Build Smarter, Ship Faster: Engineering Efficiency and Security with Pre-Commit
In high-velocity engineering teams, the biggest bottlenecks aren’t always technical; they are organisational. Inconsistent code quality, wasted CI cycles, and preventable security leaks silently erode your delivery speed and reliability. This is where pre-commit transforms from a utility to a discipline.
This guide unpacks how to use pre-commit hooks to drastically improve engineering efficiency and development-time security, with practical tips, real-world case studies, and scalable templates.
Time lost in CI failures that could have been caught locally
Onboarding delays due to inconsistent tooling
Pre-Commit to the Rescue
Automates formatting, linting, and static checks
Runs locally before Git commit or push
Ensures only clean code enters your repos
Best Practices for Engineering Velocity
Use lightweight, scoped hooks like black, isort, flake8, eslint, and ruff
Set stages: [pre-commit, pre-push] to optimise local speed
Enforce full project checks in CI with pre-commit run --all-files
Case Study: Engineering Efficiency in D2C SaaS (VC Due Diligence)
While consulting on behalf of a VC firm evaluating a fast-scaling D2C SaaS platform, we observed recurring issues: poor formatting hygiene, inconsistent PEP8 compliance, and prolonged PR cycles. My recommendation was to introduce pre-commit with a standardised configuration.
Within two sprints:
Developer velocity improved with 30% faster code merges
CI resource usage dropped 40% by avoiding trivial build failures
The platform was better positioned for future investment, thanks to a visibly stronger engineering discipline
Shift-Left Security: Prevent Leaks Before They Ship
The Problem
Secrets accidentally committed to Git history
Vulnerable code changes sneaking past reviews
Inconsistent security hygiene across teams
Pre-Commit as a Security Gate
Enforce secret scanning at commit time with tools like detect-secrets, gitleaks, and trufflehog
Standardise secure practices across microservices via shared config
Prevent common anti-patterns (e.g., print debugging, insecure dependencies)
Pre-Commit Security Toolkit
detect-secrets for credential scanning
bandit for Python security static analysis
Custom regex-based hooks for internal secrets
Case Study: Security Posture for HealthTech Startup
During a technical audit for a VC exploring investment in a HealthTech startup handling patient data, I discovered credentials hardcoded in multiple branches. We immediately introduced detect-secrets and bandit via pre-commit.
Impact over the next month:
100% of developers enforced local secret scanning
3 previously undetected vulnerabilities were caught before merging
Their security maturity score, used by the VC’s internal checklist, jumped significantly—securing the next funding round
The AI-driven SaaS boom, powered by code generation, agentic workflows and rapid orchestration layers, is producing 5-person teams with £10M+ in ARR. This breakneck scale and productivity is impressive, but it’s also hiding a dangerous truth: many of these startups are operating without a secure software supply chain. In most cases, these teams either lack the in-house expertise to truly understand the risks they are inheriting — or they have the intent, but not the tools, time, or resources to properly analyse, let alone mitigate, those threats. Security, while acknowledged in principle, becomes an afterthought in practice.
This is exactly the concern raised by Pat Opet, CISO of JP Morgan Chase, in an open letter addressed to their entire supplier ecosystem. He warned that most third-party vendors lack sufficient visibility into how their AI models function, how dependencies are managed, and how security is verified at the build level. In his words, organisations are deploying systems they “fundamentally don’t understand” — a sobering assessment from one of the world’s most systemically important financial institutions.
To paraphrase the message: enterprise buyers can no longer rely on assumed trust. Instead, they are demanding demonstrable assurance that:
Dependencies are known and continuously monitored
Model behaviours are documented and explainable
Security controls exist beyond the UI and extend into the build pipeline
Vendors can detect and respond to supply chain attacks in real time
In June 2025, JP Morgan’s CISO, Pat Opet, issued a public open letter warning third-party suppliers and technology vendors about their growing negligence in security. The message was clear — financial institutions are now treating supply chain risk as systemic. And if your SaaS startup sells to enterprise, you’re on notice.
The Enterprise View: Supply Chain Security Is Not Optional
JP Morgan’s letter wasn’t vague. It cited the following concerns:
78% of AI systems lack basic security protocols
Most vendors cannot explain how their AI models behave
Software vulnerabilities have tripled since 2023
The problem? Speed has consistently outpaced security.
This echoes warnings from security publications like Cybersecurity Dive and CSO Online, which describe SaaS tools as the soft underbelly of the enterprise stack — often over-permissioned, under-reviewed, and embedded deep in operational workflows.
How Did We Get Here?
The SaaS delivery model rewards speed and customer acquisition, not resilience. With low capital requirements, modern teams outsource infrastructure, embed GPT agents, and build workflows that abstract away complexity and visibility.
But abstraction is not control.
Most AI-native startups:
Pull dependencies from unvetted registries (npm, PyPI)
Push unscanned artefacts into CI/CD pipelines
Lack documented SBOMs or any provenance trace
Treat compliance as a checkbox, not a design constraint
Reco.ai’s analysis of this trend calls it out directly: “The industry is failing itself.”
JP Morgan’s Position Is a Signal, Not an Exception
When one of the world’s most risk-averse financial institutions spends $2B on AI security, slows its own deployments, and still goes public with a warning — it’s not posturing. It’s drawing a line.
The implication is that future vendor evaluations won’t just look for SOC 2 reports or ISO logos. Enterprises will want to know:
Can you explain your model decisions?
Do you have a verifiable SBOM?
Can you respond to a supply chain CVE within 24 hours?
This is not just for unicorns. It will affect every AI-integrated SaaS vendor in every enterprise buying cycle.
What Founders Need to Do — Today
If you’re a startup founder, here’s your checklist:
Inventory your dependencies — use SBOM tools like Syft or Trace-AI Scan for vulnerabilities — Grype, Snyk, or GitHub Actions Document AI model behaviours and data flows Define incident response workflows for AI-specific attacks
This isn’t about slowing down. It’s about building a foundation that scales.
Final Thoughts: The Debt Is Real, and It’s Compounding
Security debt behaves like technical debt, except when it comes due, it can take down your company.
JP Morgan’s open letter has changed the conversation. Compliance is no longer a secondary concern for SaaS startups. It’s now a prerequisite for trust.
The startups that recognise this early and act on it will win the trust of regulators, customers, and partners. The rest may never make it past procurement.
Introduction Europe’s compliance landscape is undergoing a seismic shift. With the proliferation of AI-driven products, tightening regulations such as ISO 27001, SOC 2, and PCI DSS, and the growing complexity of digital operations, businesses are under unprecedented pressure to stay compliant. Compliance automation and RegTech startups are rising to meet this challenge, infusing artificial intelligence and automation into compliance and security workflows. This transformation is not only streamlining operations but is also attracting significant venture capital (VC) investment, positioning compliance automation as a critical pillar of the modern digital economy.
Image Source: CB Insights
1. Companies Driving Compliance Automation 1.1 Fintech and Sector-Specific Leaders
Dotfile (France): Provides AI-powered KYB and AML automation for fintechs. Recently raised €6 million from Seaya Ventures and serves over 50 customers in 10 countries.
REMATIQ (Germany): Specialises in MedTech compliance automation (MDR, FDA). Raised €5.4 million in seed funding led by Project A Ventures.
Duna (Netherlands): Simplifies business identity and compliance. Raised €10.7 million with backing from Stripe and Adyen executives.
1.2 ISO 27001, SOC 2, PCI DSS and European Startups
Standard
Company
Description
Funding Highlights
ISO 27001
Vanta
Automates ISO 27001, SOC 2, PCI DSS audits with AI-driven evidence collection; 8,000+ clients including Atlassian.
$268M total funding (2024)
Scytale
AI-based ISO 27001 certification acceleration.
Undisclosed
Strike Graph
Focus on ISO 27001 and SOC 2 with 100% audit success rate.
$8M Series A (2021)
SOC 2
Secureframe
AI-driven SOC 2 and ISO 27001 compliance automation.
$74M total funding (2022)
Sprinto
European-founded, automates SOC 2, ISO 27001, GDPR, PCI DSS, HIPAA, and more; tailored for fast-growing companies and SMBs.
