The role of a data protection officer (DPO) is often misunderstood, under-prioritized, or overpaid for. Here’s how to get it right as a scaling startup. This guide helps founders and startup teams figure out if they need a DPO, when to bring one on board, how to choose between hiring internally or outsourcing, and what to expect in terms of costs. Along the way, we’ll show you how to avoid common missteps and how to scale your privacy compliance with ease.
Do you actually need a DPO? (And, if yes, when should you hire one?)
Whether or not your business needs a data protection officer depends on the jurisdiction you’re operating in and the nature of your data processing activities. Under the EU’s General Data Protection Regulation (GDPR), a DPO is mandatory if your company handles large-scale processing of sensitive personal data or systematically monitors individuals. The UK’s data protection legislation includes the UK’s own GDPR, which mirrors the EU version in this regard and applies similar rules.
Startups in fintech, healthtech, AI, and ecommerce often meet the threshold for needing a DPO earlier than they expect, especially if their products involve user profiling, biometric data, or international data transfers. But timing is everything. Hiring a DPO too soon can waste resources; hiring too late can leave you exposed to compliance risks and fines.
A good rule of thumb is that if you’re planning a major product launch, entering the EU or UK market, or preparing for a funding round where compliance will be scrutinized, it’s time to assess your DPO needs.
What makes a great DPO in a startup context?
A great data protection officer in a startup environment is more than a GDPR checkbox. They must be flexible, business-savvy, and deeply familiar with the specific regulatory landscape that impacts your industry. They need to balance legal compliance with startup realities—moving quickly, being resource-conscious, and working cross-functionally with tech and product teams.
3 key traits of a good DPO for startups
Translate privacy requirements into business action
A skilled data protection officer doesn’t just recite legal jargon; instead, they turn complex privacy regulations into actionable strategies that align with your business goals. This includes implementing GDPR-compliant processes and creating privacy policies to help ensure that compliance becomes a seamless part of your operations, not a roadblock.
Spot risks early and suggest scalable solutions
Startups thrive on rapid growth, but scaling quickly can expose vulnerabilities in data handling. A proactive DPO identifies potential risks before they become costly issues. By designing scalable privacy frameworks, they future-proof your business, ensuring compliance doesn’t just keep pace with your expansion but is always a few steps ahead.
Collaborate with developers and product leads, not just legal teams
In a tech-driven startup, privacy isn’t just a legal concern—it’s embedded in product design and development. A top-notch DPO works closely with developers and product teams to integrate privacy by design principles. This collaboration ensures that privacy safeguards are built into your products from the ground up, fostering trust with users and regulators alike.
Internal, external, or virtual: What type of DPO is right for you?
One of the most important requisites for DPOs serving Web3, AI, fintech, and healthtech businesses is that DPOs need to stay on top of fast-changing regulation across multiple jurisdictions—something not all internal hires can offer. This is where virtual or external DPO services often prove more effective than traditional in-house hires. Before choosing which is right for your startup, let’s examine all the options.
There are three main ways startups can fulfill the DPO role: hiring in-house, outsourcing to an external provider, or using a virtual DPO (vDPO) service.
1. Internal DPO (hired in-house)
Pros: An internal DPO offers the advantage of being fully embedded within your organization. One of the key benefits is their ability to deeply understand your business processes, culture, and unique operational needs. They are readily available for day-to-day consultations, which means they can quickly address urgent compliance issues and provide immediate guidance to your teams. For startups with highly specific workflows or a need for constant privacy oversight, an internal DPO might seem like the most straightforward choice.
Cons: Recruiting and retaining a qualified candidate can be prohibitively expensive, as salaries and benefits for experienced professionals add up quickly. Additionally, internal hires may lack the specialized cross-border expertise required for startups operating in industries like Web3, AI, fintech, or healthtech, where regulations vary across jurisdictions. As your business scales, the compliance needs may outgrow what a single internal DPO can handle, making this option less efficient over time.
An external DPO (independent expert or service provider)
Pros: An external SPO is typically an independent expert or service provider hired to oversee a company’s compliance with data protection regulations. The key advantage of this option is the expertise and impartiality they bring. External DPOs often work across multiple industries, giving them broad knowledge and hands-on experience that can be tailored to your startup’s specific regulatory challenges. They also operate without internal conflicts of interest, ensuring unbiased compliance oversight. For startups, outsourcing to an external DPO can be more cost-efficient than maintaining a full-time internal hire, as it eliminates expenses like salaries and benefits while still providing access to specialized knowledge.
