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Govtech: is the Industry at an Inflection Point?


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The government technology (“govtech”) industry is an emerging ecosystem that has the potential to transform governments. The paper maps out the ecosystem and provide a quantitative understanding of its growth trajectory by answering the following four questions:

1. What is the definition of govtech?
2. What does the ecosystem look like?
3. How is the ecosystem changing?
4. What factors will accelerate market take-off?

In order to answer these questions, experts in the biggest govtech companies, the venture capital community, government and opinion leaders were interviewed. Moreover, the paper selected 98 of the most notable govtech companies in United States based on sources like’s Govtech 100 list, and tracked their private capital deal flows from 2004 to 2015. Details of the Deal Flow Database and the methodology are in the appendix.

Published in: Technology

Govtech: is the Industry at an Inflection Point?

  1. 1. 1                 Is                                                                     Govtech:  is  the  Industry  at   an  Inflection  Point?   Christine  Suh-­‐Yeon  Hong   Stanford  Graduate  School  of  Business   Independent  Research     An  Industry  Primer   June  2016  
  2. 2. 2     Acknowledgements       I  deeply  thank  Stanford  Graduate  School  of  Business  faculty  and  McKinsey  Director   Emeritus  Lenny  Mendonca  for  advising  the  independent  research.  I  am  also  grateful   to  Co-­‐Founder  of  Textizen  Alex  Yule,  Altos  Ventures  Managing  Director  Ho  Nam,   Knight  Foundation  Director  Jonathan  Sotsky,  Chief  Financial  Officer  of  Accela   Maximilian  Schnoedl,  FuseCorps  Fellow  Robert  Henning,  Govtech  Fund  Managing   Partner  Ron  Bouganim,  Innovation  Endeavors  Investment  Partner  Scott  Brady,  Chief   Executive  Officer  of  GovDelivery  Scott  Burns,  Omidyar  Network  Investment  Partner   Stacy  Donohue,  and  Chief  Executive  Officer  of  OpenGov  Zachary  Bookman  for   providing  valuable  input  and  counsel.                                    
  3. 3. 3     Executive  Summary     The  govtech  space  has  been  growing  quickly  in  the  past  years,  driven  by  changes  in   the  government,  companies,  and  investors.  Governments  at  the  federal  and  local   level  are  embracing  technology  and  reforming  how  they  work  with  technology   companies.  Govtech  focused  companies  are  emerging,  while  existing  companies  are   accelerating  growth  through  acquisitions.  Larger  tech  players  are  also  moving  into   this  space.  Traditional  venture  capital  is  flowing  into  earlier  stage  govtech   companies,  indicating  a  new  growth  model  of  venture  backed  growth  in  the   industry.         However,  in  order  for  the  industry  reach  an  inflection  point,  three  mutually   reinforcing  factors  must  come  into  play:  governments  need  to  become  better   buyers,  credible  investors  need  to  make  big  bets,  and  more  companies  need  to  grow   and  exit  successfully.                                  
  4. 4. 4     Introduction     The  government  technology  (“govtech”)  industry  is  an  emerging  ecosystem  that  has   the  potential  to  transform  governments.  Govtech  companies  like  Accela,   GovDelivery,  and  Granicus  have  scaled  sustainably  for  nearly  two  decades.  A   number  of  govtech  companies  have  also  risen  to  prominence  in  the  last  few  years.   For  example,  OpenGov  –  a  company  that  aims  to  increase  governments’  financial   intelligence  and  transparency  through  web  based  visualization  software  –  raised   $47  million  in  funding  from  venture  capital  firms  like  Andreessen  Horowitz.  Do   these  increased  market  signals  indicate  an  inflection  point  of  the  industry,  which   could  accelerate  public  sector  transformation?     The  paper  aims  to  map  out  the  ecosystem  and  provide  a  quantitative  understanding   of  its  growth  trajectory  by  answering  the  following  four  questions:       1. What  is  the  definition  of  govtech?   2. What  does  the  ecosystem  look  like?   3. How  is  the  ecosystem  changing?   4. What  factors  will  accelerate  market  take-­‐off?     In  order  to  answer  these  questions,  experts  in  the  biggest  govtech  companies,  the   venture  capital  community,  government  and  opinion  leaders  were  interviewed.   Moreover,  the  paper  selected  98  of  the  most  notable  govtech  companies  in  United   States  based  on  sources  like’s  Govtech  100  list,  and  tracked  their   private  capital  deal  flows  from  2004  to  2015.  Details  of  the  Deal  Flow  Database  and   the  methodology  are  in  the  appendix.                              
  5. 5. 5     1.What  is  the  definition  of  govtech?     Govtech  is  defined  as  “the  technology  infrastructure  that  governments  use  to   manage  internal  operations  and  deliver  services  to  its  citizens.i”  Operations  and   services  include  various  functions  such  as  permitting,  pension  management,  tax   collection,  and  budgeting.  Companies  in  the  gov  tech  space  are  firms  that  “have   state,  local,  and  federal  government  as  their  primary  market  focus  and  derive  the   majority  of  their  revenues  from  the  public  sectorii”       In  literature,  the  term  govtech  is  often  used  interchangeably  with  civic  tech.  The   industry  does  not  have  a  standardized  definition  of  the  two  terms.  The  following   exhibit  illustrates  the  varying  definitions  among  the  industry’s  opinion  leaders.             The  paper  defines  govtech  and  civic  tech  as  two  different  spheres,  although   companies  may  operate  in  both  spaces.       • Govtech  companies  primarily  focus  on  the  operations  of  the  city,  state,  and   local  governments.  OpenGov  would  be  a  prime  example.       Govtech  companies  also  include  technologies  that  help  governments  interact   better  with  citizens.  The  primary  customer  of  the  products  and  services  are   governments.  For  example,  GovDelivery  –  a  company  that  allows  1,800   government  organization  to  reach  over  130  million  people  through  digital   De#initions)of)govtech)and)civic)tech)vary) within)the)industry) Chris&ne)Hong) Govtech( Civic(Tech( !  The)technology)infrastructure)that)government) departments)use)to)do)their)internal)work)of) deliver)services)to)their)“customers”)(i.e.) citizens).)It)is)the)“operating)system”)of)the) government) !  The)tools)citizens)use)everyday)to)engage)in)their) governance.)It)covers)a)broad)range)of)citizen) engagement)and)personal)democracy)related) activities,)including)community)organizing,) petitions,)advocacy,)politics,)campaigns,)and)etc) !  Govtech)companies)are)#irms)that)have)state,) local,)and)federal)government)as)their)primary) market)focus)and)derive)the)majority)of)their) revenues)from)the)public)sector.)) !  Civic)tech)is)one)of)the)four)domains)under)the) four)govtech)domains) !  Technology)that)is)used)to)empower)citizens)or) help)make)government)more)accessible,)ef#icient) and)effective) !  Govtech)is)an)umbrella)term)under)civic)tech) Source:)) 1)Ron)Bougham,)“Govtech:)the)$400)Billion)market)hiding)in)plain)sight.”) 2)Dustin)Haisler,)Chief)Innovation)Of#icer)“Govtech)Market)Snapshot”)e.Republic)( 3)Stacy)Donohue,)“Civic)Tech)is)Ready)for)Investment”)TechCrunch,)Apr)2015))( 4)Johnathan)Sotsky,)“Five)lessons)from)investing)in)civic)tech,”)Knight)Foundation)blog,)Apr)2015)( !  Technology)that)spurs)citizen)engagement,) increase)government)effectiveness)and) strengthen)cities) !  Govtech)is)an)umbrella)term)under)civic)tech)
