May, 2025 - Nocturnalknight's Lair

Why VCs in Europe Are Looking at Compliance Startups Now

By Ramkumar Sundarakalatharan | May 17, 2025 | Comments 0 Comment

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.	$31.8M total funding (2024)6 8 9
	Trustero	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.
PCI DSS	Payment card security standards	Drives specialised PCI DSS automation solutions (e.g., Mindsec, Sprinto).

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:

Real-Time Monitoring: AI-powered compliance automation enables continuous, real-time monitoring, instantly flagging anomalies and enabling rapid remediation.
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.

8. References & Further Reading

AI in Security & Compliance: Why SaaS Leaders Must Act On Now

By Ramkumar Sundarakalatharan | May 8, 2025 | Comments 0 Comment

We built and launched a PCI-DSS aligned, co-branded credit card platform in under 100 days. Product velocity wasn’t our problem — compliance was.

What slowed us wasn’t the tech stack. It was the context switch. Engineers losing hours stitching Jira tickets to Confluence tables to AWS configs. Screenshots instead of code. Slack threads instead of system logs. We weren’t building product anymore — we were building decks for someone else’s checklist.

Reading Jason Lemkin’s “AI Slow Roll” on SaaStr stirred something. If SaaS teams are already behind on using AI to ship products, they’re even further behind on using AI to prove trust — and that’s what compliance is. This is my wake-up call, and if you’re a CTO, Founder, or Engineering Leader, maybe it should be yours too.

The Real Cost of ‘Not Now’

Most SaaS teams postpone compliance automation until a large enterprise deal looms. That’s when panic sets in. Security questionnaires get passed around like hot potatoes. Engineers are pulled from sprints to write security policies or dig up AWS settings. Roadmaps stall. Your best developers become part-time compliance analysts.

All because of a lie we tell ourselves:
“We’ll sort compliance when we need it.”

By the time “need” shows up — in an RFP, a procurement form, or a prospect’s legal review — the damage is already done. You’ve lost the narrative. You’ve lost time. You might lose the deal.

Let’s be clear: you’re not saving time by waiting. You’re borrowing it from your product team — and with interest.

AI-Driven Compliance Is Real, and It’s Working

Today’s AI-powered compliance platforms aren’t just glorified document vaults. They actively integrate with your stack:

Automatically map controls across SOC 2, ISO 27001, GDPR, and more
Ingest real-time configuration data from AWS, GCP, Azure, GitHub, and Okta
Auto-generate audit evidence with metadata and logs
Detect misconfigurations — and in some cases, trigger remediation PRs
Maintain a living, customer-facing Trust Center

One of our clients — a mid-stage SaaS company — reduced their audit prep from 11 weeks to 7 days. Why? They stopped relying on humans to track evidence and let their systems do the talking.

Had we done the same during our platform build, we’d have saved at least 40+ engineering hours — nearly a sprint. That’s not a hypothetical. That’s someone’s roadmap feature sacrificed to the compliance gods.

Engineering Isn’t the Problem. Bandwidth Is.

Your engineers aren’t opposed to security. They’re opposed to busywork.

They’d rather fix a real vulnerability than be asked to explain encryption-at-rest to an auditor using a screenshot from the AWS console. They’d rather write actual remediation code than generate PDF exports of Jira tickets and Git logs.

Compliance automation doesn’t replace your engineers — it amplifies them. With AI in the loop:

Infrastructure changes are logged and tagged for audit readiness
GitHub, Jira, Slack, and Confluence work as control evidence pipelines
Risk scoring adapts in real-time as your stack evolves

This isn’t a future trend. It’s happening now. And the companies already doing it are closing deals faster and moving on to build what’s next.

The Danger of Waiting — From an Implementer’s View

You don’t feel it yet — until your first enterprise prospect hits you with a security questionnaire. Or worse, they ghost you after asking, “Are you ISO certified?”

Without automation, here’s what the next few weeks look like:

You scrape offboarding logs from your HR system manually
You screenshot S3 config settings and paste them into a doc
You beg engineers to stop building features and start building compliance artefacts

You try to answer 190 questions that span encryption, vendor risk, data retention, MFA, monitoring, DR, and business continuity — and you do it reactively.

This isn’t security. This is compliance theatre.

Real security is baked into pipelines, not stitched onto decks. Real compliance is invisible until it’s needed. That’s the power of automation.

You Can’t Build Trust Later

If there’s one thing we’ve learned shipping compliance-ready infrastructure at startup speed, it’s this:

Your customers don’t care when you became compliant.
They care that you already were.

You wouldn’t dream of releasing code without CI/CD. So why are you still treating trust and compliance like an afterthought?

AI is not a luxury here. It’s a survival tool. The sooner you invest, the more it compounds:

Fewer security gaps
Faster audits
Cleaner infra
Shorter sales cycles
Happier engineers

Don’t build for the auditor. Build for the outcome — trust at scale.

What to Do Next :

Audit your current posture: Ask your team how much of your compliance evidence is manual. If it’s more than 20%, you’re burning bandwidth.
Pick your first integration: Start with GitHub or AWS. Plug in, let the system scan, and see what AI-powered control mapping looks like.
Bring GRC and engineering into the same room: They’re solving the same problem — just speaking different languages. AI becomes the translator.
Plan to show, not tell: Start preparing for a Trust Center page that actually connects to live control status. Don’t just tell customers you’re secure — show them.

Final Words

Waiting won’t make compliance easier. It’ll just make it costlier — in time, trust, and engineering sanity.

I’ve been on the implementation side. I’ve watched sprints evaporate into compliance debt. I’ve shipped a product at breakneck speed, only to get slowed down by a lack of visibility and control mapping. This is fixable. But only if you move now.

If Jason Lemkin’s AI Slow Roll was a warning for product velocity, then this is your warning for trust velocity.

AI in compliance isn’t a silver bullet. But it’s the only real chance you have to stay fast, stay secure, and stay in the game.