Lack of access to capital hindering Australia’s potential to be a leader in Regtech
Limited access to funding and long sales cycles are hampering Australia’s regtech industry, preventing the sector from realizing its full potential, according to industry trade group the Regtech Association (RTA).
The RTA, which conducted qualitative research of 33 regtech companies between October and November 2019, found that the majority of the industry was self-funded (70%). Angels and high net worth individuals were the next most active capital investors (27%), followed by venture capital firms (VCs) (15%), and corporate venture capital firms (CVCs) (12%).
In a report released in December 2019, the organization deplores VCs and CVCs’ minor participation in the Australian regtech sector, noting that access to investment capital was “hyper-critical” to ensure these companies’ continued growth.
Access to funding is even more critical for the industry when considering the long sales cycles regtech companies must deal with. According to the report, it takes on average approximately 14 months for technology deployment to financial services and procurement programs. In some cases, sales cycles can take up to two years.
The sales cycle is linked to the difficulty in raising capital for businesses with a long sales cycle and protracted periods of resource-draining intensity but low cash flow, the report says.
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