  6. 6. 6     channels  like  email,  text,  and  social  communication  –  would  be  considered  a   govtech  company.       • Civic  tech  is  defined  as  technology  that  connects  and  empowers  citizens.  The   category  would  include  elections,  peer-­‐to-­‐peer  interactions,  community   organizing  and  etc.  Companies  like,  a  petition  website  that   provides  a  tool  to  advance  social  causes,  would  be  considered  a  civic  tech   company  rather  than  govtech  company.       Civic  tech  also  includes  technologies  that  help  citizens  interact  better  with   governments.  Although  both  govtech  and  civic  tech  companies  ultimately   help  governments  and  citizens  enhance  mutual  interaction,  the  difference  is   in  their  target  customers  –  i.e.  the  payers  and  users  of  the  products  and   services.  A  civic  tech  company’s  primary  target  customer  is  citizens.,  for  example,  is  a  civic  tech  company  because  the  company   targets  citizens  directly.  In  contrast,  Accela’s  civic  engagement  services  (e.g.,   legislative  management,  citizen  relationship  management)  would  be   classified  as  govtech  because  the  payers  of  the  services  are  governments.                   Govtech(is(the(technology(that(helps(governments( operate(more(effectively(and(ef5iciently,(and(is( distinct(from(civic(tech( Chris&ne)Hong) Govtech( Civic(tech( !  Technology(that(connects(and( empowers(citizens(( !  Includes(technology(that( enables(citizens(directly(to( better(interact(with( governments;(primary( customers(are(citizens( !  Technology(helps(governments( operate(more(effectively(and( ef5iciently( !  Includes(technology(that(helps( governments(to(better(interact( with(citizens;(primary( customers(are(governments( Focus(of(the(study(
  7. 7. 7     2.What  does  the  govtech  ecosystem  look  like?     This  section  surveys  the  players  that  collectively  shape  the  govtech  ecosystem.  The   key  players  covered  are:       § Government   § For  profit  companies     § Investors   § Accelerators  and  foundations             Government       In  the  United  States,  government  customers  are  organized  into  federal,  state,  local   governments  and  agencies.  There  are  over  600  federal  departments  and  agencies  in   the  United  States.  Further,  there  are  over  89,000  local  government  agencies  across   the  country,  50,000  of  which  are  for  special  purpose  government  functions  like   utility  and  school  districtsiii.  As  of  2015,  the  United  States  government  spends  $175   billion  on  technology  –  $79  billion  at  the  federal  level  and  $96  billion  at  the  state  and   local  leveliv.           The$govtech$ecosystem$is$comprised$of$ governments,$companies,$investors,$and$ accelerators$and$foundations$ Governments* Footnote:$De:initions$adopted$from$“Govtech$Market$Snapshot”$by$Dustin$Haisler,$Chief$Innovation$Of:icer$at$e.Republic$($The$Govtech$Market$Snapshot$report$includes$a$“Civic$Tech”$cluster.$The$ cluster$was$not$used$for$this$study,$and$the$existing$classi:ication$of$“civic$tech”$companies$were$categorized$into$the$other$three$clusters.$ Chris&ne)Hong) For*pro-it* companies* Investors* Accelerators*&* foundations* !  Federal$ !  State$ !  Local$$ !  Agencies$ Customers) Service)providers) Company)scalers) Ecosystem)shapers) !  Traditional$venture$capital$ !  Govtech$focused$ventures$capital$ !  Strategic$investors$ !  Impact$investors$ !  Growth/private$equity$ !  Accelerators$ !  Foundations$ !  Legacy$vendors$ !  Government$contractors$ !  Large$tech$companies$ !  Emerging$government$ focused$tech$companies$
  8. 8. 8     For  profit  companies     There  are  four  types  of  for  profit  companies  in  the  govtech  space:   • Traditional  legacy  vendors  like  Oracle,  IBM  or  SAP     • Government  contractors  like  Accenture,  CGI,  or  Deloitte   • Large  tech  companies  like  Google  parent  Alphabet  or  SalesForce   • Government  focused  tech  companies,  like  Accela  or  OpenGov       The  focus  of  this  paper  is  the  fourth  category  of  for  profit  companies  –  emerging   tech  companies  that  focus  primarily  on  government  verticals.  There  are  over  100   notable  for  profit  companies  that  have  federal,  state,  local  governments  and   agencies  as  their  primary  customers.    These  emerging  companies  can  be  categorized   into  three  main  domains:  administration,  service  delivery,  and  smart   infrastructurev.  The  following  categorization  and  definitions  were  adopted  from   E.Republic.       § Administration:  The  record  layer  of  government,  including  permissions,   data  and  money.  Services  or  products  help  increase  transparency,   processing,  visualization  and  management  of  records.  Category  includes   systems  that  automate  financial,  personnel,  case,  asset,  traffic,  construction   and  land  management  records.       § Service  delivery:  The  transaction  layer  of  the  government.  Services  or   products  help  processing  of  transactions,  payments  and  logistics  by  public   employees  or  citizens/business  entities  to  fulfill  public  service  requests  and   service  delivery.  The  category  would  include  systems  that  automate   licensing,  payments  and  business  intelligence  of  records.  It  also  includes   services  that  engage  with  citizens  to  better  deliver  government  services.       § Smart  infrastructure:  The  infrastructure  layer  of  government  enabling   operational  capacity  of  physical  assets  ad  systems  (e.g.,  facilities,  roads,  and   utilities)  through  digital  controls,  sensors,  self-­‐monitoring  predictive   analytics  and  security.  The  category  includes  smart  grid,  smart  meter  and  the   cloud.    
  9. 9. 9         Investors     There  are  five  types  of  investors  in  the  govtech  space:  traditional  venture  capital,   govtech  focused  venture  capital,  strategic  investors,  impact  investors,  and   growth/private  equity  firms.       Traditional  venture  capital     Traditional  venture  capital  firms  look  for  investments  that  will  yield  above  market   returns.  They  generally  have  a  diversified  portfolio  with  strategic  pillars.  Thus  far,   traditional  funds  have  invested  in  govtech  companies  opportunistically;  most  VCs  in   the  database  invested  in  one  govtech  company.  OpenGov,  for  example,  is  just  one  of   Andreessen  Horowitz’s  284  portfolio  companies.     Govtech  focused  venture  capital       The  Govtech  Fund,  managed  by  Ron  Bouganim  and  advised  by  Tim  O’Reilly,  is  the   first  govtech  focused  venture  capital  fund.    Founded  in  September  2014,  the  fund   has  raised  $23  million  in  its  first  round  and  exclusively  invests  in  govtech   companies.  Its  portfolio  companies  include  companies  like  SmartProcure,   MindMixer,  AmigoCloud,  Seamlessdocs,  and  Mark43.           Govtech(companies(are(categorized(into( three(domains( Administration+ !  Companies(that(service(the(record(layer(of( government(permissions,(data(and(money.(Includes( systems(that(automate(;inancial,(personnel,(asset,( traf;ic,(construction(and(land(management(records( Domains+ Service+delivery+ !  Companies(that(service(the(transaction(layer(of(the( government.(Services(or(products(help(processing(of( transactions,(payments(and(logistics(by(public( employees(or(citizens/business(entities(to(ful;ill( public(service(requests(and(service(delivery( Smart+ infrastructure+ !  Companies(that(serve(the(infrastructure(layer(that( enables(operational(capacity(of(physical(assets(and( systems((e.g.,(grids,(smart(meter)( Examples+ Accela(automates(transactions(and( service(delivery(–(e.g.,(land( management,(asset(management,( licensing( Bidgely(helps(governments(monitor( and(manage(energy(use( GovDelivery(helps(governments( expand(digital(audiences(and(move( citizens(to(take(action(through(digital( channels(like(email,(text,(and(social( communication(( Footnote:(De;initions(adopted(from(“Govtech(Market(Snapshot”(by(Dustin(Haisler,(Chief(Innovation(Of;icer(at(e.Republic((“Civic(Tech”(cluster.(The(cluster(was(not(used(for(this( study,(and(the(existing(classi;ication(of(“civic(tech”(companies(were(categorized(into(the(other(three(clusters.( Christine(Hong(