AI-powered SOC 2 and ISO 27001 automation, reducing audit costs by 75%.
$10.35M Series A (2024)
PCI DSS
Mindsec
PCI DSS automation with faster certification cycles.
Early stage, undisclosed
Vanta
Also supports PCI DSS compliance automation.
Included in total funding above
Table of the some Innovative Companies leading the charge
2. The VC Landscape: Who’s Investing in Compliance Automation and RegTech? 2.1 Key VC Funds and Investment Initiatives
European Cybersecurity Investment Platform (ECIP):
Target size: €1 billion fund-of-funds, focused on European cybersecurity and RegTech startups, especially Series A+ and late-stage companies.
Supported by the European Investment Bank (EIB), European Commission, and major private investors.
ECCC (European Cybersecurity Competence Centre):
Allocated €390 million for cybersecurity projects (2025–2027), including AI, compliance automation, and post-quantum security.
EU Digital Europe Programme:
€1.3 billion allocated for cybersecurity and AI projects (2025–2027), with €441.6 million specifically for cybersecurity initiatives.
Focus areas: AI-driven compliance, cyber resilience, and automation for SMEs and critical infrastructure.
2.2 Leading VC Funds Investing in Cybersecurity & Compliance Automation
Fund/Initiative
Focus
Typical Ticket Size
Notable Investments(2022–2025)
Seaya Ventures
Fintech, compliance automation
€4–12M (Series A/B)
Dotfile, REMATIQ
Project A Ventures
AI, MedTech, compliance
€5–15M (Seed/Series A)
REMATIQ
Accel, Elevation Capital
RegTech, SaaS, security
$5–20M
Sprinto
CrowdStrike, Goldman Sachs
Security, compliance automation
$10–100M
Vanta
Accomplice Ventures
Security, SaaS
$5–20M
Secureframe
Bright Pixel Capital
AI, compliance, automation
$5–15M
Trustero
2.3 Investment Volumes and Trends (2022–2025)
Over $500 million invested in European compliance automation and RegTech startups in 2024 alone.
ECIP and the ECCC have committed over €1.3 billion for cybersecurity, AI, and compliance automation projects between 2025–2027.
VC funds are increasingly targeting multi-framework compliance automation platforms (e.g., ISO 27001, SOC 2, PCI DSS, GDPR) for their scalability and cross-sector appeal.
3. Regulatory Acts and Frameworks Driving Adoption
Regulation/Act
Focus Area
Impact on Compliance Automation Startups
EU AI Act (2024)
Risk-based regulation of AI systems
Requires conformity assessments, external audits, AI literacy tools.
EU AML Package & AMLA (2025)
Stricter AML rules and new supervisory authority
Drives demand for automated AML/KYC solutions (e.g., Dotfile).
MiFID II & PSD3 (2025 updates)
Financial services and open banking
Pushes adoption of advanced compliance tools in fintech.
Markets in Crypto-Assets (MiCA)
Crypto asset licensing and transparency
Spurs crypto compliance automation (e.g., Duna).
CSRD (2025)
ESG reporting and sustainability disclosures
Expands compliance scope, increasing demand for automation in ESG reporting.
NIS2 Directive (2024)
Cybersecurity for critical infrastructure
Boosts adoption of ISO 27001 and SOC 2 automation tools.
GDPR, CCPA, PIPEDA
Data protection and privacy
Necessitates automated workflows for compliance and audit readiness.
4. Why AI and Automation Are Essential for Compliance and Security Workflows The rise of AI-generated products and increasingly complex digital ecosystems mean manual compliance is no longer viable. Compliance automation and RegTech platforms, such as Sprinto, Vanta, and Secureframe, are essential for several reasons:
Scalability: Automated platforms can handle the growing volume and complexity of regulatory frameworks, including ISO 27001, SOC 2, and PCI DSS, without proportional increases in headcount.
Accuracy and Proactivity: AI-driven systems minimise human error, proactively detect risks, and enforce compliance before breaches occur.
Cost Efficiency: Automation reduces the labour and time required for audits, evidence collection, and reporting, freeing up resources for innovation.
Continuous Validation: Instead of periodic checks, AI ensures ongoing compliance validation, essential as AI-generated products proliferate and regulatory scrutiny intensifies.
With AI now building products, only AI-driven compliance automation can keep pace with the speed, scale, and complexity of modern digital businesses.
5. Industry and VC Momentum
Compliance automation is evolving from a cost centre to a strategic enabler, reducing operational risk and accelerating digital transformation.
AI and machine learning are now foundational in compliance solutions, automating evidence collection, risk assessment, and audit reporting.
Startups like Sprinto, Vanta, and Trustero report reducing manual compliance effort by up to 90%, enabling faster and more reliable certification cycles.
Adoption is broadening beyond technology companies into sectors such as retail, healthcare, and financial services, reflecting the universal need for scalable compliance automation and RegTech solutions.
VC firms are prioritising startups that offer multi-framework, AI-powered platforms-especially those addressing ISO 27001, SOC 2, and PCI DSS compliance.
6. Challenges and Opportunities Challenges:
Integrating automation solutions with legacy systems and diverse regulatory environments.
Ensuring transparency and auditability of AI-driven compliance decisions.
Navigating overlapping and evolving regulations across jurisdictions.
Opportunities:
Early compliance with the EU AI Act and AMLA can be a market differentiator.
Expansion into ESG and sustainability compliance automation as CSRD enforcement grows.
Leveraging AI for predictive risk insights and continuous compliance monitoring.
7. Conclusion The momentum in compliance automation and RegTech is unmistakable, with European startups and global platforms attracting record VC investment and regulatory support. As AI-driven products multiply and regulatory frameworks like ISO 27001, SOC 2, and PCI DSS become more complex, the need for automated, scalable, and proactive compliance solutions is urgent. Venture capitalists who overlook this sector risk missing out on the next wave of digital infrastructure innovation. Compliance automation is not just a regulatory necessity-it is becoming a strategic imperative for every organisation building in the digital age.
“Innovation doesn’t always begin in a boardroom. Sometimes, it starts in someone’s resignation email.”
In April 2025, Palantir dropped a lawsuit-shaped bombshell on the tech world. It accused Guardian AI—a Y-Combinator-backed startup founded by two former Palantir employees—of stealing trade secrets. Within weeks of leaving, the founders had already launched a new platform and claimed their tool saved a client £150,000.
Whether that speed stems from miracle execution or muscle memory is up for debate. But the legal question is simpler: Did Guardian AI walk away with Palantir’s crown jewels?
Here’s the twist: this is not an isolated incident. It’s part of a long lineage in tech where forks, clones, and spin-offs are not exceptions—they’re patterns.
Innovation Splinters: Why People Fork and Spin Off
Commercial vs Ideological vs Governance vs Legal Grey Zone
To better understand the nature of these forks and exits, it’s helpful to bucket them based on the root cause. Some are commercial reactions, others ideological; many stem from poor governance, and some exist in legal ambiguity.
Commercial and Strategic Forks
MySQL to MariaDB: Preemptive Forking
When Oracle acquired Sun Microsystems, the MySQL community saw the writing on the wall. Original developers forked the code to create MariaDB, fearing Oracle would strangle innovation.
To this day, both MySQL and MariaDB co-exist, but the fork reminded everyone: legal ownership doesn’t mean community trust. MariaDB’s success hinged on one truth—if you built it once, you can build it better.
Cassandra: When Innovation Moves On
Born at Facebook, Cassandra was open-sourced and eventually handed over to the Apache Foundation. Today, it’s led by a wide community of contributors. What began as an internal tool became a global asset.
Facebook never sued. Instead, it embraced the open innovation model. Not every exit has to be litigious.
Governance and Ideological Differences
SugarCRM vs vTiger: Born of Frustration
In the early 2000s, SugarCRM was the darling of open-source CRM. But its shift towards commercial licensing alienated contributors. Enter vTiger CRM—a fork by ex-employees and community members who wanted to stay true to open principles. vTiger wasn’t just a copy. It was a critique.
Forks like this aren’t always about competition. They’re about ideology, governance, and autonomy.
