you plan to attend and would like to attend his session on Planning for an Exit: Software Edition

• Several members of the Big Band team will be in Chicago for the SaaS Academy events October 23-25 and OCTOBER 27-29, CHICAGO, IL. We are eager to connect with anyone planning to attend!

Join The Band

We’re building our database with the best leaders and operators out there. If you know exceptionally talented people that may one day want to work with us, please have them get in touch with us at [email protected] or fill out the form on our Connect page.

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