  10. 10. 10     Strategic  investors     There  are  venture  capital  funds  that  invest  for  strategic  purposes  as  well.  For   example,  In-­‐Q-­‐Tel  is  a  privately  held,  not-­‐for-­‐profit  company  that  invests  in  high   tech  companies  for  the  purpose  of  keeping  the  Central  Intelligence  Agencies   equipped  with  the  latest  technology.  It  has  made  three  investments  in  the  govtech   space:  Socrata,  Boundless  Spatial,  and  BlueLine  Grid.       Impact  investors     Impact  investors  invest  with  the  goal  of  creating  social  impact  and  not  solely  to   generate  above  market  returns.  Impact  investors  provide  blended  capital  including   grants  and  investments.  Omidyar  Network,  established  in  2004  by  eBay  founder   Pierre  Omidyar,  focuses  on  a  portfolio  of  companies  that  promote  governance  and   civic  engagement.  SeeClickFix,  a  company  that  allows  residents  to  report  non-­‐ emergency  neighborhood  to  local  governments,  is  an  exemplary  investment  they   have  made  in  the  govtech  space.  Omidyar  Network  also  provides  grants  to   accelerators  like  Code  for  America.       Growth/private  equity  investors     Growth  and  private  equity  investors  invest  in  later  stage  deals.    Accela  –  one  of  the   most  well  funded  companies  in  the  govtech  space  –  raised  $235  million  from   growth/private  equity  firms  like  ABRY  Partners,  Bregal  Sagemount,  and  J.P.  Morgan.     Accelerators  and  foundations       Non-­‐profit  entities  and  foundations  play  the  role  of  accelerators  in  the  govtech   space  through  funding,  talent  development,  mentorship  and  talent  match  making.         Accelerators     The  most  prominent  accelerator  in  the  space  is  Code  for  America,  a  non-­‐profit   founded  in  2009  that  matches  technology  professionals  with  city  governments.  Code   for  America  has  partnered  with  130  governments  as  of  2016,  working  on  projects   like  opening  police  data  with  the  Indianapolis  Department  of  public  safety.     The  Code  for  America  Fellowship  Program  has  played  an  instrumental  role  in   incubating  companies.  For  example,  Textizen  –  a  text  message  platform  that  helps   governments  engage  with  its  citizens  –  was  born  out  of  the  Code  for  America  
  11. 11. 11     program.  Founder  Alex  Yule  was  able  to  gain  a  deep  understanding  of  the  need  for   an  engagement  platform  in  government  agencies  while  working  on  the  fellowship   program.  By  the  end  of  the  fellowship,  he  was  able  to  identify  a  clear  need  in  the   market  and  test  the  minimal  viable  product.  Textizen  was  quickly  advertised   through  the  press  and  word  of  mouth,  followed  by  inbound  service  requests  from   other  government  agencies.  The  company  received  seed  funding  from  the  Knight   Foundation,  and  raised  $450,000  before  being  acquired  by  GovDelivery  in  2015.   Similarly,  Code  for  America  has  been  providing  seed  funding  and  support  to   companies  like  ArchiveSocial,  Aunt  Bertha,  and  AmigoCloud.       Foundations     Foundations  like  the  Knight  Foundation,  Citi  Foundation  and  Bloomberg   Philanthropies  play  a  cardinal  role  in  shaping  the  govtech  ecosystem.  The  Knight   Foundation  –  focused  mainly  on  civic  tech  –  hosts  the  City  Challenge  and  provides   seed  funding  for  start  ups.  The  Citi  Foundation  established  the  City  Accelerator  to   help  municipalities  run  more  effectively  in  11  cities.  Bloomberg  Philanthropies   launched  the  Mayor’s  Challenge  competition  that  awards  bold  ideas  to  promote   government  innovation.                                            
  12. 12. 12     3.  How  is  the  ecosystem  changing?     The  paper  thus  far  mapped  out  the  key  players  in  the  govtech  ecosystem.  The   following  section  shows  how  the  ecosystem  has  been  shifting  by  tracking  the   activities  of  governments,  for  profit  companies,  and  investors.         Overall,  the  govtech  space  has  grown  significantly  in  the  past  five  years.  The   government  is  making  moves  to  become  more  tech  savvy  and  is  changing  its  ways  of   working  with  technology  companies.  Notable  govtech  companies  have  emerged,   while  existing  companies  are  scaling  organically  and  inorganically  through   acquisitions.  Large  tech  players  like  Google  parent  Alphabet  are  moving  into  the   space.  Also,  there  has  been  a  dramatic  increase  in  private  capital  flow,  with   prominent  venture  capital  firms  investing  in  govtech  companies  –    especially  in   earlier  stage  companies.             Government       Federal,  state,  and  local  governments  are  showing  indications  of  becoming  more   technology  savvy.  Moreover,  local  governments  are  changing  their  procurement   practices  for  better  private  sector  engagement.       How$is$the$ecosystem$changing?$ Chris&ne)Hong) Governments* For*pro-it* companies* Investors* Trend* Drivers* !  Governments$IT$systems$moving$onto$cloud$ !  Higher$citizens$expectations,$especially$among$the$ younger$generation$ !  Public$system$failures$like$$ !  Budget$cuts$driving$the$need$for$more$cost$effective$ technology$solutions$$ !  Governments$are$becoming$more$tech$savvy$ customers$ !  Governments$are$changing$their$procurement$ practices$$ !  Active$incubator$and$acceleration$programs$ !  Government$signaling$(e.g.,$more$tech$savvy,$ changing$procurement$systems)$ !  More$active$early$stage$funding$ !  Many$notable$small$government$focused$companies$ emerging$in$the$past$5$years$ !  Existing$companies$scaling$through$acquisitions$ !  Large$tech$companies$moving$into$the$space$(e.g.,$ Alphabet’s$SideWalk$Labs)$ !  Government$signaling$(e.g.,$more$tech$savvy,$ changing$procurement$systems)$ !  Increased$exit$opportunities$for$smaller$ companies$$ !  Private$capital$Nlow$has$increased$dramatically$ !  Increased$early$stage$investing$into$govtech$ companies,$fueling$venture$backed$growth$ !  Traditional$venture$capital$Nirms$moving$into$the$ space$(e.g.,$Andreessen$Horowitz)$
  13. 13. 13       Governments  are  becoming  more  tech  savvy     Federal  Government   In  2009,  President  Obama  created  the  position  of  Chief  Technology  Officer  of  the   United  States  –  acknowledging  the  importance  of  the  role  of  technology  in   government.  In  2014,  the  White  House  launched  the  United  States  Digital  Service  to   provide  the  federal  government  consultation  services  on  information  technology.   The  first  head  of  the  US  Digital  Service  was  a  former  Google  Engineer.  Similarly,  18F   was  established  to  reform  citizen  facing  government  technology  using  lean  startup   methods,  open  source  code,  and  contemporary  programming  languages.  To  ensure  a   steady  flow  of  tech  talent,  the  White  House  launched  the  Presidential  Innovation   Fellows  program  to  pair  top  talent  from  the  private  and  non  profit  sectors  with   government  officials  to  solve  challenges  in  the  federal  government.  These  key   initiatives  and  hires  signal  that  the  federal  government  is  making  efforts  to  become   more  tech  savvy.     Local  Governments   San  Francisco  and  New  York  are  two  of  the  most  prominent  examples  of  cities  that   are  leading  the  charge  in  innovation.  San  Francisco  Mayor  Edwin  M.  Lee,  for   example,  has  launched  the  Mayor’s  Office  of  Civic  Innovation  (MOCI)  in  order  to   keep  the  government  more  “accountable,  accessible,  and  responsive.”  He  created  the   Chief  Innovation  Officer    role  and  hired  Jay  Nath  to  “introduce  new  ideas  and   approaches  to  make  city  government  more  transparent,  efficient,  and  focused  on   our”     Mayor  De  Blasio  of  New  York  established  the  Tech  and  Innovation  Office  to  drive  the   city  wide  technology  strategy.  The  program  is  headed  by  the  first  ever  Chief   Technology  Officer  of  New  York,  Minerva  Tantoco.  The  office  is  recruiting  top  tech   talent  to  drive  projects  that  make  the  city  smarter.         Governments  are  changing  how  they  work  with  the  private  sector     Governments  –  especially  at  the  city  level  –  are  experimenting  with  new  ways  of   working  with  the  private  sector.  One  of  the  biggest  areas  of  reform  is  procurement.   Traditional  government  procurement  processes  are  complex  and  difficult  for  the   private  sector  to  navigate.  A  typical  process  starts  with  issuing  a  request  for   proposal  (RFP)  and  a  bidding  process,  which  may  be  prolonged  due  to  challenges   like  protests.  Vendor  selection  can  take  months  to  several  years.      