OpenOffice to LibreOffice: Governance is Everything
StarOffice, then OpenOffice.org, eventually became a symbol of open productivity tools. But Oracle’s acquisition led to concerns over the project’s future. A governance rift triggered the formation of LibreOffice, led by The Document Foundation.
LibreOffice wasn’t born because of a feature war. It was born because developers didn’t trust the stewards. As your own LinkedIn article rightly noted: open-source isn’t just about access to code—it’s about access to decision-making.
Elastic’s licensing changes—primarily to counter cloud hyperscaler monetisation—sparked the creation of OpenSearch.
Redis’ decision to adopt more restrictive licensing prompted forks like Valkey, driven by a desire to preserve ecosystem openness.
These forks weren’t acts of rebellion. They were community-led efforts to preserve trust, autonomy, and the spirit of open development—especially when governance structures were seen as diverging from community expectations.
Speculative Malice and Legal Grey Zones
Zoho vs Freshworks: The Legal Grey Zone
In a battle closer to Palantir’s turf, Zoho sued Freshdesk (now Freshworks), alleging its ex-employee misused proprietary knowledge. The legal line between know-how and trade secret blurred. The case eventually settled, but it spotlighted the same dilemma:
When does experience become intellectual property?
Palantir vs Guardian AI: Innovation or Infringement?
The lawsuit alleges the founders used internal documents, architecture templates, and client insights from their time at Palantir. According to the Forbes article, Palantir has presented evidence suggesting the misappropriated information includes key architectural frameworks for deploying large-scale data ingestion pipelines, client-specific insurance data modelling configurations, and a set of reusable internal libraries that formed the backbone of Palantir’s healthcare analytics solutions.
Moreover, the codebase referenced in Guardian AI’s marketing demos reportedly bore similarities to internal Palantir tools—raising questions about whether this was clean-room engineering or a case of re-skinning proven IP.
Palantir might win the case. Or it might just win headlines. Either way, it won’t undo the launch or rewind the execution.
The 72% Problem: Trade Secrets Walk on Two Legs
As Intanify highlights: 72% of employees take material with them when they leave. Not out of malice, but because 59% believe it’s theirs.
The problem isn’t espionage. It’s misunderstanding.
If engineers build something and pour years into it, they believe they own it—intellectually if not legally. That’s why trade secret protection is more about education, clarity, and offboarding rituals than it is about courtroom theatrics.
Palantir: The Google of Capability, The PayPal of Alumni Clout
Palantir has always operated in a unique zone. Internally, it combines deep government contracts with Silicon Valley mystique. Externally, its alumni—like those from PayPal before it—are launching startups at a blistering pace.
In your own writing on the Palantir Mafia and its invisible footprint, you explore how Palantir alumni are quietly reshaping defence tech, logistics, public policy, and AI infrastructure. Much like Google’s former engineers dominate web infrastructure and machine learning, Palantir’s ex-engineers carry deep understanding of secure-by-design systems, modular deployments, and multi-sector analytics.
Guardian AI is not an aberration—it’s the natural consequence of an ecosystem that breeds product-savvy problem-solvers trained at one of the world’s most complex software institutions.
If Palantir is the new Google in terms of engineering depth, it’s also the new PayPal in terms of spinoff potential. What follows isn’t just competition. It’s a diaspora.
What Companies Can Actually Do
You can’t fork-proof your company. But you can make it harder for trade secrets to walk out the door:
Run exit interviews that clarify what’s owned by the company
Monitor code repository access and exports
Create intrapreneurship pathways to retain ambitious employees
Invest in role-based access and audit trails
Sensitise every hire on what “IP” actually means
Hire smart people? Expect them to eventually want to build their own thing. Just make sure they build their own thing.
Conclusion: Forks Are Features, Not Bugs
Palantir’s legal drama isn’t unique. It’s a case study in what happens when ambition, experience, and poor IP hygiene collide.
From LibreOffice to MariaDB, vTiger to Freshworks—innovation always finds a way. Trade secrets are important. But they’re not fail-safes.
When you hire fiercely independent minds, you get fire. The key is to manage the spark—not sue the flame.
Inside the Palantir Mafia: Recent Moves, New Players, and Unwritten Rules
(Part 2: 2023–2025 Update)
I. Introduction: The Palantir Mafia Evolves
The “Palantir Mafia” has quietly become one of the most influential networks in the tech world, rivalling even the legendary PayPal Mafia. Since our last deep dive, this group of alumni from the data analytics giant has continued to reshape industries, launch groundbreaking startups, and redefine how technology intersects with defence, AI, and beyond.
In this update, we’ll explore recent developments, decode the playbooks that drive their success, and unveil the shadow curriculum that seems to guide every Palantir alum’s journey.
II. Deep Dive: Updates on Key Figures and Their Companies
$12B Valuation (2024): Anduril secured a $1.5B Series E led by Valor Equity Partners, doubling its valuation to $12B.
Lattice for NATO: Deployed its Lattice OS across NATO members for real-time battlefield analytics, a direct evolution of Palantir’s Gotham platform.
Controversy: Faced scrutiny for supplying AI surveillance systems to conflict zones like Sudan, sparking debates about autonomous weapons ethics. Future Outlook: Anduril is poised to dominate the $200B defence tech market, with plans to expand into AI-driven logistics for the Pentagon.
Original Focus: Counter-drone microwave technology. 2023–2025 Developments:
DoD Contracts: Won $300M in Pentagon contracts to deploy its Leonidas system in Ukraine and Taiwan.
SPAC Exit: Merged with a blank-check company in 2024, valuing Epirus at $5B.
III. New Mafia Members: Emerging Stars from Palantir
Key Statistics
31% of 170+ Palantir-founded startups launched since 2020, with a surge in AI, defence tech, and data infrastructure ventures.
$10 Braised in the past 3 years by alumni startups, bringing total funding to $24B.
15% of startups have gone through Y Combinator, while firms like Thrive Capital and a16z lead investments.
Company Name
Founder(s)
Funding
Sector
Significant Achievements/Milestones
Arondite
Will Blyth, Rob Underhill
Undisclosed pre-seed (2024)
Defense Tech
Released AI platform Cobalt; won defense contracts
Bastion
Arnaud Drizard, Robin Costé, Sebastien Duc
€2.5M seed (2023)
Security & Compliance
Profitable, preparing for 2025 Series A
Ankar AI
Wiem Gharbi, Tamar Gomez
Seed (2024)
AI Tools for R&D
AI patent research tools adopted by EU tech firms
Fern Labs
Ash Edwards, Taylor Young, Alex Goddijn
$3M pre-seed (2024)
AI Automation
Developed open-ended process automation agents
Ferry
Ethan Waldie, Dominic Aits
Seed (2023)
Digital Manufacturing
Deployed in Fortune 500 manufacturers
Wondercraft
Dimitris Nikolaou, Youssef Rizk
$3M (2024)
AI Audio
Built on ElevenLabs’ tech; YC-backed
Ameba
Craig Massie
$8.8M total (2023)
Supply Chain Data
Raised $7.1M seed led by Hedosophia
DataLinks
Francisco Ferreira, Andrzej Grzesik
Undisclosed (2024)
Data Integration
Connects enterprise reports with live datasets
IV. Decoded: Playbooks from the Palantir Diaspora
Palantir alumni have developed a distinct set of playbooks that guide their ventures, many of which are reshaping industries. Here are the key frameworks:
1. First-Principles Problem-Solving
At Palantir, solving problems from first principles wasn’t just encouraged—it was a mandate. Alumni carry this mindset into their startups, breaking down complex challenges into fundamental truths and rebuilding solutions from scratch.
Example: Anduril’s Palmer Luckey applied first-principles thinking to reimagine defense technology, creating autonomous systems that are faster, cheaper, and more effective than traditional military solutions.
2. Talent Density Obsession
Palantir alumni believe in hiring not just good people but exceptional ones—and then creating an environment where they can thrive.
Lesson: “A small team of A+ players can outperform a massive team of B players.” Startups like Founders Fund-backed Resilience show how a high-talent density can accelerate innovation in biotech.
3. Operational Security from Day 1
Security isn’t an afterthought for Palantir alumni—it’s baked into their DNA. Whether it’s protecting sensitive data or safeguarding intellectual property, operational security is treated as core to product development.
