A growth-stage startup had reached the term-sheet stage with a regional strategic investor. The numbers were strong, the product was working. Then the investor’s legal team looked at the data side: millions of users’ data sat in cloud services across three countries with no standard contracts in place; marketing permissions weren’t recorded; and a small leak from a year earlier had never been reported to the regulator. The deal didn’t die — it froze, and the valuation was quietly marked down under the heading of “remediation cost.” The problem wasn’t a bad company; it was undocumented data governance.
Founders usually think of due diligence as a financial and corporate exercise: the cap table, contracts, IP. But in recent years data protection has become a line item of its own — because personal data is now both the most valuable asset and the quietest liability. In this piece, we explain what an investor or acquirer looks at on the data side, and how, as a founder, you can clean up that picture in advance.
Why Data Protection Is Now Its Own Due Diligence Item
A startup’s value increasingly lives in the data it processes. But that same data, mishandled, is an inherited debt: fine exposure, litigation exposure, churn exposure, and remediation cost. The investor wants to know whether what they’re buying contains a hidden liability. Most rounds that an investor passes on die not from one big problem, but from a pile of small “uncleaned” items — and data protection sits near the top of that pile.
Red Flag 1 — No Inventory, No Anything
The first thing examined is the personal data inventory, because the inventory is proof that the company knows its own data flows. If there’s no inventory, the investor assumes: this company doesn’t know what it processes, and therefore cannot manage its risk. That single gap can stretch diligence out by weeks. Having passed a KVKK compliance audit is your strongest card here.
Red Flag 2 — Undocumented Cross-Border Transfers
This is the most common and most misunderstood item in technology companies. If you use AWS, Google Cloud, Stripe, Vercel, a CRM, or a support tool, you are almost certainly transferring personal data abroad. With the amendment to article 9 of Law No. 6698 made by Law No. 7499 — in force since 1 June 2024 — these transfers must rest on a standard contract, binding corporate rules, or another lawful mechanism. The standard contracts adopted by Board decision 2024/959 must be notified to the Authority within five business days of signing. An undocumented transfer shows up directly as a finding in diligence, and takes time to fix.
Red Flag 3 — Missing Consent and Permission Records
Marketing permissions, explicit consents, and cookie approvals must all be on record. “Users already agreed” is not enough; you must be able to show when, with which text, and which version they agreed to. Especially in companies whose growth story rests on email/SMS marketing, a database without valid permission is an asset that can’t be used once acquired — and is therefore worth little.
Red Flag 4 — Hiding or Failing to Report Past Breaches
A breach that occurred but was never reported to the regulator creates a double problem when it surfaces in diligence: the breach itself, and the violation of the notification obligation (the 72-hour rule). Honesty is the strategy here — presenting a known incident upfront, together with the measures taken, always does less damage than its later discovery.
Red Flag 5 — Sloppy Handling of Employee and Candidate Data
The HR side is most founders’ blind spot. Résumés, performance records, biometric attendance data — all of it is personal data, and is often kept for years with no privacy notice or retention policy. The Board’s principle decision 2026/921 on biometric attendance tracking is a concrete example of the sensitivity here.
A Preparation Checklist for Founders
Cleaning up the data side before you go out both protects your valuation and speeds the process:
- Prepare a current personal data inventory and keep it at hand.
- Tie every cross-border transfer to a standard contract or other mechanism, and file the notifications.
- Compile consent/permission records in versioned, time-stamped form.
- Prepare an honest summary of past breaches and the measures taken.
- Update privacy notices at every touchpoint.
- Where possible, come to the table with an independent compliance audit report.
Data Is the Risk Waiting at the Edge of the Deal
Good transactions share a pattern: the founder has already looked where the inspecting party will look. Data protection rarely saves a deal on its own, but caught unprepared it can slow one on its own — and time is the most expensive thing in a round. Compile your own data house before closing, with the same rigor you’d expect from whoever is about to buy or back you.
Preparing for a round? Let’s clean up the data side before closing. Schedule a call →
Frequently Asked Questions
What does an investor look at first on the data side?
The personal data inventory. Without it, the company is assumed not to know its own data flows, and diligence drags on.
What is the most common red flag?
Undocumented cross-border transfers — services like AWS, Google Cloud, and Stripe likely move data abroad.
How do I prepare before going out to raise?
Pass an independent KVKK compliance audit and compile your inventory, transfer, and consent records.
Sources
- KVKK — Cross-Border Transfer: https://www.kvkk.gov.tr/Icerik/2053/Yurtdisina-Aktarim
- KVKK — Public Announcement on Standard Contracts and Binding Corporate Rules: https://www.kvkk.gov.tr/Icerik/7938/Standart-Sozlesmeler-ve-Baglayici-Sirket-Kurallarina-Iliskin-Dokumanlar-Hakkinda-Kamuoyu-Duyurusu
- Law No. 6698 on the Protection of Personal Data (art. 9): https://www.mevzuat.gov.tr/mevzuatmetin/1.5.6698.pdf
This article is for general information only and does not constitute legal advice. For a specific situation, please consult Vircon Legal.