  14. 14. 14     Emerging  govtech  companies  may  find  this  process  difficult  to  navigate  for  three   reasons.  First,  companies  are  required  to  comply  with  a  variety  of  regulations  to  be   government  contractors,  which  may  be  costly  and  time  consuming.  As  an  example,  a   snapshot  of  the  requirements  by  the  San  Francisco  city  and  county  is  captured   below.           Second,  the  vendor  registration  process  is  complex.  Within  one  local  government,   each  department  may  have  a  different  set  of  registration  documents  scattered   across  multiple  websites  without  any  centralized  guidelines.  Third,  a  high  degree  of   customization  is  often  preferred  than  standardized  products  and  services.  For  such   reasons,  it  takes  time  for  smaller  companies  set  up  and  generate  revenue  –  making  it   difficult  for  them  to  grow  quickly  and  sustainably.     Government  entities  often  times  end  up  contracting  larger  companies  that  know   how  to  navigate  the  procurement  system  rather  than  working  with  the  companies   that  provide  the  best,  most  cost  effective  solutions.  Prices  are  driven  up  because   players  are  driven  out  in  the  bidding  process.  However,  many  governments  have   often  times  found  it  challenging  to  reform  their  procurement  processes.     San  Francisco  is  one  of  the  cities  leading  the  charge  in  changing  how  cities  work   with  the  private  sector.  For  example,  modeled  after  the  18F,  the  city  is  widening  its   pool  of  pre-­‐approved  vendors.  Once  a  company  is  pre-­‐approved  after  submitting  a   prototype,  they  are  then  “handheld”  by  the  government  through  the  vendor   registration  and  compliance  processes.  The  government  would  then  issue  RFPs  to   Compliance+requirements+for+government+ contractors+–+example+of+San+Francisco+ Source:+City+and+County+of+San+Francisco,+2016+Start+UP+IN+Residence+Program++ Chris&ne)Hong) Requirement* Explanation* !  The+Ordinance+requires+contractors+to+provide+employees+covered+by+the+Ordinance+who+do+work+ funded+under+the+contract+with+hourly+gross+compensation+and+paid+and+unpaid+time+off+that+meet+ certain+minimum+requirements+ Minimum* Compensation* Ordinance*(MCO)* !  The+HCAO+requires+employers+to+offer+health+plan+beneMits+to+their+covered+employees,+to+make+ payments+to+the+City+for+use+by+the+Department+of+Public+Health,+or,+under+limited+circumstances,+to+ make+payments+directly+to+their+covered+employees.+Covered+employers+must+pay+$4.50+per+hour,+ capped+at+$180.00+per+work+week.++ Health*Care* Accountability* Ordinance*(HCAO)* !  If+the+contract+is+for+more+than+$50,000,+the+ordinance+requires+contractors+to+notify+the+First+Source+ Hiring+Program+of+available+entryTlevel+jobs+and+provide+the+Workforce+10+Development+System+with+ the+Mirst+opportunity+to+refer+qualiMied+individuals+for+employment+ First*Source*Hiring* Program*(FSHP)* !  Vendors+cannot+discriminate+in+the+provision+of+beneMits+between+employees+with+domestic+partners+ and+employees+with+spouses,+and/or+between+the+domestic+partners+and+spouses+of+employees.++ Nondiscrimination*in* Contracts*and* BeneDits*
  15. 15. 15     the  pre-­‐approved  pool  of  companies  to  expedite  the  procurement  process.  Such   initatives  allow  the  government  to  effectively  purchase  cost  effective  products  and   solutions  in  a  shorter  amount  of  time.       The  San  Francisco  Entrepreneur-­‐in-­‐Residence  program  is  another  example  of  how   goverments  can  reform  the  traditional  procurement  process.  The  program  allows   for  earlier  stage  companies  to  deliver  disruptive  solutions  by  working  with  the   government  directly.  The  following  slide  captures  a  snapshot  of  the  program.           These  changes  indicate  that  governments  are  becoming  more  effective  buyers.   Perhaps  as  a  result  of  these  efforts,  there  are  indications  that  sales  cycles  are   shortening  and  velocity  is  increasing.  According  to  the  Govtech  Fund,  the  average   sales  cycle  of  the  fund’s  four  portfolio  companies  is  86  days,  but  can  be  as  short  as  2   weeks.vii  One  of  the  portfolio  companies  has  been  signing  government  clients  at  a   rate  of  one  in  three  days.  While  interviews  with  other  govtech  companies  reveal  that   sales  cycles  still  remain  long  on  average  and  could  take  up  to  years,  there  are   indications  of  positive  change.       For  profit  companies       Emerging  govtech  companies,  existing  govtech  companies  scaling  through   acquisitions,  and  tech  giants  are  playing  a  critical  role  accelerating  the  govtech   industry.         San$Francisco$Entrepreneurship1in1 Residence$Program$ Source:$City$and$County$of$San$Francisco,$2016$Start$UP$IN$Residence$Program$$ Chris&ne)Hong) !  Launched$by$Mayor$Edwin$Lee$in$2014$to$ explore$innovative$solutions$to$civic$ challenges$that$can$lower$costs,$increase$ revenue,$and$enhance$productivity$ $ !  The$program$selects$talented$start$ups$and$ matches$with$city$departments$for$16$weeks$ $ !  Start$ups$develop$technology$enabled$ prototypes;$if$successful,$departments$will$ license$and$purchase$the$product$ Program'description'
  16. 16. 16       Government  focused  technology  companies  are  emerging     There  has  been  a  marked  increase  in  govtech  companies  since  2010.  As  shown  in   the  exhibit  below,  60  of  the  98  most  notable  govtech  companies  in  the  database   emerged  after  2010.  The  surge  coincides  with  and  are  fueled  by  the  rise  of   accelerators  like  Code  for  America  (founded  in  2009,  funded  by  Omidyar  Network)   and  government  efforts  to  become  more  tech  savvy.  A  number  of  these  companies   are  still  small  in  size,  with  less  than  50  employees.         60#notable#govtech#companies#were# founded#in#the#past#6#years# 0" 2" 4" 6" 8" 10" 12" 14" 16" 18" Before" 2000" 2000" 2001" 2002" 2003" 2006" 2007" 2008" 2009" 2010" 2011" 2012" 2013" 2014" 2015" Number'of'govtech'companies'found'per'year' Source:#Deal#Flow#Database,,#Angel#List,#CB#Insights,#Crunchbase# Chris5ne"Hong" N=98# N=#60##
  17. 17. 17             Existing  companies  are  scaling  through  acquisition     The  market  has  seen  a  dramatic  increase  in  acquisitions  from  2014,  driven  by   companies  like  Accela  and  GovDelivery.  Out  of  the  23  acquisitions  from  2001,  more   than  half  of  the  deals  were  from  2014  and  2015.  Accela  alone  accounted  for  9  of  the   23  acquisitions  captured  in  the  database,  and  GovDelivery  accounted  for  4  deals.                   The$majority$of$the$companies$included$in$the$ study$are$small,$with$less$than$50$employees$ 75# 6# 10# 2# 3# 1# 1# Less#then#50# 51/100# 101/250# 251/500# 501/1000# 1001/5000# Over#5000# Number'of'employees'per'company' Source:$Deal$Flow$Database,$,$Angel$List,$CB$Insights,$Crunchbase$ Chris5ne#Hong# Small:'75' Midsized:'18' Large:'5'
