Every founder knows the thrill of the moment: the first term sheet lands, the product is live, the market is opening up. But in 2025, there’s a new line in the sand: Did you clear the regulatory path before you scaled?
Today, it’s not enough to disrupt the market — you have to anticipate the rule-set that will govern it.
Investors are shifting gears. After a decade of “move fast and break things,” they’re asking: Who built the compliance engine before the crash? Because the truth is, regulation has become a form of alpha — a competitive advantage for startups that think of law not as a hurdle, but as a moat.
The new era of smart compliance
The startup landscape has changed. High-profile failures — from crypto exchanges to wild valuations in fintech and AI — taught us that the regulatory cost of growth can be massive. Today’s investors and founders alike expect legal strategy from day one, not as an afterthought.
Consider the RegTech market: One recent estimate projects it will swell to about $70.64 billion by 2030, growing at a compound annual rate of roughly 23%. Another forecast predicts growth to $70.8 billion by 2033. The message: Companies are no longer asking if they need compliance automation and legal-engineering infrastructure. They’re asking when they can monetize it.
So when a startup designs its product around KYC, AML, data-protection or licensing from the outset, it’s not just avoiding risk — it’s building a moat others will struggle to cross. For founders, regulation isn’t just the cost of entry anymore — it’s the cost of exit-edge.
When the law becomes a moat
There are former unicorns, and there are regulation-ready unicorns. The difference hinges on when they built their compliance architecture, hired legal engineers and treated regulation as product.
Take payment infrastructure: Stripe built payment-security and licensing into its model early, as Stripe’s PCI Level 1 certification and multijurisdiction licenses (U.S. money-transmitter, EU/UK e-money) enabled it to integrate cleanly with Apple Pay, power Shopify’s native payments, and — per a 2023 announcement — expand its role processing payments for Amazon.
Or look at crypto: Coinbase built a licensure footprint early, publishing its U.S. money-transmitter licenses and securing New York’s BitLicense in 2017. Its 2021 SEC S-1 repeatedly frames regulatory compliance and licensing as fundamental to the business.
In insurtech, from the outset, Lemonade hired senior insurance veterans (e.g., former AIG executive Ty Sagalow) and, per its S-1 and subsequent filings, expanded licensure across the U.S., operationalizing the 50-state regulatory landscape rather than trying to route around it.
These examples show a pattern: When compliance is built in from the start, the cost of scaling drops and competitors face much higher entry bars. Regulation becomes a moat — not a burden.
The rise of ‘legal engineering’
Welcome to the era of the legal engineer. The traditional model (sign contract, then lawyer reads, then flagged risk) is being replaced by code, automation and internal teams who speak both product and law.
Startups such as Carta built cap-table software that includes “built-in tools and support to help with compliance year-round,” allowing it to embed governance and securities-law readiness into the product nature of equity management.
Plaid has publicly positioned itself for evolving “data use, access, and consumer permission” rules (e.g., Section 1033) by building features such as data transparency messaging and consent-capture into its API stack — indicating a clear regulatory-first posture in its product roadmap.
And what’s happening in AI? Founders are hiring general counsels on day one to forecast imminent regimes — privacy law (GDPR, CCPA), AI transparency bills, emerging algorithms-as-infrastructure regulation.
The startup battle isn’t simply product vs. product anymore — it’s regulatory architecture vs. regulatory architecture.
Reports back this up: One credible industry estimate shows the global compliance, governance and risk market is already around $80 billion and projected to reach $120 billion in the next five years. In short: Startups that solve compliance at scale are building infrastructure for everyone else to rent. That’s platform-level potential.
Investors are taking note
Regulation-ready startups aren’t just surviving — they’re attracting smarter capital. Venture funds now assess regulatory maturity, legal runway and governance readiness early on. A startup that can show it isn’t “waiting to deal with compliance” but designed it, has a valuation edge.
Crunchbase data shows global startup funding reached $91 billion in Q2 2025, up 11% year over year. While not all of that is focused on law or compliance, the trend signals that smart investors are buried deeper in risk assessment and governance. Legal tech funding is accelerating, too: the sector recently topped $2.4 billion in venture funding this year, an all-time high.
Funds are no longer only assessing TAM or go-to-market speed; they’re asking: “What’s the regulatory runway? Who owns risk? Who built the compliance pipeline?” Because in sectors like fintech, climate tech, health tech and AI, the fastest growth path is often the one that avoids the enforcement arm.
The future: law as competitive advantage
Let’s zoom out for a moment. We’re moving into a world where regulation isn’t a ceiling — it’s scaffolding. It defines markets, enables scaling and filters winners from pretenders. Founders who see law as a source of architecture, not as chewing-gum-on-the-shoe, will be the ones writing the playbook.
Think about AI: Startups that design for regulatory change (data-provenance, audit trails, rights management) are already positioning for the future.
Think about climate tech: Companies that can navigate evolving carbon-credit regimes or ESG disclosure laws are building invisible advantages.
Think about fintech: Those that mastered licensing, KYC/AML, consumer-data flows early are the backbone of infrastructure.
The next wave of unicorns won’t just have better tech — they’ll have truly infinitely better legal DNA. They won’t just disrupt a market; they’ll help write the rules of the market before they scale.
Because in this new era, regulation isn’t a deadweight — it’s a launchpad.
Aron Solomon is the chief strategy officer for Amplify. He holds a law degree and has taught entrepreneurship at McGill University and the University of Pennsylvania, and was elected to Fastcase 50, recognizing the top 50 legal innovators in the world. His writing has been featured in Newsweek, The Hill, Fast Company, Fortune, , CBS News, CNBC, USA Today and many other publications. He was nominated for a Pulitzer Prize for his op-ed in The Independent exposing the NFL’s “race-norming” policies.
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Illustration: Dom Guzman
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