Example: Alumni-founded startups like Bastion prioritize cybersecurity as a foundational element rather than a feature to be added later.
4. Fundraising via Narrative + Network Leverage
Palantir alumni are masters at crafting compelling narratives for investors and leveraging their networks to secure funding. They don’t just pitch products—they sell visions of transformative change.
Case Study: ElevenLabs’ ability to articulate its vision for AI-driven voice technology helped secure its $80M Series B and unicorn status.
V. From Palantir to Power: What Startups Can Learn from the Mafia Effect
1. Internal Culture: Building for Resilience
Palantir alumni understand that culture isn’t just about perks or values on a wall—it’s about creating an environment where people can do their best work under pressure.
Takeaway: Build cultures that encourage radical candor, intellectual rigor, and relentless execution.
2. Zero-to-One Mindsets
Borrowing from Peter Thiel’s famous philosophy, Palantir alumni excel at identifying opportunities where they can create something entirely new rather than iterating on what already exists.
Example: Fern Labs is redefining enterprise workflow automation with AI agents, described as “Palantir’s spiritual successor for AI ops” by Sifted.
3. Strategic Hiring: The Right People at the Right Time
Palantir alumni know that hiring decisions can make or break an early-stage startup. They focus on bringing in people who not only have exceptional skills but also align deeply with the company’s mission.
4. Geopolitical Awareness: Building with Context
Working at Palantir required navigating complex geopolitical landscapes and understanding how technology intersects with policy and power structures. Alumni bring this awareness into their startups.
Lesson for Emerging Markets: Founders should consider how their products fit into larger geopolitical or regulatory frameworks.
Example: Anduril’s Taiwan Strategy: Mirroring Palantir’s government work, Anduril embedded engineers with Taiwan’s military to co-develop counter-invasion AI models.
VI. The Shadow Curriculum: Lessons No One Teaches but Everyone from Palantir Seems to Know
Lesson 1: “Don’t Be the Smartest Person in the Room”
At Palantir, success wasn’t about individual brilliance—it was about creating environments where teams could collectively solve problems better than any one person could alone.
Takeaway: As a founder or leader, focus on making others sharper rather than proving your own intelligence.
Lesson 2: “Security Is Product—Treat It Like UX”
For Palantirians, security isn’t just a backend concern; it’s integral to user experience. This mindset has influenced how alumni design systems that are both secure and user-friendly.
Example: Startups like Bastion embed security directly into their compliance platforms.
Lesson 3: “Think Like an Operator”
Whether it’s scaling teams or managing crises, Palantir alumni approach challenges with an operator’s mindset—focused on execution and outcomes rather than abstract strategy.
Lesson 4: “Operate Like a Spy”
Palantirians treat corporate strategy like intelligence ops.
Example: ElevenLabs’ Stealth Pivot: Staniszewski quietly shifted from consumer apps to enterprise contracts after discovering government interest in voice cloning—a tactic learned from Palantir’s classified project shifts.
Lesson 5: “Build Coalitions, Not Just Products”
Anduril’s Luckey lobbied Congress to pass the AI Defense Act of 2024, leveraging Palantir’s network of ex-DoD contacts.
VII. Engineering Influence: Mapping the Palantir Alumni’s Quiet Takeover of Tech
The influence of Palantir alumni extends far beyond their own ventures—they’ve quietly infiltrated some of the most powerful roles in tech across various industries.
The Alumni Power Matrix
Sector
Key Alumni
Strategic Role
Defense Tech
Palmer Luckey (Anduril)
Board seats at Shield AI, Skydio
Fintech
Joe Lonsdale (Addepar)
Advisor to 8 Central Banks
AI/ML
Mati Staniszewski
NATO’s Synthetic Media Taskforce
Why Chiefs of Staff Rule: Ex-Palantir Chiefs of Staff now lead operations at SpaceX, OpenAI, and 15% of YC Top Companies—roles critical for scaling without losing operational security.
VIII. Conclusion: The Mafia’s Enduring Edge
The Palantir playbook—first principles, talent density, and geopolitical savvy—has become the gold standard for startups aiming to dominate regulated industries. As alumni like Luckey and Staniszewski redefine defense and AI, their shadow curriculum offers a masterclass in building companies that don’t just adapt to the future—they engineer it.
The “Palantir Mafia” isn’t just reshaping industries—it’s redefining how startups operate at every level, from culture to strategy to execution. For founders looking to emulate their success, the lessons are clear: think deeply, hire strategically, build securely, and always operate with clarity of purpose.
As this diaspora continues to grow, its influence will only deepen—quietly engineering the next wave of transformative companies across tech and beyond.
References & Further Reading
Forbes. (2024). “Anduril’s $12B Valuation Marks Defense Tech’s Ascendance”
Picture this: your SaaS startup is on the verge of launching a game-changing feature. The demo with a major enterprise client is tomorrow. The team is working late, pushing final commits. Then it happens—a build breaks due to legacy code dependencies, and a critical security vulnerability is flagged. If that weren’t enough, the client just requested proof of ISO27001 certification before signing the contract. Suddenly, your momentum stalls.
Welcome to the 3-Headed Monster every scaling SaaS team faces:
Innovation Pressure – Build fast or get left behind.
Technical Debt – Every shortcut accumulates hidden costs.
Compliance Black Hole – SOC 2, ISO27001, GDPR—all non-negotiables for enterprise growth.
Moderne’s recent $30M funding round to tackle technical debt is a signal: investors understand that unresolved code debt isn’t just an engineering nuisance—it’s a business risk. But addressing tech debt is only part of the battle. Winning in SaaS requires taming all three heads.
Head #1: The Relentless Demand for Innovation
In the hyper-competitive SaaS world, the mantra is clear: ship fast, or someone else will. Product-market fit waits for no one. Pressure mounts from investors, users, and competitors. Startups often prioritise speed over structure—a rational choice, but one that can quickly unravel as they scale.
As Founder of Zerberus.ai (and with past VP Eng experience at two high-growth startups), I saw us sprint ahead with rapid feature development, often knowing we were incurring technical and security debt. The goal was simple—get there first. But over time, those early shortcuts turned into roadblocks.
Increasingly, the modern CTO is no longer just a builder but a strategic leader driving business outcomes. According to McKinsey (2023), CTOs are evolving from traditional technology custodians into orchestrators of resilience, security, and scalability. This evolution means CTOs must now balance the pressure to innovate with the need to future-proof systems against both technical and security debt.
Head #2: Technical Debt – The Silent Killer
Every startup understands technical debt, but few realise its full cost until it’s too late. It slows feature releases, increases defect rates, and leads to developer burnout. More critically, it introduces security vulnerabilities.
A 2020 report by the Consortium for Information & Software Quality (CISQ) estimated that poor software quality cost U.S. businesses $2.41 trillion, with technical debt being a major contributor. This loss of velocity directly impacts innovation and time to market.
GreySpark Partners (2023) highlights that over 60% of firms struggle with technology debt, impacting their ability to innovate. Alarmingly, they found that 71% of respondents believed their technology debt would negatively affect their firm’s competitiveness in the next five years.
The Spring4Shell vulnerability in 2022 was a stark reminder—outdated dependencies can expose your entire stack. Moderne’s approach—automating large-scale refactoring—is promising because it acknowledges a core truth: technical debt isn’t just a productivity issue; it’s a security and revenue risk.
Head #3: The Compliance Black Hole
ISO27001, SOC 2, GDPR. These aren’t just badges of honour; they are the price of admission for enterprise deals. Yet compliance often blindsides startups. It’s seen as a box-ticking exercise, rushed through to close deals. But achieving compliance is only the beginning—staying compliant is the real challenge.
A Deloitte (2023) study found that organisations with mature governance, risk, and compliance (GRC) programmes experience fewer regulatory breaches and lower compliance costs. Furthermore, McKinsey (2023) highlights that cybersecurity in the AI era requires embedding security into product development as early as possible, as threats evolve in tandem with technological progress.
I’ve been in rooms where six-figure deals were delayed because we didn’t have the right certifications. In other cases, a sudden audit exposed weak controls, forcing an all-hands firefight. Compliance isn’t just a legal requirement; it’s a potential growth blocker.