  18. 18. 18         There%were%23%acquisitions%from%2001%to% 2015;%more%than%half%are%from%2014:15% The$number$of$acquisitions$spiked$in$2014915$ Source:%Deal%Flow%Database,,%Angel%List,%CB%Insights,%Crunchbase% Chris&ne)Hong) 1) 1) 2) 1) 1) 1) 8) 8) 2001) 2009) 2010) 2011) 2012) 2013) 2014) 2015) Accela$accounted$for$6$of$the$8$ acquisitions$in$2014$ Accela&and&GovDelivery&accounted&for& more&than&half&of&the&acquisitions& Accela&and&GovDelivery&acquired&13&companies& Source:&Deal&Flow&Database,&,&Angel&List,&CB&Insights,&Crunchbase& Chris&ne)Hong) 9) 4) 3) 2) 1) 1) 1) 1) 1) 1) 1) Accela) GovDelivery) TriTech) So<ware) Systems) Granicus) AppCityLife) Fiscal)note) Maximus) mySideWalk) OpenGov) Periscope) Holdings) Taser)
  19. 19. 19         Acquisitions  are  driven  by  a  need  for  scale,  as  scale  is  a  competitive  advantage  in  the   industry.    Scale  is  an  indicator  of  reliability  and  sustainability  of  the  business,  which   is  quintessential  for  government  customers.  Bigger  companies  also  have  more   experience  in  navigating  around  the  complex  procurement  process,  and  have  the   wherewithal  to  absorb  higher  customer  acquisition  costs.  Moreover,  companies  that   have  grown  successfully  can  attract  more  funding  to  further  scale.       The  exhibit  below  shows  how  Accela  accelerated  its  growth  through  acquisitions.  It   tripled  its  revenue  from  2013  to  2015  after  acquiring  8  companies.  Accela’s  recent   activites  signal  that  there  may  be  more  consolidation  in  the  industry  going  foward,   and  greater  exit  opportunities  for  smaller  companies.       List%of%acquisitions%by%companies%in%the% database% Source:%Deal%Flow%Database,%Crunchbase% Chris&ne)Hong) Acquiror Acquisition+year Acquired+company Accela 2015 PublicStuff Fiscal3note 2015 MyCandidate GovDelivery 2015 Textizen Maximus 2015 Acentia mySideWalk 2015 VoterTide Taser 2015 MediaSolv3Solutions3Corporation TriTech3Software3Systems 2015 Tiburon Accela 2015 Springbook Accela 2014 Decade3Software3Company Accela 2014 Government3Outreach Accela 2014 Kinsail Accela 2014 Envista Accela 2014 IQM2 Accela 2014 GeoTMS GovDelivery 2014 NuCivic Periscope3Holdings 2014 AppCityLife 2013 OnQueue3Technologies GovDelivery 2012 GovInteract Granicus 2011 Daystar3Computer3Systems Granicus 2010 TriTech3Software3Systems 2010 Ortivus GovDelivery 2009 GovLoop Accela 2001 Tidemark3Computer3Systems
  20. 20. 20               Accela&accelerated&growth&by&raising&capital& and&through&acquisitions& Source:&PrivCo,&Crunchbase,&Interview&with&Max&Schnoedl,&CFO& Chris&ne)Hong) Company(pro*ile( Growth(model( !  Description:(Accela&software&helps&government& agencies&automate&transactions&and&service&delivery& in&land&management,&asset&management,&licensing& and&public&health&and&safety& !  Founded:&1999& !  Employees&(2015):&700&& !  Financials&(2015):&Revenue&of&$140&million& & !  Funding:(3&rounds&of&funding&from&undisclosed& venture&capital&(2004)&and&private&equity&(2013,& 2015)& !  Acquisitions:(8&acquisitions&in&2014P15&including& SpringBook,&IQM2,&Envista,&Kinsail,&Government& Outreach,&Decade&Software&Company,&and&Public&Stuff& !  Growth(through(acquisitions& !  Started&out&with&a&point&solution&in&permitting&& !  IdentiXied&customer&needs&of&existing&clients,&and&expanded& into&new&products&and&solutions&through&acquisition&& & !  Scaling(quickly(( !  Scale&is&critical&to&government,&as&credibility,&reliability&and& long&term&sustainability&of&service&providers&are&critical&& !  Scaled&through&targeting&larger&customer&base&(i.e.&cities&with& population&of&over&100,000)& & !  Bootstrapping(until(company(reached(scale( !  Received&Xirst&round&of&funding&of&$4.12&million&from&VCs&Xive& years&after&establishment& !  Only&received&substantial&rounds&of&funding&in&2013&and&2015& after&proving&sustainability&and&acquiring&“high&proXile”& customers&(e.g.,&City&of&New&York,&San&Francisco)&& !  Accelerated&growth&after&funding& Accela&attracted&the&most&private&capital,& totaling&over&$200&million& !"!!!! !50!! !100!! !150!! !200!! !250!! Accela! SST! OPOW ER! C3!Energy!Socrata! Captricity! OpenGov!Enigm a! FiscalNote!Bidgely! AutoGrid!System s! TriTech!SoGw are!System s! EngagePoint! GovDelivery! W aterSm art!SoGw are!M ark43!Granicus! Boundless!SpaMal! $&USD&million& Scale&of&funding&&&number&of&companies& >$10&million& >$0&8&$10& No&funding&or& undisclosed& 18& 46& 34& Companies&with&more&than&$10&million&of&funding& Source:&Deal&Flow&Database,&,&Angel&List,&CB&Insights,&Crunchbase& ChrisMne!Hong!
  21. 21. 21           Large  tech  companies  are  moving  into  the  space     Large  tech  companies  like  Alphabet  (Google  parent  company)  are  moving  into  the   govtech  space.  SideWalk  Labs,  the  brainchild  of  Larry  Page  and  Daniel  Doctoroff,   was  launched  in  2016  to  create  a  “smart  city  from  scratch.”  The  company’s  first   major  initiative  is  LinkNYC  that  replaces  old  pay  phones  with  kiosks  that  provide   free  Wi-­‐Fi  within  a  150-­‐foot  radius,  as  well  as  touchscreens  to  allow  free  local  phone   calls  and  Internet  browsing.       Companies  like  Alphabet  have  a  unique  and  significant  role  in  creating  smarter   cities  and  governments.  Alphabet  has  the  capital  to  firepower  innovations.  It  is  able   to  attract  top  talent  to  navigate  around  complex  government  processes  and   influence  political  processes.  It  can  convene  key  players  to  cooperate  on  initiatives.     Going  forward,  tech  giants  like  Alphabet  will  have  a  large  role  to  play  in  the  govtech   space.                     Accela&reached&3x&growth&after& raising&capital& Source:&PrivCo& Chris&ne)Hong) 29.34) 38.8) 50.5) 55) 59) 64.5) 70) 90) )140)) Revenue& ($&mn)& Number&of& employees& 146) 165) 210) 220) 230) 240) 260) 500) 700) 2007) 2008) 2009) 2010) 2011) 2012) 2013) 2014) 2015) CAGR) 10.6%) CAGR) 29.5%) $40&million& &&&&&&&&$143.5&million&& Funding& Accela&focused&on&scale&and&sustainability&before&accelerating&growth& through&funding&and&acquisitions&in&2013&
  22. 22. 22     Investors     There  have  been  three  notable  changes:  private  capital  flow  has  increased  in  the   past  few  years,  especially  in  early  stage  govtech  companies.  Traditional  venture   capital  firms  are  also  moving  into  this  space.       Increased  private  capital  flow     In  the  past,  few  govtech  companies  have  attracted  large  amount  of  private  capital,   especially  in  early  stages.  Venture  capital  firms  express  risk  factors  such  as  long   sales  cycle,  complex  processes,  and  return  profile  as  a  few  reasons  why  they  hesitate   to  invest.       There  was  a  spike  in  private  capital  flow  in  2015.  Established  companies  like  Accela   accounted  for  a  large  portion  of  the  capital  flow,  but  relatively  new  companies  like   OpenGov  or  Enigma  were  also  able  to  raise  capital.  Overall,  while  not  gradual,   private  capital  flow  increase  by  50%  compounded  annual  growth  rate  (CAGR)  from   2004  to  2015.            
  23. 23. 23           More  active  early  stage  investing     Many  companies  in  this  space  bootstrapped  until  they  reached  scale.  Data  shows   that  the  longest  living  companies  have  self-­‐sustained  for  an  average  of  16  years   before  receiving  investment.  Maximus,  a  company  founded  in  1975  that  helps   governments  administer  health,  child,  and  family  related  programs,  did  not  raise   private  capital  until  2010.  Accela  and  GovDelivery  also  grew  self-­‐sustainably  for   years.  They  raised  capital  in  later  stage  rounds  after  showing  promises  of  longer-­‐ term  sustainability.      