Cons: As external DPOs are not fully integrated into your day-to-day operations, they may take longer to familiarize themselves with your company’s processes and culture. Their availability can also be divided among multiple clients, which might impact responsiveness during critical moments. For startups requiring constant hands-on support or seamless integration into workflows, this option may not always be ideal unless specifically tailored for startup needs.
Virtual DPO service (remote, as-needed)
Pros: A virtual DPO offers a flexible and scalable solution for startups, operating remotely and often on a part-time or as-needed basis. The biggest advantage of virtual DPO services is their adaptability; they can scale with your business as it grows, ensuring you only pay for the level of support you require. Virtual DPOs provide access to on-demand privacy professionals who bring global compliance expertise, making them particularly effective for startups navigating complex regulations like EU GDPR and UK GDPR. They combine affordability with efficiency, helping startups optimize their legal spend without compromising on quality or expertise.
Cons: Virtual DPO services may lack the personal touch of an in-house DPO and may rely heavily on automated systems that can struggle with nuanced regulatory changes and cross-border legal demands. To get around these issues, a quick and effective onboarding process is needed to ensure the vDPO service gains a deep understanding of your company’s operations, culture, and compliance needs. Companies can also look for virtual DPOs that combine advanced technology with human expertise, ensuring they can handle nuanced regulatory changes and meet cross-border data protection demands effectively.
Book a free DPO readiness consultation to see if your business qualifies for our vDPO packages.
DPO hiring costs in 2025
Costs vary significantly depending on the type of DPO you choose and the complexity of your data processing activities. Here’s a comparison of what startups can expect to pay in 2025:
With ‘DPO as a service’ models gaining popularity, especially in the UK and EU, startups can now access expert data protection officer services on an outcome-based or subscription basis. This gives founders more control over their budget and ensures privacy support grows with their business.
How Legal Nodes delivers scalable, virtual DPO services
Technology startups can benefit from vDPO services that Legal Nodes provides using a virtual, cross-border legal support platform. This approach provides you with outsourced data protection officer services that are tailored to your growth stage and business model.
Join hundreds of Legal Nodes clients—including fintech and AI startups operating in Europe, the UK, and beyond—who rely on Legal Nodes for clear, actionable privacy guidance.
With Legal Nodes, you can:
- Assess if and when you need a DPO
- Choose the right level of support your company currently requires
- Get fast access to privacy specialists across multiple jurisdictions
- Have help understanding your short- and long-term task list for privacy compliance
What makes Legal Nodes different is our integrated approach harmonizing privacy requirements with tax, corporate, and product objectives. It’s not just about appointing a DPO: it’s about setting up cost-effective, scalable, long-term privacy infrastructure from the start.
What happens if you skip the DPO requirement?
Failing to appoint a DPO when legally required can expose your business to serious consequences. Regulators in the EU and UK are increasingly scrutinizing startups and scaleups that process personal data without proper oversight.
The risks include:
- Regulatory fines of up to €10 million or 2% of global turnover under the GDPR
- Business disruption from investigations or audits
- Loss of trust from users, partners, and investors
These aren’t just theoretical risks. Startups that delay compliance often find themselves scrambling to fix problems later, and usually at a much higher cost and with more reputational damage.
On that note, it’s also important to mention that DPOs do not serve the same role as UK or EU representatives. Learn more about the differences between the roles and when you may need to hire an EU or UK representative.
Red flags to look out for when choosing a DPO for your startup
When choosing a DPO for your startup, there are a few red flags to watch out for. A lack of transparency is a major warning sign—if a candidate or provider cannot clearly explain their approach to compliance or data protection practices, it may indicate gaps in their expertise or commitment. Similarly, limited experience with industry-specific or cross-border regulations can leave your startup exposed to compliance risks, especially if you operate in sectors like fintech, AI, or healthtech. Learn more about the qualifications that DPOs should hold in our Ultimate Guide to Hiring a DPO.
Finally, poor scalability is another concern; your DPO should be able to adapt to your growing needs as your business expands. By prioritizing candidates or providers who demonstrate clarity, expertise, and flexibility, you can avoid these pitfalls and ensure your startup’s compliance needs are met effectively.
Get started with a flexible vDPO solution from Legal Nodes
If your startup is processing personal data in the EU or UK, you likely need a DPO. Hiring one doesn’t have to be complicated or expensive. Legal Nodes offers virtual DPO services that help you scale your privacy compliance without scaling your legal costs.
Our online onboarding makes it easy to get started, and our outcome-based pricing model gives you the flexibility to spend legal credits only on the support you actually need. Whether you’re preparing for your next funding round, launching in a new market, or simply want to get your compliance right, trust Legal Nodes to help you do so compliantly.
Book a free DPO readiness consultation and see if your business qualifies for one of our flexible vDPO packages.
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