RegTech investments in Q1 more than doubled YoY, as interest in compliance software picks up

RegTech companies raised a combined total of $238m across across 34 deals, a record number of transactions, in the opening quarter of 2017.

With regulatory pressures forcing companies to seek more efficient ways to maintain compliance with existing rules and keep up with new ones, the demand for RegTech software continues to grow and investors are willing to put more capital into the sector. Q1 2017 saw total funding to the sector grow 102% Q1-on-Q1. However, the funding total remained below the high reached in Q3 2016 when $314m was committed to RegTech companies. The number of deals also increased in the opening quarter of 2017 with 10 more transactions closed compared to the first quarter of last year. The largest deal went to Netwrix, an Irvine-based compliance startup, which raised $51m Series A round from Updata Partners in February.

Investment in Compliance-focused companies made a comeback in Q1 2017

  • In 2016, for the first time anti-fraud companies received larger proportion of RegTech investment than compliance-focused firms.
  • The share of funding going to the compliance subsector has been decreasing since 2014. However, compliance-focused investments staged a comeback in the first quarter of the year raking in 59% of RegTech investments.
  • The share of investments to the reporting subsector also saw an uptick in Q1 with 12% after they only comprised 4% of RegTech funding last year.

London consistently closes more RegTech deals than any other city

  • London continued to close the highest number of RegTech transactions worldwide in Q1 2017, after FinTech Global previously reported that the city closed the most deals in the period 2012-2016.
  • The largest of the 9 deals closed in London in the first quarter of the year went to Dealflo, a financial agreement automation service, which raised $12.5m Series B round in February.
  • A new entry in the top cities ranking is McClean, Virginia. The city is home to anti-fraud companies ID-me and Verato that raised $19m and $12.5m, respectively.

Q1 showed positive signs for RegTech investments in 2017. The scale of opportunity for the RegTech sector is estimated to be very big with spiralling costs and complexity for financial institutions. Hence, investors keep putting money in the industry as companies that capture the space can generate excellent returns.

The data for this research was taken from the FinTech Global database. More in-depth data and analytics on investments and companies in RegTech as well as across all FinTech sectors and regions around the world are available to subscribers of FinTech Global. ©2017 FinTech Global

 

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