  24. 24. 24               In  recent  years,  many  companies  were  able  to  raise  capital  within  2  years  of  their   foundation.  Companies  can  now  attract  capital  from  early  on,  indicating  a  new   model  of  venture-­‐backed  growth  in  the  govtech  space.  The  most  prominent  example   is  OpenGov,  which  raised  series  A  of  $3  million  the  year  if  was  founded.  It  raised  a   total  of  $47  million,  enabling  the  acquisition  of  Ontodia  in  April  2016.       Longest(living(businesses(bootstrapped(for(an( average(of(16(years(before(receiving( investment( 35# 22# 19# 17# 11# 11# 9# 9# Maximus# TriTech#So6ware# Systems# Vision#Internet# ViewPoint# Boundless#SpaBal# GovDelivery# Granicus# SST# Years&from&foundation&to&/irst&investment&among&the&most&established&govtech&companies& Year& founded& 1975& 1992& 1995& 1995& 2002& 1999& 1999& 1995& ChrisBne#Hong# Average:&& 16&years& Footnote:(For(Maximus,(35(years(is(based(on(the(time(between(its(foundation((and(receiving(private(capital.(In(2010.(The(company(went(public(in(1997,(raising(money(from(the(public(market.( Source:(Deal(Flow(Database,(,(Angel(List,(CB(Insights,(Crunchbase( There%is%active%late%stage%funding%for% businesses%that%proved%long%term%viability% !40!! !113!! !199!! !230!! !216!! !34!! !61!! Seed! Series!A! Series!B! Series!C! Series!D!3!G! Debt/Conver;ble!note! Undisclosed/others! Amount'of'investments'for'type'of'investment' $%USD%million,%Total%=%$892%million% #'of'' deals' Average'' Deal'size' ($'mn)'' 78% 0.57' 25% 4.5' 18% 11' 9% 26' 5% 43' 9% 3.3' Chris;ne!Hong!Source:%Deal%Flow%Database,,%Angel%List,%CB%Insights,%Crunchbase%
  25. 25. 25                     Many%companies%raised%capital%within%2% years%% N%=%64% Years&before&receiving&/irst&investment& Average:&& 3&years& Chris&ne)Hong)Source:%Deal%Flow%Database,,%Angel%List,%CB%Insights,%Crunchbase% 35% 22% 17% 11%11% 9% 9% 8% 5% 5% 5% 4% 3% 3% 3% 3% 3% 3% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Maximus% TriTech%Software%Systems% ViewPoint% Boundless%Spatial% GovDelivery% Granicus% SST% EngagePoint% Loveland%Technologies% CitySourced% Accela% APPCityLife% StreetCred% Village%Defense% Vendor%Registry% AmigoCloud% MetroTech%Net% Cityzenith% Measured%Voice% Revelstone% LocalData% SnapSense% Munetrix% Aunt%Bertha% Junar% CivilMaps% PublicStuff% SmartProcure% Compology% WaterSmart%Software% Bidgely% LegCyte% Pondera% DoubleMap% Localisto% Citizinvestor% Open%Counter%Enterprises% ArchiveSocial% Loci%Controls% SeeClickFix% CityScan% Placemeter% Mark43% AutoGrid%Systems% Enigma% Captricity% Socrata% MuniRent% Remix% NextRequest% CitiVox% OpportunitySpace% OppSites% coUrbanize% Metropia%Inc.% PredPol% SeamlessDocs% BlueLine%Grid% FiscalNote% OpenGov% C3%Energy% OPOWER% Companies*like*OpenGov*are*scaling* through*early*stage*investments* Chris&ne)Hong) Bootstrap,)then)go) public)) Bootstrap)until) reaching)scale,)then) accelerate)growth) through)investments) and)acquisitions) Scale)through)early) stage)investments) Growth)models)
  26. 26. 26         Traditional  venture  capital  firms  are  moving  into  the  space     Traditional  venture  capital  firms  like  Andreessen  Horowitz  (A16Z)  and  New   Enterprise  Associates  are  moving  into  the  space.  A16Z  is  a  $4  billion  venture  firm   founded  in  2009.  In  2015,  it  led  two  rounds  of  Series  B  funding  for  OpenGov.  Marc   Andreessen  personally  joined  the  board  of  the  company,  commenting  that   “OpenGov  is  changing  the  future  of  government,  giving  public  agencies  and  all  levels   the  kinds  of  financial  tools  that  successful  companies  use  to  analyze  and  manage   their  business.  Better  data  means  a  better-­‐run  government  –  and  that’s  good  for  all   of  us.  I’m  thrilled  to  be  a  part  of  the  mission.viii”     New  Enterprise  Associates  (NEA)  is  a  venture  capital  firm  founded  in  1977  focusing   on  a  variety  of  investment  stages,  ranging  from  seed  to  growth  stage.  With  $18   billion  assets  under  management,  it  is  considered  one  of  the  largest  venture  capital   firm.  Since  its  founding,  the  firm  has  invested  in  650  companies  in  a  variety  of   industries  and  realized  over  500  liquidity  events.  The  company  has  made  four   investments  in  the  govtech  space,  including  Placemeter,  Opower,  Enigma  and  Fiscal   Note  since  2010.       However,  govtech  companies  account  for  a  small  proportion  of  these  funds’  overall   portfolio.  In  fact,  most  investors  in  the  space  have  invested  in  one  company.   Nevertheless,  the  entry  of  traditional  venture  capital  in  this  space  provides   credibility  and  validation  that  will  likely  spur  further  investment.   OpenGov:)Scaling)through)early)stage) investments) Chris&ne)Hong) Company(pro*ile( Growth(strategy( !  Description:(OpenGov)increases)7inancial)transparency) and)budget)intelligence)for)state)and)local)governments)) !  Founded:)2012) !  Employees)(2015):)~)150)people)) !  Financials)(2015):)Undisclosed) ) !  Funding:($47)million)through)4)rounds)of)funding)from) 24)investors)from)early)stages)of)the)company,)including) prominent)investors)like)Andreessen)Horowitz) !  Acquisitions:(Acquired)Ontodia)in)April)2016,)a)open) data)solutions)7irm) 3) 4) 15) 25) Series)A)2012) Series)A)2013) Series)B)2014) Series)B)2015) Funding(year(and(amount( $)million) !  Focusing(on(a(point(solution(( !  Created)a)product)focusing)on)one)speci7ic)vertical)based)on) government)need) ) !  Raising(capital(early(on(for(rapid(growth( !  Raised)capital)from)inception)to)accelerate)growth,)allowing) OpenGov)to)reach)more)than)500)governments)in)44)states) !  Quickly)expanded)sales)organization)and)built)expertise)in) navigating)) Source:)Press)Search,)Crunchbase)
  27. 27. 27                           Most%investors%invested%in%one%govtech% company% Number'of'investments'in'govtech'companies'(multiple'rounds'in'one'company'counts'as'one)' Chris&ne)Hong) 0) 2) 4) 6) 8) 10) 12) 14) 16) Code)for)America) Govtech)Fund) LaunchCapital) Andreessen)Horowitz) Kapor)Capital) SV)Angel) 2M)Companies) ABRY)Partners) Accomplice) Alrai)capital) Apsara)Capital) Band)of)Angels) Bold)Capital)Partners) Brevet)Capital)Management) Capital)Innovators) City)Light)Capital) Collabora&ve)Fund) Constella&on)Technology)Ventures) Correla&on)Ventures) Dan)Rose) Dorm)Room)Fund) E.ON)Venture)Partners) Eric)Schmidt) FirstMark)Capital) Founda&on)Capital) Frazier)Technology)Ventures) General)Catalyst)Partners) Goldcrest)Investments) Green)Visor)Capital) Informa&on)City) J.P.)Morgan)Partners) Joseph)Hlady) Khosla)Ventures) Labrador)Ventures) Launchpad)LA) Levensohn)Venture)Partners) Mark)Cuban) Menlo)Incubator) Morgenthaler)Ventures) New)Ground)Ventures) New)York)Life)Insurance)Company) OpenView)Venture)Partners) Pallasite)Ventures) Perle)Ventures) Portage)Venture)Partners) Qualcomm)Ventures) RNR)Ventures) RWE)Supply)&)Trading) ScoY)Cook) SF)Capital)Partners) Social)Capital) SoundBoard)Angel)Fund) Steve)Case) The)New)York)Times) Thrive)Capital) TriplePoint)Capital) Vanedge)Capital) Visionnaire)Ventures) Winklevoss)Capital) Source:%Deal%Flow%Database,,%Angel%List,%CB%Insights,%Crunchbase% Only%a%few%investors%made%more%than%one% investment% 14# #4## 4# 4# 3# 3# 3# 3# #2## #2## #2## #2## #2## #2## #2## #2## #2## #2## Code#for#Am erica#Govtech#Fund# Knight#Founda:on# New #Enterprise#Associates# Civic#Accelerator# InBQBTel#LaunchCapital# M otorola#Solu:ons#Venture# 500#Accelerator# Andreessen#Horow itz# Entrepreneurs#Roundtable# Founder#Collec:ve#Kapor#Capital# Sand#Hill#Angels#StartBup#Chile# SV#Angel# TechStars#W estly#Group# Top$investors$in$the$govtech$space$by$frequency$of$investment$(multiple$rounds$in$one$company$counts$as$one)$ Chris:ne#Hong#Source:%Deal%Flow%Database,,%Angel%List,%CB%Insights,%Crunchbase% Accelerators%