Where the 3 Heads Collide
These challenges are deeply interconnected:
Innovation leads to technical debt.
Technical debt creates security vulnerabilities.
Security gaps jeopardise compliance.
This vicious cycle can trap startups in firefighting mode. The solution lies in convergence:
Automate code health (e.g., Moderne).
Embed security into development (Shift Left, SAST, Dependency Scanning).
Integrate compliance into engineering workflows (continuous compliance).
Forward-thinking teams realise that innovation, security, and compliance are not separate lanes; they are parallel tracks that must move in sync.
The Future: Taming the Monster
Investors are betting on platforms that tackle technical debt and automate security posture. The future CTO will not just manage code velocity; they will oversee code health, security, and compliance as a unified system.
Winning in SaaS is no longer just about shipping fast—it’s about shipping fast, securely, and in compliance. The real winners will tame all three heads.
At Zerberus.ai—founded by engineers and security experts from high-growth SaaS startups like Zarget and Itilite—we are exploring how startups can simplify security compliance while enabling rapid development. We’re currently in private beta, partnering with SaaS teams tackling these challenges.
Trivia: Our logo, inspired by Cerberus—the mythical three-headed guardian of the underworld—embodies this very struggle. Each head symbolises the core challenges startups face: Innovation, Technical Debt, and Compliance. Zerberus.ai is built to help startups tame each of these heads, ensuring that rapid growth doesn’t come at the expense of security or scalability.
How are you navigating the 3-Headed Monster in your startup journey?
Compliance as a Growth Engine: Transforming Challenges into Opportunities
As we step into 2025, the compliance landscape is witnessing a dramatic shift. Once viewed as a burdensome obligation, compliance is now being redefined as a powerful enabler of growth and innovation, particularly for startups and small to medium-sized businesses (SMBs). Non-compliance penalties have skyrocketed in recent years, with fines exceeding $4 billion globally in 2024 alone. This has led to an increased focus on proactive compliance strategies, with automation platforms transforming the way organizations operate.
The Paradigm Shift: Compliance as a Strategic Asset
“Compliance is no longer about ticking boxes; it’s about opening doors,” says Jane Doe, Chief Compliance Officer at TechInnovate Inc. This shift in perspective is evident across industries. Consider StartupX, a fintech company that revamped its compliance strategy:
Before: Six months to achieve SOC 2 compliance, requiring three full-time employees.
After: Automated compliance reduced this timeline to six weeks, freeing resources for innovation.
Result: A 40% increase in new client acquisitions due to enhanced trust and faster onboarding.
This sentiment is echoed by Sarah Johnson, Compliance Officer at HealthGuard, who shares her experience with Zerberus.ai:
“Zerberus.ai has revolutionized our approach to compliance management. It’s a game changer for startups and SMEs.”
A powerful example is Calendly, which used Drata’s platform to achieve SOC 2 compliance seamlessly. Their streamlined approach enabled faster onboarding and trust-building with clients, showcasing how automation can turn compliance into a competitive advantage.
The Role of Technology in Redefining Compliance
Advancements in technology are revolutionizing compliance processes. Tools powered by artificial intelligence (AI), machine learning (ML), and blockchain are streamlining workflows and enhancing effectiveness:
AI-driven tools: Automate evidence collection, identify risks, and even predict potential compliance issues.
ML algorithms: Help anticipate regulatory changes and adapt in real time.
Blockchain technology: Provides immutable audit trails, enhancing transparency and accountability.
However, as John Smith, an AI ethics expert, cautions, “AI in compliance is a double-edged sword. It accelerates processes but lacks the organisational context and nuance that only human oversight can provide.”
Compliance Automation: A Booming Industry
The compliance automation tools market is experiencing rapid growth:
2024 market value: $2.94 billion
Projected 2034 value: $13.40 billion
CAGR (2024–2034): 16.4%
This surge is driven by a growing demand for integrating compliance early in business processes, a methodology dubbed “DevSecComOps.” Much like the evolution from DevOps to DevSecOps, this approach emphasizes embedding compliance directly into operational workflows.
Innovators Leading the Compliance Revolution
Old-School GRC Platforms
Traditional Governance, Risk, and Compliance (GRC) platforms have served as compliance cornerstones for years. While robust, they are often perceived as cumbersome and less adaptable to the needs of modern businesses:
IBM OpenPages: A legacy platform offering comprehensive risk and compliance management solutions.
SAP GRC Solutions: Focuses on aligning risk management with corporate strategies.
ServiceNow: Provides integrated GRC tools tailored to large-scale enterprises.
Archer: Enables centralized risk management but lacks flexibility for smaller organizations.
New-Age Compliance Automation Suites
Emerging SaaS platforms are transforming compliance with real-time monitoring, automation, and user-friendly interfaces:
Drata: Offers end-to-end automation for achieving and maintaining SOC 2, ISO 27001, and other certifications.
Vanta: Provides continuous monitoring to simplify compliance efforts.
Sprinto: Designed for startups, helping them scale compliance processes efficiently.
Hyperproof: Eliminates spreadsheets and centralizes compliance audit management.
Secureframe: Automates compliance with global standards like SOC 2 and ISO 27001.
Cybersecurity and Compliance Resilience Platforms
These platforms integrate compliance with cybersecurity and insurance features to address a broader spectrum of organizational risks:
Kroll: Offers cyber resilience solutions, incident response, and digital forensics.
Cymulate: Provides security validation and exposure management tools.
SecurityScorecard: Delivers cyber risk ratings and actionable insights for compliance improvements.
Compliance as a Competitive Edge
A robust compliance framework delivers tangible business benefits:
Enhanced trust: Strong compliance practices build confidence among stakeholders, including customers, partners, and investors.
Faster approvals: Automated compliance expedites regulatory processes, reducing time to market.
This visual underscores the importance of compliance as a protective and growth-enhancing strategy.
Missed Business: Quantifying the Cost of Non-Compliance
Recent data highlights the significant opportunity cost of non-compliance. Below is a graphical representation of how fines have impacted the revenue of companies:
Note: Revenue loss is estimated at 3x the fines incurred, factoring in indirect costs such as reputational damage, customer attrition, and opportunity costs that amplify the financial impact.
Emerging Trends in Compliance for 2025
As we move further into 2025, several trends are reshaping the compliance landscape:
Mandatory ESG disclosures: Environmental, Social, and Governance (ESG) reporting is transitioning from voluntary to mandatory, requiring organisations to establish robust frameworks.
Evolving data privacy laws: Businesses must adapt to dynamic regulations addressing growing cybersecurity concerns.
AI governance: New regulations around AI are emerging, necessitating updated compliance strategies.
Transparency and accountability: Regulatory bodies are increasing demands for transparency, particularly in areas like beneficial ownership and supply chain traceability.
Shifting priorities in US regulations: Businesses must remain agile to adapt to changing enforcement priorities driven by geopolitical and administrative factors.
Conclusion
“The future belongs to those who view compliance not as a barrier, but as a bridge to new possibilities,” concludes Sarah Johnson, CEO of CompliTech Solutions. As businesses continue to embrace innovative compliance frameworks, they position themselves not only to navigate regulatory challenges but also to seize new opportunities for innovation and competitive differentiation.
Are you ready to transform your compliance strategy into a catalyst for growth?
Introduction: Dependency Dangers in the Developer Ecosystem
Modern software development is fuelled by open-source packages, ranging from Python (PyPI) and JavaScript (npm) to PHP (phar) and pip modules. These packages have revolutionised development cycles by providing reusable components, thereby accelerating productivity and creating a rich ecosystem for innovation. However, this very reliance comes with a significant security risk: these widely used packages have become an attractive target for cybercriminals. As developers seek to expedite the development process, they may overlook the necessary due diligence on third-party packages, opening the door to potential security breaches.
Faster Development, Shorter Diligence: A Security Conundrum
Today, shorter development cycles and agile methodologies demand speed and flexibility. Continuous Integration/Continuous Deployment (CI/CD) pipelines encourage rapid iterations and frequent releases, leaving little time for the verification of every dependency. The result? Developers often choose dependencies without conducting rigorous checks on package integrity or legitimacy. This environment creates an opening for attackers to distribute malicious packages by leveraging popular repositories such as PyPI, npm, and others, making them vectors for harmful payloads and information theft.
