Danish startup Whistleblower Software is now making a formal move to rebrand as Formalize as it shifts its focus to the expanding compliance software market, securing a fresh €15 million ($16 million) to fuel its expansion.
The compliance software industry is experiencing significant growth, largely due to increasing regulatory pressure. This billion dollar market has caught the attention of investors, with private equity firm Thoma Bravo recently acquiring German company EQS Group for $435 million. Along with this, several startups such as Cypago, Hyperproof, Certa, and Anecdotes have successfully raised large amounts of funding for their unique compliance software platforms.
Formalize is now setting its sights on a bigger piece of the $54 billion GRC (Governance, Risk, and Compliance) pie.
“The compliance software market is thriving, driven by the strict regulatory agenda of the European Union,” Formalize co-founder and CEO Jakob Lilholm stated in a recent email to TechCrunch. He added, “While compliance serves the greater good, it can be challenging for companies without efficient management tools.”
“Whistleblowing may seem unseemly, but it has played a significant role in some of the biggest news stories of our time, including the Facebook and Cambridge Analytica data scandal and Tesla’s accident report revelations last year,” Lilholm continued. However, many employees are hesitant to come forward with information due to fears of retaliation.
As Formalize emerged in 2021, the EU passed a new whistleblowing directive, mandating that larger companies implement internal reporting systems to protect employees who report company misconduct. The software provided by Formalize allows employees to submit an anonymous written report, or speak with the assurance that their voice will be distorted.
The company has already secured several well-known clients including McDonald’s, Gap, and ABN-AMRO, a Dutch banking giant.
Accomplishing Compliance
Formalize initially raised a small $3 million seed round of funding about 16 months ago. With an additional €15 million recently secured, the company is now preparing to expand beyond whistleblowing software. They plan to launch a comprehensive compliance platform that streamlines and automates the various compliance efforts companies are expected to undertake, particularly in light of the GDPR data protection laws in Europe. This platform will also align with the recent NIS2 cyber security regulations, which legally require data security measures and were put into effect last January.
“Each new law, such as GDPR and NIS2, requires time to implement and operate. Effectively managing compliance is a competitive advantage in an ever-changing landscape of legislation,” Lilholm explained.
Not only does the new compliance system integrate with existing systems like CRMs and supplier databases, but it also allows companies to conduct risk assessments and incident reporting through a single interface. Furthermore, it enables businesses to map data processing activities, policies, and GDPR procedures.
As the company moves beyond its initial focus on whistleblowing, it has decided to change its name to better reflect its broader scope and market potential. Formalize co-founder and CTO Kristoffer Abell explained, “Whistleblowing and data compliance are connected by the intention of the GDPR regulation. Whistleblowing helps companies identify non-compliance in various areas of ethics and compliance, while other compliance areas establish a new standard of organizational responsibility that aligns with public interests.”
France’s BlackFin Capital Partners will lead the €15 million Series A round, with support from London-based West Hill Capital, the lead investor in Formalize’s initial seed round.
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