  28. 28. 28     4.  What  factors  will  accelerate  market  take-­‐ off?     The  govtech  ecosystem  has  grown  quickly  in  the  past  few  years,  driven  by  the   changes  in  government  behavior,  the  growth  of  govtech  companies,  and  the  influx  of   private  capital.  These  are  promising  signals  that  indicate  that  the  industry  is   heading  towards  an  inflection  point.  Industry  experts  point  to  a  three  key  enabling   factors  for  further  growth  of  the  space.     Governments  need  to  become  better  buyers     The  govtech  market  will  depend  ultimately  upon  governments  becoming  better   customers  by  reforming  procurement  processes.  With  a  rise  of  a  more  tech  savvy   generation  of  citizens,  reforms  are  imperative.  The  likes  of  San  Francisco  are  leading   the  charge,  but  changes  need  to  be  rolled  out  across  the  board  in  multiple  levels  of   government.  The  following  are  a  few  ways  experts  point  to  for  a  better  procurement   processes:       § Simplifying  the  entry  requirements  of  registering  as  a  vendor   § Prioritizing  standard,  best  in  class,  commercially  available  products  over   large  custom  projects     § Building  expertise  in  integrating  across  products  in  house  vs.  building  new   products  in  house   § Changing  rules  so  contracting  officers  can  adapt  more  quickly  in  how  they   buy  as  long  as  commitments  are  1  year  or  less   § Moving  to  smaller  procurements  vs.  bundling  all  problems  under  one   procurement,  which  makes  only  integrators  able  to  bid     An  important  enabler  of  large  scale  changes  is  the  inflow  of  technology  and  private   sector  talent  into  the  government  as  change  agents.  Notable  nonprofit  organizations   –  e.g.,  Code  for  America  or  Fuse  Corps  –  are  serving  this  role  as  talent  match  makers.   The  White  House  is  recruiting  talent  through  the  US  Digital  Service  and  18F.  The   scaling  of  these  programs  will  enable  governments  to  become  better  buyers  of   technology.            
  29. 29. 29     Big  bets  by  investors  with  government  expertise     Bigger  bets  in  the  industry  by  credible  investors  will  further  spur  growth.  Although   Marc  Andreeseen’s  investment  in  OpenGov  built  more  confidence  and  interest  in  the   govtech  space,  there  is  still  uncertainty  around  govtech  in  the  venture  capital   community.  Only  a  handful  of  investors  currently  understand  how  to  work  with  the   government.  A  credible  investor  bringing  in  capital  and  making  large  investments   will  legitimize,  validate,  and  signal  potential  in  the  market.       Successful  cases  of  growth  and  exits     The  industry  needs  to  see  more  successful  cases  of  growth  and  exits  for  more   companies  and  capital  to  flow  into  the  space.  According  to  industry  experts,  a  large   proportion  the  acquisition  deal  sizes  still  remain  under  $5  million.  Only  three  out  of   the  companies  in  the  database  went  public,  and  it  took  an  average  of  24  years  to  do   so.  While  there  is  uncertainty  in  how  long  it  will  take  to  see  more  successful  exits,   there  are  positive  signals;  new  entrants,  deal  flow  and  the  amount  of  capital  have  all   increased  in  the  past  few  years.  Companies  like  Accela  and  GovDelivery  are   acquiring  smaller  companies,  increasing  exit  opportunities.  We  expect  to  see  a   positive  trajectory  going  forward.                                          
  30. 30. 30     Conclusion     The  govtech  space  has  been  accelerating  growth  in  the  recent  years,  signaling  an   inflection  point  in  the  near  future.  Governments  are  becoming  more  tech  savvy   customers  and  changing  procurement  practices,  especially  at  the  local  level.  A   number  of  small  govtech  companies  have  emerged  in  the  past  6  years,  while  existing   companies  are  scaling  by  raising  capital  and  through  acquisitions.  Larger  tech   players  like  Alphabet  are  moving  into  the  space,  bringing  in  credibility  and  capital   into  the  market.  Prominent  investors  have  started  investing  in  govtech  companies,   especially  in  earlier  stage  ones.       However,  there  is  still  uncertainty.  The  acceleration  of  the  market  will  hinge  on   three  critical  factors:  further  changes  in  government  behavior,  big  bets  by  investors,   and  increased  cases  of  growth  and  exits.  The  industry  is  seeing  positive  signals  and   we  are  optimistic  for  the  role  of  the  govtech  industry  in  innovating  how   governments  operate.                                               Questions  or  comments?  Contact  
  31. 31. 31     APPENDIX               Tracked(( deal(*low( The$database$is$based$on$private$capital$ deal$2lows$of$selected$govtech$companies$ !  Companies$chosen$from$ “Govtech$$100”$$list,$and$ cross$checked$with$ Angel$List$companies$ under$“government$ innovation”$ !  98$companies$from$the$ US$chosen$ Selected(Govtech( company(list( !  Collected$basic$ information$such$as$year$ founded,$description,$ type,$and$location$ Aggregated(company( pro*iles( !  Tracked$private$capital$ investment$including$seed,$ series$AG$G,$convertible$ notes,$Mezzanine,$and$debt$$ !  Data$from$CB$Insights$and$ Crunchbase$ Chris&ne)Hong) Footnote:$ The$approach$was$adopted$from$Knight$Foundation$report$“The$Emergence$of$Civic$Tech:$Investments$in$a$Growing$Field.”$December$2013$by$Mayur$Patel,$Jon$Sotsky,$Sean$Gourley$and$Daniel$Houghton.$( publication_pdfs/knightGcivicGtech.pdf)$ Parameters(of(the(database( Chris&ne)Hong) Organization* !  The(list(of(top(govtech(companies(were(derived(from(’s(top(100(Govtech(companies( list,(and(cross(checked(with(Angel(List.(A(few(companies(were(excluded(because(they(were( classiCied(as(“civic(tech”(according(to(the(study’s(deCinition.(( !  The(database(includes(98(proCit(companies(of(varying(sizes,(including(companies(that(went(public( and(were(acquired.(Non(proCit(organizations(and(not(legally(registers(entities(are(excluded.(( Companies(identiCied(as(“civic(tech”(were(excluded((e.g.,( Timeframe* !  Deal(Clow(was(tracked(from(2004(until(April(2016.(Deal(Clows(tracked(by(CB(Insights(and( Crunchbase(are(included(in(the(database.(( Investments* !  Investors(include(angel(investors,(venture(capital(Cirms,(foundations,(accelerators,(private(and( growth(equity(Cirms.(Capital(Clows(from(going(public(or(government(funding(were(excluded.(( Geography* !  This(study(is(solely(focused(on(the(United(States(companies(and(deal(Clows(received(domestically( and(internationally(by(the(companies.((
  32. 32. 32                           “Smart'infrastructure”'companies'are' relatively'well'funded' Types&of&companies&surveyed& Amount&of&funding&per&type&of&company& Total'='$892'million' '487'' '119'' '286'' 47' 35' 16' Administration' Service'Delivery' Smart'Infrastructure' 16%& 36%& N'='98' 48%& 32%& 13%& 55%& Chris&ne)Hong)Source:'Deal'Flow'Database,','Angel'List,'CB'Insights,'Crunchbase' Govtech(companies(had(an(average(of(2(rounds( of(funding,(with(SST(leading(the(way( 0" 1" 2" 3" 4" 5" 6" 7" 8" 9" SST" Captricity" WaterSmart"So:ware" Accela" C3"Energy" Compology" FiscalNote" Loci"Controls" OpenGov" SeamlessDocs" SmartProcure" ArchiveSocial" Bidgely" BlueLine"Grid" Boundless"SpaNal" CityScan" CivilMaps" coUrbanize" Mark43" Metropia"Inc." Open"Counter"Enterprises" OPOWER" Placemeter" PublicStuff" SeeClickFix" Socrata" AmigoCloud" APPCityLife" Aunt"Bertha" AutoGrid"Systems" Enigma" Granicus" OpportunitySpace" PredPol"" Village"Defense" Buildingeye" CiNVox" CiNzinvestor" CitySourced" Cityzenith" DoubleMap" EngagePoint" GovDelivery" Junar" LegCyte" LocalData" Localisto" Loveland"Technologies" Maximus" Measured"Voice" MetroTech"Net" Munetrix" MuniRent" OppSites" Pondera"" Remix" Revelstone" SnapSense" StreetCred" TriTech"So:ware"Systems" Vendor"Registry" ViewPoint" Number'of'funding'rounds'among'the'64'companies'that'received'funding' !  Total'143'rounds' !  Average'of'2'rounds'per' company' !  Founded(in(1995,(SST(provides(gunshot(detection(systems(to( cities( !  Series(A(–(G,(with(Airst(round(in(2004( !  Investors(include(City(Light(Capital,(Claremont(Creek(Ventures,( Labrador(Ventures,(etc( ChrisNne"Hong"Source:(Deal(Flow(Database,(,(Angel(List,(CB(Insights,(Crunchbase(