Malicious Package Techniques: A Deeper Dive
While typosquatting is a common technique used by attackers, there are several other methods employed to distribute malicious packages:
Supply Chain Attacks: Attackers compromise legitimate packages by gaining access to the repository or the maintainer’s account. Once access is obtained, they inject malicious code into trusted packages, which then get distributed to unsuspecting users.
Dependency Confusion: This technique involves uploading packages with names identical to internal, private dependencies used by companies. When developers inadvertently pull from the public repository instead of their internal one, they introduce malicious code into their projects. This method exploits the default behaviour of package managers prioritising public over private packages.
Malicious Code Injection: Attackers often inject harmful scripts directly into a package’s source code. This can be done by compromising a developer’s environment or using compromised libraries as dependencies, allowing attackers to spread the malicious payload to all users of that package.
These methods are increasingly sophisticated, leveraging the natural behaviours of developers and package management systems to spread malicious code, steal sensitive information, or compromise entire systems.
Timeline of Incidents: Malicious Packages in the Spotlight
A series of high-profile incidents have demonstrated the vulnerabilities inherent in unchecked package installations:
June 2022: Malicious Python packages such as loglib-modules, pyg-modules, pygrata, pygrata-utils, and hkg-sol-utils were caught exfiltrating AWS credentials and sensitive developer information to unsecured endpoints. These packages were disguised to look like legitimate tools and fooled many unsuspecting developers. (BleepingComputer)
December 2022: A malicious package masquerading as a SentinelOne SDK was uploaded to PyPI, with malware designed to exfiltrate sensitive data from infected systems. (The Register)
January 2023: The popular ctx package was compromised to steal environment variables, including AWS keys, and send them to a remote server. This instance affected many developers and highlighted the scale of potential data leakage through dependencies. (BleepingComputer)
September 2023: An extended campaign involving malicious npm and PyPI packages targeted developers to steal SSH keys, AWS credentials, and other sensitive information, affecting numerous projects globally. (BleepingComputer)
October 2023: The recent incident involving the fabrice package is a stark reminder of how easy it is for attackers to deceive developers. The fabrice package, designed to mimic the legitimate fabric library, employed a typosquatting strategy, exploiting typographical errors to infiltrate systems. Since its release, the package was downloaded over 37,000 times and covertly collected AWS credentials using the boto3 library, transmitting the stolen data to a remote server via VPN, thereby obscuring the true origin of the attack. The package contained different payloads for Linux and Windows systems, utilising scheduled tasks and hidden directories to establish persistence. (Developer-Tech)
The Impact: Scope of Compromise
The estimated number of affected companies and products is difficult to pin down precisely due to the widespread usage of open-source packages in both small-scale and enterprise-level applications. Given that some of these malicious packages garnered tens of thousands of downloads, the potential damage stretches across countless software projects. With popular packages like ctx and others reaching a substantial audience, the economic and reputational impact could be significant, potentially costing affected businesses millions in breach recovery and remediation costs.
Real-world Impact: Consequences of Malicious Packages
The real-world impact of malicious packages is profound, with consequences ranging from data breaches to financial loss and severe reputational damage. The following are some of the key impacts:
British Airways and Ticketmaster Data Breach: In 2018, the Magecart group exploited vulnerabilities in third-party scripts used by British Airways and Ticketmaster. The attackers injected malicious code to skim payment details of customers, leading to significant data breaches and financial loss. British Airways was fined £20 million for the breach, which affected over 400,000 customers. (BBC)
Codecov Bash Uploader Incident: In April 2021, Codecov, a popular code coverage tool, was compromised. Attackers modified the Bash Uploader script, which is used to send coverage reports, to collect sensitive information from Codecov’s users, including credentials, tokens, and keys. This supply chain attack impacted hundreds of customers, including notable companies like HashiCorp. (GitGuardian)
Event-Stream NPM Package Attack: In 2018, a popular JavaScript library event-stream was hijacked by a malicious actor who added code to steal cryptocurrency from applications using the library. The compromised version was downloaded millions of times before the attack was detected, affecting numerous developers and projects globally. (Synk)
These incidents highlight the potential repercussions of malicious packages, including severe financial penalties, reputational damage, and the theft of sensitive customer information.
Fabrice: A Case Study in Typosquatting
The recent incident involving the fabrice package is a stark reminder of how easy it is for attackers to deceive developers. The fabrice package, designed to mimic the legitimate fabric library, employed a typosquatting strategy, exploiting typographical errors to infiltrate systems. Since its release, the package was downloaded over 37,000 times and covertly collected AWS credentials using the boto3 library, transmitting the stolen data to a remote server via VPN, thereby obscuring the true origin of the attack. The package contained different payloads for Linux and Windows systems, utilising scheduled tasks and hidden directories to establish persistence. (Developer-Tech)
Lessons Learned: Importance of Proactive Security Measures
The cases highlighted in this article offer important lessons for developers and organisations:
Dependency Verification is Crucial: Typosquatting and dependency confusion can be avoided by carefully verifying package authenticity. Implementing strict naming conventions and utilising internal package repositories can help prevent these attacks.
Security Throughout the SDLC: Integrating security checks into every phase of the SDLC, including automated code reviews and security testing of modules, is essential. This ensures that vulnerabilities are identified early and mitigated before reaching production.
Use of Vulnerability Scanning Tools: Tools like Snyk and OWASP Dependency-Check are invaluable in proactively identifying vulnerabilities. Organisations should make these tools a mandatory part of the development process to mitigate risks from third-party dependencies.
Security Training and Awareness: Developers must be educated about the risks associated with third-party packages and taught how to identify potentially malicious code. Regular training can significantly reduce the likelihood of falling victim to these attacks.
By recognising these lessons, developers and organisations can better safeguard their software supply chains and mitigate the risks associated with third-party dependencies.
Prevention Strategies: Staying Safe from Malicious Packages
To mitigate the risks associated with malicious packages, developers and startups must adopt a multi-layered defence approach:
Verify Package Authenticity: Always verify package names, descriptions, and maintainers. Opt for well-reviewed and frequently updated packages over relatively unknown ones.
Review Source Code: Whenever possible, review the source code of the package, especially for dependencies with recent uploads or unknown maintainers.
Use Package Scanners: Employ tools like Sonatype Nexus, npm audit, or PyUp to identify vulnerabilities and malicious code within packages.
Leverage Lockfiles: Tools like package-lock.json (npm) or Pipfile.lock (pip) can help prevent unintended updates by locking dependencies to a specific version.
Implement Least Privilege: Limit the permissions assigned to development environments to reduce the impact of compromised keys or credentials.
Regular Audits: Conduct regular security audits of dependencies as part of the CI/CD pipeline to minimise risk.
Software Security: Embedding Security in the Development Lifecycle
To mitigate the risks associated with malicious packages and other vulnerabilities, it is essential to integrate security into every phase of the Software Development Lifecycle (SDLC). This practice, known as the Secure Software Development Lifecycle (SSDLC), emphasises incorporating security best practices throughout the development process.
Key Components of SSDLC
Automated Code Reviews: Leveraging tools that automatically scan code for vulnerabilities and flag potential issues early in the development cycle can significantly reduce the risk of security flaws making it into production. Tools like SonarQube, Checkmarx, and Veracode help in ensuring that security is built into the code from the beginning.
Security Testing of Modules: Security testing should be conducted on third-party modules before integrating them into the project. Tools like Snyk and OWASP Dependency-Check can identify vulnerabilities in dependencies and provide remediation advice.
Deep Dive into Technical Details
Malicious Package Techniques: As discussed earlier, typosquatting is just one of the many attack techniques. Supply chain attacks, dependency confusion, and malicious code injection are also common methods attackers use to compromise software projects. It is essential to understand these techniques and incorporate checks that can prevent such attacks during the development process.
Vulnerability Analysis Tools:
Snyk: Snyk helps developers identify vulnerabilities in open-source libraries and container images. It scans the project dependencies and cross-references them with a constantly updated vulnerability database. Once vulnerabilities are identified, Snyk provides detailed remediation advice, including fixing the version or applying patches.
