RegTech companies have raised almost 2.5-times as much capital this year than they did in 2017.
More than $6.1bn has been raised by RegTech companies across 529 deals since 2014. The RegTech sector expanded steadily between 2014 and 2017, with funding increasing at a CAGR of 12.4% and annual deal activity staying above 100 transactions during the period.
2018 has been a standout year for RegTech investment, with funding reaching record levels. 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.
The RegTech landscape is maturing, as participants adjust to the implementation of new regulations, such as GDPR and MiFID II. The spike in funding this year was driven by an increase in later-stage transactions. Sift Science, a San Francisco-based anti-fraud solution provider, raised a $53m Series D round in one of the largest RegTech deals of the year. This investment was led by Stripes Group and the funds will be used to distribute the company’s fraud prevention platform globally.
RegTech companies have raised more than $6bn globally since 2014, with the average deal size in the industry sitting at just over $11.6m. North American companies have received the majority of global RegTech funding since 2014, claiming two-thirds of both total investment and total deal activity.
Signifyd, a San Francisco-based fraud detection solution provider, has been one of the most active RegTech companies, raising $185m across five deals since 2014. The company raised $100m in Series D funding at a $400m valuation, led by PremjiInvest in Q2 2018. This investment was one of the largest RegTech deals last quarter and came on the back of company revenue reaching $75m in 2017, from a customer base of 10,000.
European-based companies have been involved in over a quarter of all RegTech deals globally since 2014, but have claimed just $565m (9.2%) of the total capital invested in the sector, with the average deal size in the region at $4.1m. The RegTech landscape in Europe has had a relatively high proportion of early-stage transactions with almost 40% of deals at grant, angel and seed stage, compared to just 24% of deals in North America.
Almost a quarter of total RegTech investment has flowed to Asia since 2014, despite RegTech companies in the region having been involved in only 6% of transactions globally. However, if Beijing-based facial recognition solution provider SenseTime, which raised $1.2bn in Q2 2018 is excluded, the region’s share of total RegTech investment drops from 22.9% to just 3.8%.