With Finland’s Innovation Fund SITRA: Why Tech Compliance Challenges are a Big Market Opportunity for VCs and Policymakers alike
In 2023, I worked with Finland's innovation fund Sitra, wearing my Harvard University and Hertie School hats and after conversations I had with top Brussels policymakers, on a bold call for Europe - to reframe the EU's high regulatory burden on data and AI not as an innovation barrier, but as an opportunity. I call for policymakers, investors, and entrepreneurs to collaborate in building European, VC-backed champions that could power regulated tech through technological solutions. During Slush 2023, we partnered with Sitra and scale-up Wolt to host a dedicated Slush Policy Side event at the Nordic’s leading startup campus Maria 01, to launch my report alongside VC investors, RegTech companies, big-tech representatives, the US Ambassador, a Member of the European Parliament, and a former Finnish Minister.
Download: Enabling the responsible use of technology at scale - Why Europe needs a regulatory technology innovation ecosystem.
In tech's trenches, a familiar scene plays out: VCs grimace at new regulations while policymakers craft rules with little thought for innovation dynamics. But what if smart VCs befriended policymakers and this age-old tension isn't a deadlock—but rather Europe's next big tech opportunity?
Europe's regulatory wave isn't just a challenge—it's spawning the next generation of high-growth companies at the intersection of innovation and compliance. And the blueprint for this transformation? It's already written in the FinTech revolution.
When Europe regulated financial services post-2008, it didn't just create neobanks like Revolut and N26. It birthed an entire ecosystem of infrastructure players that now power modern banking. Think how Sequoia and General-Catalyst-backed Stripe absorbs cross-border payment nightmares by default, how Index Ventures-backed Clausematch streamlines compliance for financial institutions, how Balderton Capital-backed ComplyAdvantage solves financial crime risks, or how Xange-backed Apiax embeds regulatory logic into financial products. These "picks and shovels" companies became the often invisible backbone of financial services, some even moving towards unicorn status while operating behind the scenes.
Today's digital regulations are creating similar infrastructure opportunities—but across every sector. The AI Act, DSA, DMA, Data Act, and Data Governance Act aren't just rules. They're market creators, just like MiFID II and PSD2 were for financial services. Each one demands new technological solutions: AI governance platforms, content moderation tools, data space infrastructure. The next unicorn might be building the "Stripe for AI compliance" or the backbone for cross-sector data sharing.
Think of it this way: If climate change and digitalization are our era's twin challenges, then RegTech is to responsible technology what climate tech is to the green transition—an enabler of efficiency at scale. And with €800 billion at stake in the EU's data economy alone, the market opportunity is massive.
For VCs, this represents an unprecedented opportunity. RegTech democratizes compliance, enabling startups and SMEs to compete alongside tech giants without massive legal budgets. That is also in the interest of each of their portfolio companies. For policymakers, it offers a pathway to demonstrate that responsible innovation can match the pace of regulated markets with the right tools.
But seizing this opportunity requires more than capital or policy—it demands an ecosystem. We need to bring together:
Venture capitalists who understand regulated markets
Policymakers who embrace RegTech as a 21st century tool for compliance
Entrepreneurs building scalable solutions
Industry leaders facing compliance and risks
Experts who can explain highly complex regulations and processes to builders
Together, these actors can build the backbone of Europe's digital economy. Think regulatory sandboxes for testing solutions, dedicated funding structures that understand compliance-driven innovation, and platforms for knowledge sharing between tech builders and policy shapers.
The vision is clear: Europe can lead in developing - and exporting - RegTech solutions that make digital compliance seamless and scalable. But realizing this potential requires a new alliance between innovation and regulation spheres. We need to move fast—these markets are forming now as regulations come into force.
For VCs and policymakers, RegTech represents more than compliance solutions—it's the foundation for Europe's next generation of tech champions. By embracing this regulatory revolution, Europe can prove that responsible innovation at scale isn't just possible—it's profitable for the ones who are regulated thanks to a dynamic market of RegTech solutions. The question now is: who will lead the charge?