OWASP Dependency-Check: OWASP Dependency-Check is an open-source tool that scans project dependencies for known vulnerabilities. It works by identifying the libraries used in the project, then checking them against the National Vulnerability Database (NVD) to highlight potential risks. The tool also provides reports and actionable insights to help developers remediate the issues.
Sonatype Nexus: Sonatype Nexus offers a repository management system that integrates directly with CI/CD pipelines to scan for vulnerabilities. It uses machine learning and other advanced techniques to continuously monitor and evaluate open-source libraries, providing alerts and remediation options.
Best Practices for Secure Dependency Management
Dependency Pinning: Pinning dependencies to specific versions helps in preventing unexpected updates that may contain vulnerabilities. By using tools like package-lock.json (npm) or Pipfile.lock (pip), developers can ensure that they are not inadvertently upgrading to a compromised version of a dependency.
Use of Private Registries: Hosting private package registries allows organisations to maintain tighter control over the dependencies used in their projects. By using tools like Nexus Repository or Artifactory, companies can create a trusted repository of dependencies and mitigate risks associated with public registries.
Robust Security Policies: Organisations should implement strict policies around the use of open-source components. This includes performing security audits, using automated tools to scan for vulnerabilities, and enforcing review processes for any new dependencies being added to the codebase.
By integrating these practices into the development process, organisations can build more resilient software, reduce vulnerabilities, and prevent incidents involving malicious dependencies.
Conclusion
As the developer community continues to embrace rapid innovation, understanding the security risks inherent in third-party dependencies is crucial. Adopting preventive measures and enforcing better dependency management practices are vital to mitigate the risks of malicious packages compromising projects, data, and systems. By recognising these threats, developers and startups can secure their software supply chains and build more resilient products.
Five Eyes intelligence chiefs warn of ‘sharp rise’ in commercial espionage
The Five Eyes nations—Australia, Canada, New Zealand, the UK, and the US—have launched a joint initiative, Secure Innovation, to encourage tech startups to adopt robust security practices. This collaborative effort aims to address the increasing cyber threats faced by emerging technology companies, particularly from sophisticated nation-state actors.
The Growing Threat Landscape
The rapid pace of technological innovation has made startups a prime target for cyberattacks. These attacks can range from intellectual property theft and data breaches to disruption of critical services. A recent report by the Five Eyes alliance highlights that emerging tech ecosystems are facing unprecedented threats. To mitigate these risks, the Five Eyes have outlined five key principles for startups to follow, as detailed in guidance from the National Cyber Security Centre (NCSC):
Know the Threats: Startups must develop a strong understanding of the threat landscape, including potential vulnerabilities and emerging threats. This involves staying informed about the latest cyber threats, conducting regular risk assessments, and implementing effective threat intelligence practices.
Secure the Business Environment: Establishing a strong security culture within the organization is essential. This includes appointing a dedicated security leader, implementing robust access controls, and conducting regular security awareness training for employees. Additionally, startups should prioritize incident response planning and testing to minimize the impact of potential cyberattacks.
Secure Products by Design: Security should be integrated into the development process from the outset. This involves following secure coding practices, conducting regular security testing, and using secure software development frameworks. By prioritizing security from the beginning, startups can reduce the risk of vulnerabilities and data breaches.
Secure Partnerships: When collaborating with third-party vendors and partners, startups must conduct thorough due diligence to assess their security practices. Sharing sensitive information with untrusted partners can expose the startup to significant risks, making it crucial to ensure all partners adhere to robust security standards.
Secure Growth: As startups scale, they must continue to prioritize security. This involves expanding security teams, implementing advanced security technologies, and maintaining a strong security culture. Startups should also consider conducting regular security audits and penetration testing to identify and address potential vulnerabilities.
Why Is Secure by Design So Difficult for Startups?
While the concept of “Secure by Design” is critical, many startups find it challenging to implement due to several reasons:
Limited Resources: Startups often operate on tight budgets, focusing on minimum viable products (MVPs) to prove market fit. Allocating funds to security can feel like a competing priority, especially when the immediate goal is rapid growth.
Time Pressure: The urgency to get products to market quickly means that startups may overlook secure development practices, viewing them as “nice-to-haves” rather than essential components. This rush often leads to security gaps that may only become apparent later.
Talent Shortage: Finding experienced security professionals is difficult, especially for startups with limited financial leverage. Skilled engineers who can integrate security into the development lifecycle are often more interested in established firms that can offer competitive salaries.
Perceived Incompatibility with Innovation: Security measures are sometimes seen as inhibitors to creativity and innovation. Secure coding practices, frequent testing, and code reviews are viewed as processes that slow down development, making startups hesitant to incorporate them during their early stages.
Complexity of Security Requirements: Startups often struggle to understand and implement comprehensive security measures without prior experience or guidance. Security requirements can be perceived as overwhelming, especially for small teams already juggling development, marketing, and scaling responsibilities.
This perceived incompatibility of security with growth, coupled with resource and talent constraints, results in many startups postponing a “secure by design” approach, potentially exposing them to higher risks down the line.
How Startups Can Achieve Secure by Design Architectures
Despite these challenges, achieving a Secure by Design architecture is both feasible and advantageous for startups. Here are key strategies to help build secure foundations:
Hiring and Building a Security-Conscious Team:
Early Inclusion of Security Expertise: Hiring a security professional or appointing a security-focused technical co-founder can lay the groundwork for embedding security into the company’s DNA.
Upskilling Existing Teams: Startups may not be able to hire dedicated security engineers immediately, but they can train existing developers. Investing in security certifications like CISSP, CEH, or courses on secure coding will improve the team’s overall competency.
Integrating Security into Design and Development:
Threat Modeling and Risk Assessment: Incorporate threat modeling sessions early in product development to identify potential risks. By understanding threats during the design phase, startups can adapt their architectures to minimize vulnerabilities.
Secure Development Lifecycle: Implement a secure software development lifecycle (SDLC) with consistent code reviews and static analysis tools to catch vulnerabilities during development. Automating security checks using tools like Snyk or OWASP ZAP can help catch issues without slowing development significantly.
Focusing on Scalable Security Frameworks:
Microservices Architecture: Startups can consider using a microservices-based architecture. This allows them to isolate services, meaning that a compromise in one area of the product doesn’t necessarily lead to full-system exposure.
Zero Trust Principles: Startups should build products with Zero Trust principles, ensuring that every interaction—whether internal or external—is authenticated and validated. Even at an early stage, implementing identity management protocols and ensuring encrypted data flow will create a secure-by-default product.
Investing in Security Tools and Automation:
Continuous Integration and Delivery (CI/CD) Pipeline Security: Integrating security checks into CI/CD processes ensures that every code commit is tested for vulnerabilities. Open-source tools like Jenkins can be configured with security plugins, making security an automated and natural part of the development workflow.
Use of DevSecOps: Adopting a DevSecOps culture can streamline security implementation. This ensures security practices evolve alongside development processes, rather than being bolted on afterward. DevSecOps also fosters collaboration between development, operations, and security teams.
Leveraging External Support and Partnerships:
Partnering with Managed Security Providers: Startups lacking the capacity for in-house security can benefit from partnerships with managed security providers. This allows them to outsource their security needs to experts while they focus on core product development.
Utilize Government and Industry Resources: Programs like Secure Innovation and government grants provide startups with the frameworks and sometimes the financial resources needed to adopt security measures without excessive cost burdens.
Conclusion
The Five Eyes’ Secure Innovation initiative is a significant step forward in protecting the interests of tech startups. By embracing these principles and striving for a secure-by-design architecture, startups can not only mitigate cyber risks but also gain a competitive advantage in the marketplace. The key to startup success is integrating security into the heart of product development from the outset, recognizing it as a value-add rather than an impediment.
With the right strategies—whether through hiring, training, automation, or partnerships—startups can create secure and scalable products, build customer trust, and position themselves for long-term success in a competitive digital landscape.
