Security due diligence in funding rounds: what funds ask for and how to prepare

Why security became part of venture capital due diligence

Due diligence is the verification process an investor runs before committing capital. Historically focused on financial, legal, and product matters, diligence has come to include a technical cybersecurity and privacy track. The reason is economic: a security breach or a data protection penalty after the investment directly erodes the value of the fund's stake, and in extreme cases undermines the entire investment thesis.

For fintechs, the scrutiny is greater. Companies that process financial data, operate as a payment institution, or connect to arrangements regulated by the Central Bank face additional obligations and the expectation that controls exist from early on. The LGPD (Law 13.709/2018) adds regulatory exposure to any company that processes personal data, with the ANPD already imposing administrative penalties.

The practical point for the founder is that the fund does not expect large-enterprise maturity from an early-stage startup. What it evaluates is the trajectory: is there awareness of the risks, are there controls proportionate to the stage, and is there a credible plan to close gaps as the company scales. A complete absence of structure is what signals risk, not the absence of an expensive certificate.

What investors and funds actually ask for

Security diligence typically combines a questionnaire, a technical session with the engineering team, and a review of documents in the data room. The recurring themes follow a structure close to the NIST CSF 2.0 functions (Govern, Identify, Protect, Detect, Respond, Recover): governance and policies, asset and data inventory, protection controls, and incident detection and response.

On governance, the fund asks who owns security in the company, which policies exist (information security, access control, incident response, vendor management), and how they are reviewed. On compliance, it looks for the mapping of personal data processing under the LGPD, the existence of a DPO or data protection officer, and the posture toward frameworks like ISO/IEC 27001 and SOC 2 Type II, even when certification has not yet been obtained.

On the technical side, the assessment covers identity and access management (MFA, least privilege, offboarding), application and cloud security, encryption of data at rest and in transit, vulnerability management, and penetration test (pentest) results. Incident history is reviewed closely: not so much whether an incident happened, but how it was detected, contained, communicated, and used to fix the root cause.

Finally, the vendor supply chain. Subprocessors, cloud providers, and third-party integrations enter the analysis because they inherit risk for the operation. Contracts with data protection clauses, processing agreements, and a minimum verification of critical vendors' posture show that the company understands its true perimeter.

Red flags that stall, delay, or lower the valuation

Not every finding carries the same weight. The ones that worry funds most are those that indicate systemic risk or bad faith: a material incident not disclosed to the investor, personal data or credentials publicly exposed, a complete absence of access control, or data processing without a legal basis under the LGPD. These tend to generate conditions precedent in the term sheet, a holdback of part of the value, or, at the extreme, a walk-away.

Maturity red flags have a milder effect, usually delay and renegotiation. A lack of formal policies, no recent pentest, secrets managed in plaintext, no incident response plan, and insufficient logging rarely kill a round on their own, but they stretch diligence and can be used as leverage on the valuation.

The most common aggravating factor is not the finding itself, but how the team reacts to it. A founder who downplays it, improvises answers, or discovers the problem during the technical session conveys a lack of control. A founder who already knows their gaps, has a dated plan to close each one, and shows evidence of progress turns a negative finding into a signal of operational maturity.

How to build the security data room before the round

The security data room is an organized folder with the evidence the fund will request, prepared before diligence begins. The logic is to flip the script: instead of answering questions under pressure in the middle of the negotiation, you deliver a curated set that demonstrates readiness and speeds up the timeline. Structure the material by NIST CSF functions to make it easy for the investor to read.

Include the set of policies (information security, access control, incident response, vendor management, data retention), the mapping of personal data processing and the record of processing operations required by the LGPD, the org chart of security responsibilities, the inventory of critical assets and vendors, evidence of technical controls (MFA, encryption, tested backups), and the most recent pentest report along with the remediation plan.

Treat the data room as a living document. Policies need to be signed and dated, evidence needs to reflect the environment's actual configuration, and pentest findings need a clear status: fixed, in remediation with a deadline, or accepted with justification. Material that is outdated or inconsistent with what the team describes in the technical session breeds more distrust than a missing document.

Frameworks that anchor the conversation: NIST CSF, ISO 27001, and SOC 2

Adopting a recognized framework gives diligence a common structure and vocabulary. NIST CSF 2.0 is useful as a maturity map because it organizes security into six functions and lets you show progress stage by stage, without requiring certification. It is a good starting point for startups that need to build from scratch.

ISO/IEC 27001 defines the requirements of an information security management system (ISMS) and is the international reference for formal certification. SOC 2, based on the AICPA's Trust Services Criteria, is frequently required by enterprise customers and also valued by funds; the Type II report, which assesses the operation of controls over a period, carries more weight than Type I.

For most startups fundraising, the practical recommendation is to use NIST CSF to diagnose and prioritize, close the critical gaps, and then, as customer and investor demand grows, move on to SOC 2 or ISO 27001. What matters is that the chosen framework is actually operated, not merely declared: controls on paper without evidence of execution do not survive a technical session.

How Decripte supports diligence preparation

Decripte works with Brazilian startups and fintechs to reduce the friction of security diligence before the round. The starting point is usually an assessment that maps the current posture against NIST CSF, ISO 27001, and the SOC 2 criteria, identifying the gaps that tend to become red flags at the negotiating table.

From the diagnosis, we work on compliance (structuring policies, LGPD alignment, and preparation for certifications), on pentesting to identify and prioritize product and infrastructure vulnerabilities, and on organizing the security data room so the investor finds structured evidence. For teams just getting started, there is a free plan to begin the diagnosis at no upfront cost.

The goal is not to generate documents for diligence and stop there, but to install controls that keep operating after the investment, when growth expands the attack surface and scrutiny from customers and regulators increases. Preparing security early protects the valuation in the current round and reduces risk in the following ones.

Practical checklist

1. 1

   1. Run an assessment against a framework

   Diagnose your current posture using NIST CSF 2.0 as a map and identify the gaps that could become red flags. Prioritize by risk and by likelihood of surfacing in diligence.

2. 2

   2. Formalize the essential policies

   Document, sign, and date policies for information security, access control, incident response, and vendor management. Make sure they reflect the actual operation, not a generic template.

3. 3

   3. Align data processing with the LGPD

   Map which personal data you process, under which legal basis, and maintain the record of processing operations. Appoint the data protection officer (DPO) and review subprocessor contracts.

4. 4

   4. Reinforce the critical technical controls

   Implement MFA, least privilege, encryption at rest and in transit, secrets management, and tested backups. Establish minimum logging and detection for incidents.

5. 5

   5. Run a pentest and remediate

   Engage a product and infrastructure penetration test, fix the critical findings, and keep a dated plan for the rest, with a status for each item.

6. 6

   6. Assemble the security data room

   Organize policies, evidence, data mapping, vendor inventory, and the pentest report into a structure aligned with the NIST CSF functions, ready for the fund.

7. 7

   7. Prepare the team for the technical session

   Line up who owns each area, rehearse the likely questions, and ensure consistency between what the data room shows and what engineering describes.

Frequently asked questions