RegTech100 companies go on to raise $234.6m

A quarter of last year’s RegTech100 companies have gone on to raise nearly a quarter of a billion dollars since 1 November 2017.

A decade on from the global financial crisis, a barrage of new legislation is putting an increasing strain on financial institutions. With the regulatory pressures continuing to mount, the global RegTech sector is continuing to flourish.

More than $6.1bn has been raised by RegTech companies across 529 deals since 2014, according to data by RegTech Analyst. The data showed that more than $2.5bn has been raised in the first six months of the year already, which is equal to 87.2% of the total capital raised by RegTech companies in 2015, 2016 and 2017 combined.

On the back of a rise in interest, 100 companies were hand-picked by a panel of industry experts for the RegTech100. The 2018 list highlighted the world’s most innovative RegTech companies that every financial institution needs to know about as they consider and develop their mission critical RegTech strategies.

Following the release, the 2018 list received worldwide attention, with companies that won places on the list generating huge awareness among financial institutions. In November, Qumram, which captures digital interactions to ensure compliance, prevent fraud and enrich customer service, was purchased by Dynatrace. Just weeks later, cloud security business Skyhigh Networks was purchased by McAfee.

Since Q4 2017, more than $3.2bn has been invested in the global RegTech sector. Out of that total, more than $234.6m went to RegTech100 companies, with 25 out of the 100 going onto to raise funds following the award.

In November, Australian Securities and Frankfurt Stock Exchange listed iSignthis, placed up to AUD$6.5m to institutional and sophisticated investors. Just a few months later, the identity verification and payment services provider exceeded $100m in transaction value. iSignthis provides remote identity verification, payment authentication and payment processing to meet AML/CFT requirements.

In an interview with RegTech Analyst, CEO John Karantzis said: “Following a capital raising round last year, the company has successfully secured central banking facilities, and is progressing with its principal membership rollout of Tier 1 connections to the Swift, SEPA, Mastercard, Visa, JCB, and Amex networks.

“These payment methods will be tightly coupled to our Paydentity service, which allows real time identity verification and payments to be processed simultaneously, for any of the 4.2Bn financially included persons in the world.”

In February, Bermuda-based consumer consent and data rights company Trunomi closed a $3.6m round of funding, bringing its fundraising total to $14m. Founded in 2013, and led by CEO Stuart Lacey, Trunomi provides customer consent and data rights management technology which enables businesses to request, receive, capture and prove the legal basis for processing customers data.

Commenting on the investment round, Lacey said: “The timing was excellent for all investors as was completed just prior to the bombshell news from Facebook re Cambridge Analytica, and the expansion of GDPR in Europe and the equivalent laws beings passed in California, and most recently Brazil. These laws are evidence of a massive wave sweeping across the planet where Trust and Transparency in the usage of personal data have become mainstream concerns for all industries.”

Trunomi is using the additional proceeds to expand its offerings in response to growing demand under PSD2 and Open Banking, and to start exploring deployments in new markets (SE Asia and LatAm) and additional verticals.

“Being recognised by RegTech100 is instrumental as it helps companies around the world rapidly sort through all the noise and new suppliers to locate mature companies. For example, Trunomi, whose technologies are robust and in deployment with Fortune 500 companies – and whom bring real production level solutions that rapidly solve time-to-value, create efficiencies, result in real ROI and elegantly address regulatory requirements at the same time.”

Top investment rounds

The largest deal for a RegTech100 company came just months after the final list was revealed. MetricStream, a provider of governance, risk and compliance solutions, closed a $65m financing round, bringing its total funding to more than $195.7m. Investors in the round included from EDBI, Goldman Sachs, and Sageview Capital, among others. Led by CEO Mikael Hagstroem, the San Francisco-based RegTech aims to improve business performance by streamlining and strengthening an enterprise’s risk management, corporate governance, regulatory compliance, vendor governance, and quality management practices.

Just last month, ObserveIT, a threat management provider with more than 1,700 customers around the world, reeled in $33m. The investment came from Bain Capital Ventures, Spring Lake Equity Partners and NightDragon Security. Based in Boston, ObserveIT claims to be the only solution that empowers security teams to detect insider threats, streamline the investigation process, and prevent data exfiltration.

The third biggest investment in the 100 went to Digital Reasoning, which closed a $30m funding round in March. The round featured BNP Paribas Barclays, Square Capital, Goldman Sachs, Nasdaq, Lemhi Ventures, HCA, and the Partnership Fund for New York City.

Founded in 2000, Digital Reasoning is headquartered in Nashville, Tennessee and led by CEO Brett Jackson. Its platform, Synthesys, helps enterprises, financial services institutions, government agencies and healthcare organisations reveal concealed relationships, risks and opportunities. Using cognitive computing, the platform mitigates threats and risk, and safeguarding regulatory compliance across the financial services industry.

On the back of the RegTech100, BehavioSec went onto raise a $17.5m Series B investment from Trident Capital Cybersecurity, Cisco Investments, ABN AMRO, Octopus Ventures and Conor Venture Partners, bringing the company’s fundraising total to $25.7m. BehavioSec’s behavioural analytics platform leverages machine learning to prevent fraud or account takeover. With the Series B capital, the RegTech set its sights on expanding global operations and relocating its corporate headquarters to the United States.

Just last month, Barclays, JP Morgan and Next Group backed Cloud9 Technologies’ $14m Series B, with the proceeds earmarked to accelerate development and global roll-out of its SaaS-based voice communications platform. Established in 2014 by a group of serial entrepreneurs and pioneers in trader communications technology, Cloud9 provides a cloud-based replacement to traditional trading ‘turrets.’

The RegTech100 also featured email security startup Tessian (formerly CheckReciepent), which raised $13m in June, and expense report analysis startup AppZen, which raised $13m shortly after the RegTech100 was announced.

The other remaining RegTech100 companies to raise funding include Regit ($815,000), Signaturit ($1.4m), W2 Global Data ($1.7m), OneVisage ($402,000), idwall ($3m), Gecko Govenance ($1m), IdentityMind Global ($10m), CXi ($2.3m), ClauseMatch($5m), Ascent Technologies ($6m), and LogicGate ($7.5m).

Electronic Identification, Finomial, and Agreement Express also went on to raise undisclosed funding rounds on the back of the RegTech100.

Following the success of the 2018 RegTechs, nominations for the 2019 RegTech 100 list are now open to all RegTech, RiskTech and cybersecurity companies offering solutions for financial services firms.

Copyright © 2018 RegTech Analyst

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Copyright © 2018 RegTech Analyst


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