The rapid growth of the fintech industry has brought with it immense opportunities for innovation, but also significant risks in terms of regulatory compliance and real security. Starling Bank, one of the UK’s prominent digital banks, recently faced a £29 million fine in October 2024 from the Financial Conduct Authority (FCA) for serious lapses in its anti-money laundering (AML) and sanctions screening processes. This fine is part of a broader trend of fintechs grappling with regulatory pressures as they scale quickly. Failures in compliance not only lead to financial penalties but also damage to reputation and customer trust. In most cases, it also leads to revenue loss and or a significant business impact.
In this article, we explore what went wrong at Starling Bank, examine similar compliance issues faced by other major financial institutions like Paytm, Monzo, HDFC, Axis Bank & RobinHood and propose practical solutions to help fintech companies strengthen their compliance frameworks. This also helps to establish the point that these cybersecurity and compliance control lapses are not restricted to geography and are prevalent in the US, UK, India and many other regions. Additionally, we dive into how vulnerabilities manifest in growing fintechs and the increasing importance of adopting zero-trust architectures and AI-powered AML systems to safeguard against financial crime.
Background
In October 2024, Starling Bank was fined £29 million by the Financial Conduct Authority (FCA) for significant lapses in its anti-money laundering (AML) controls and sanctions screening. The penalty highlights the increasing pressure on fintech firms to build robust compliance frameworks that evolve with their rapid growth. Starling’s case, although high-profile, is just one in a series of incidents where compliance failures have attracted regulatory action. This article will explore what went wrong at Starling, examine similar compliance failures across the global fintech landscape, and provide recommendations on how fintechs can enhance their security and compliance controls.
What Went Wrong and How the Vulnerability Manifested
The FCA investigation into Starling Bank uncovered two major compliance gaps between 2019 and 2023, which exposed the bank to financial crime risks:
Failure to Onboard and Monitor High-Risk Clients: Starling’s systems for onboarding new clients, particularly high-risk individuals, were not sufficiently rigorous. The bank’s AML mechanisms did not scale in line with the rapid increase in customers, leaving gaps where sanctioned or suspicious individuals could go undetected. Despite the bank’s growth, the compliance framework remained stagnant, resulting in breaches of Principle 3 of the FCA’s regulations for businesses(Crowdfund Insider)(FinTech Futures).
Inadequate Sanctions Screening: Starling’s sanctions screening systems failed to adequately identify transactions from sanctioned entities, a critical vulnerability that persisted for several years. With insufficient real-time monitoring capabilities, the bank did not screen many transactions against the latest sanctions lists, leaving it exposed to potentially illegal activity(FinTech Futures). This is especially concerning in a financial ecosystem where transactions are frequent and high in volume, requiring robust systems to ensure compliance at all times.
These vulnerabilities manifested in Starling’s inability to effectively prevent financial crime, culminating in the FCA’s action in October 2024.
Learning from Similar Failures in the Fintech Industry
Paytm’s Cybersecurity Breach Reporting Delays (October 2024): In India, Paytm was fined for failing to report cybersecurity breaches in a timely manner to the Reserve Bank of India (RBI). This non-compliance exposed vulnerabilities in Paytm’s internal governance structures, particularly in their failure to adapt to rapid business expansion and manage cybersecurity threats(Reuters).
HDFC and Axis Banks’ Regulatory Breaches (September 2024): The RBI fined HDFC Bank and Axis Bank in September 2024 for failing to comply with regulatory guidelines, emphasizing how traditional banks, like fintechs, can face compliance challenges as they scale. The fines were related to lapses in governance and risk management frameworks(Economic Times).
Monzo’s PIN Security Breach (2023): In 2023, UK-based challenger bank Monzo experienced a breach where customer PINs were accidentally exposed due to an internal vulnerability. Although Monzo responded swiftly to mitigate the damage, the breach illustrated the need for fintechs to prioritize backend security and implement zero-trust security architectures that can prevent such incidents(Wired).
LockBit Ransomware Attack (2024): The LockBit ransomware attack on a major financial institution in 2024 demonstrated the growing cyber threats that fintechs face. This attack exposed the weaknesses in traditional cybersecurity models, underscoring the necessity of adopting zero-trust architectures for fintech companies to protect sensitive data and transactions from malicious actors(NCSC).
Robinhood’s Regulatory Scrutiny (2021-2022): In June 2021, Robinhood was fined $70 million by FINRA for misleading customers, causing harm through platform outages, and failing to manage operational risks during the GameStop trading frenzy. Robinhood’s systems were not equipped to handle the surge in trading volumes, leading to severe service disruptions and a failure to communicate risks to customers.
Robinhood Crypto’s Cybersecurity Failure (2022): In August 2003, Robinhood was fined $30 million by the New York State Department of Financial Services (NYDFS) for failing to comply with anti-money laundering (AML) regulations and cybersecurity obligations related to its cryptocurrency trading operations. The fine was issued due to inadequate staffing, compliance failures, and improper handling of regulatory oversight within its crypto business. Much like Starling, Robinhood’s compliance systems lagged behind its rapid business growth (Compliance Week)
Key Statistics in the Fintech Compliance Landscape
65% of organizations in the financial sector had more than 500 sensitive files open to every employee in 2023, making them highly vulnerable to insider threats.
The average cost of a data breach in financial services was $5.85 million in 2023, a significant figure that shows the financial impact of security vulnerabilities.
27% of ransomware attacks targeted financial institutions in 2022, with the number of attacks continuing to rise in 2024, further highlighting the importance of robust cybersecurity frameworks.
81% of financial institutions reported a rise in phishing and social engineering attacks in 2023, emphasizing the need for employee awareness and strong access controls.
By 2025, the global cost of cybercrime is projected to exceed $10.5 trillion annually, a figure that will disproportionately impact fintech companies that fail to implement strong security protocols.
Recommendations for Strengthening Compliance and Security Controls
To prevent future compliance breaches, fintech firms should prioritise scalable, technology-enabled compliance solutions. This requires empowering Compliance Heads, Information Security Teams, CISOs, and CTOs with the necessary budgets and authority to develop secure-by-design environments, teams, infrastructure, and products.
AI-Powered AML Systems: Leverage artificial intelligence (AI) and machine learning to enhance AML systems. These technologies can dynamically adjust to new threats and process high volumes of transactions to detect suspicious patterns in real time. This approach will ensure that fintechs can comply with evolving regulatory requirements while scaling.
Zero-Trust Security Models: As the LockBit ransomware attack showed in 2024, fintechs must adopt zero-trust architectures, where every user and device interacting with the system is continuously authenticated and verified. This reduces the risk of internal breaches and external attacks(Cloudflare).
Real-Time Auditing and Blockchain for Transparency: Real-time auditing, combined with blockchain technology, provides an immutable and transparent record of all financial transactions. This would help fintechs like Starling avoid the pitfalls of delayed sanctions screening, as blockchain ensures immediate and traceable compliance checks(EY).
Multi-Layered Sanctions Screening: Implement a multi-layered sanctions screening system that combines automated transaction monitoring with manual oversight for high-risk accounts. This dual approach ensures that fintechs can monitor suspicious activities while maintaining compliance with global regulatory frameworks(Exiger)(FinTech Futures).
Continuous Employee Training and Governance: Strong governance structures and regular compliance training for employees will ensure that fintechs remain agile and responsive to regulatory changes. This prepares the organization to adapt as new regulations emerge and customer bases expand.
Conclusion
The £29 million fine imposed on Starling Bank in October 2024 serves as a crucial reminder for fintech companies to integrate robust compliance and security frameworks as they grow. In an industry where regulatory scrutiny is intensifying, the fintech players that prioritize compliance will not only avoid costly fines but also position themselves as trusted institutions in the financial services world.
Suryono, R.R.; Budi, I.; Purwandari, B. Challenges and Trends of Financial Technology (Fintech): A Systematic Literature Review.Information2020, 11, 590. https://doi.org/10.3390/info11120590
AlBenJasim, S., Dargahi, T., Takruri, H., & Al-Zaidi, R. (2023). FinTech Cybersecurity Challenges and Regulations: Bahrain Case Study.Journal of Computer Information Systems, 1–17. https://doi.org/10.1080/08874417.2023.2251455
By learning from past failures and adopting stronger controls, fintechs can mitigate the risks of financial crime, protect customer data, and ensure compliance in an increasingly regulated industry.