  33. 33. 33       Companies  included  in  the  Deal  Flow  database     Company   Type   Description   2FA   Administration   2FA  Inc.  is  a  veteran-­‐owned  cybersecurity  company  created  on  the  single  vision  of   simplifying  authentication.   Accela   Administration   Accela  software  helps  government  agencies  automate  transactions  and  service   delivery  in  land  management,  asset  management,  licensing,  and  public  health  &  safety.   Aecosoft   Service   Delivery   Aecosoft  software  helps  governments  minimize  manual  workflows  and  go  paperless.   AmigoCloud   Administration   AmigoCloud  provides  mobile  Geographic  Information  System  (GIS)  solutions  to   government.   Appallicious   Administration   Appallicious  creates  open  data  visualization  products  for  government  agencies  on  its   proprietary  platform.   APPCityLife   Administration   AppCityLife  provides  an  end-­‐to-­‐end  platform  for  developing  city-­‐  and  agency-­‐  specific   mobile  apps.   ArchiveSocial   Administration   ArchiveSocial  provides  cloud-­‐based  social  media  archiving  for  records  management,   regulatory  compliance,  and  e-­‐discovery.   Aunt  Bertha   Service   Delivery   Aunt  Bertha  helps  people  find  social  services  and  education  programs  in  their   neighborhood  by  ZIP  code.   AutoGrid   Systems   Smart   Infrastructure   AutoGrid  Systems  analyze  the  large  amounts  of  data  generated  by  smart  meters,   building  management  systems,  voltage  regulators,  thermostats  and  other  equipment,   allowing  public  utilities  to  monitor  usage  and  automate  controls.   Bidgely   Smart   Infrastructure   Bidgely  helps  governments  monitor  and  manage  energy  use.   BlueLine  Grid   Administration   BlueLine  Grid  helps  first  responders  find  each  other  and  collaborate  in  the  field.   Boundless   Spatial   Administration   Boundless  provides  commercial  open  source  maintenance,  spatial  IT  infrastructure,   and  data  management  and  analysis  tools.   BS&A   Software   Administration   BS&A  Software  provides  municipalities  with  a  suite  of  management  tools  in  public   finance,  property  tax  and  assessment,  and  building  inspection.   Buildingeye   Service   Delivery   Buildingeye  maps  planning  application  data  in  cities,  allowing  planners,  businesses   and  the  public  to  see  what  is  being  planned  in  their  area.   C3  Energy   Smart   Infrastructure   C3Energy  makes  software  to  manage  power  generation  and  delivery.   Captricity   Administration   Captricity  converts  paper-­‐based  records  to  digital  data.   CitiVox   Administration   CitiVox,  Inc.  operates  an  open-­‐source  platform  that  enables  decision-­‐makers  visualize   data  around  issues  like  traffic,  crime,  public  health,  environment,  and  real  estate   development  to  drive  better  policies  for  government.     Citizinvestor   Administration   Citizinvestor  is  a  crowdfunding  and  civic  engagement  platform  for  local  government   projects.   CityScan   Smart   Infrastructure   CityScan  helps  inspect,  observe  and  predict  street-­‐level  activity  and  changes  that   impact  cities.   CitySourced   Service   Delivery   CitySourced  helps  cities  and  utilities  manage  their  assets,  ensure  regulatory   compliance,  improve  safety,  and  respond  to  customer  requests.   Cityzenith   Service   Delivery   Cityzenith  allows  cities  to  see,  manage,  and  use  the  disparate  data  it  holds  through  its   platform.  
  34. 34. 34     CivicPlus   Service   Delivery   CivicPlus  provides  governments  with  cloud-­‐based  solutions  including  websites,   HRMS,  emergency  notifications  and  mobile  apps.   CivilMaps   Administration   CivilMaps  brings  artificial  intelligence  to  collecting  and  analyzing  spatial  data  held  by   cities.   Compology   Smart   Infrastructure   Compology  builds  WasteOS,  a  dynamic  routing  system  built  around  the  unique  needs   of  the  waste  industry.   Connected  Bits   Administration   ConnectedBits  develops  mobile  applications  to  connect  governments  and  other   organizations  with  their  communities.   coUrbanize   Service   Delivery   coUrbanize  is  an  online  platform  for  real  estate  developers  and  communities  to  build   better  cities  together.   Court   Innovations   Service   Delivery   Court  Innovations’  Matterhorn  platform  enables  self-­‐service  for  resolving  disputes   and  minor  criminal  cases  entirely  online.   CrimeStar   Administration   CrimeStar  provides  investigation  and  records  management  software  for  law   enforcement  and  the  courts.   Datamade   Service   Delivery   DataMade  helps  people  track  and  understand  what  is  happening  in  their  community   through  data  visualization  and  storytelling  tools.   Department  of   Better   Technology   Service   Delivery   The  Department  of  Better  Technology  is  a  forms  software  platform  to  foster  greater   engagement  and  operational  efficiency.   DoubleMap   Smart   Infrastructure   DoubleMap  provides  an  automatic  vehicle  location  platform  to  university  and  public   transit  systems.   Dropcountr   Smart   Infrastructure   DropCountr  is  an  app-­‐based  technology  for  utilities  and  their  customers  to  help   conserve  water.   eGov   Strategies   Service   Delivery   eGov  Strategies  provides  governments  with  enterprise  payment  services,  content   management  and  additional  interactive  service  delivery  tools.   EngagePoint   Administration   EngagePoint  provides  multi-­‐program  enrollment  and  case  management,  along  with   enterprise  invoicing  and  payment  processing  for  government.   Enigma   Administration   Enigma  software  allows  governments  to  discover,  surface,  manage,  and  analyze  public   data  sources.   ESRI   Administration   Esri  provides  a  geospatial  platform  and  related  tools  for  public  agencies.   EvoGov   Service   Delivery   EvoGov  provides  CMS,  e-­‐government  software  and  custom  Web  development  to   municipalities.   FireStop   Administration   FireStop  helps  firefighters  share  critical  response  information  in  real  time  through  its   mobile  software  platform.   FiscalNote   Administration   FiscalNote  applies  artificial  intelligence,  big  data,  and  predictive  analytics  to  help   public  agencies  in  decision-­‐making.   GovDelivery   Service   Delivery   GovDelivery  offers  solutions  that  promote  transformation  of  the  citizen  experience  by   helping  government  reach  more  people  and  get  people  to  take  action  through  digital   channels.       GovInvest   Administration   GovInvest  helps  governments  visualize  and  understand  complex  actuarial  data.   GovQA   Service   Delivery   WebQA  provides  multi-­‐channel  customer  service  workflow,  portal  and  social-­‐ networking  technologies  to  governments.   GovSense   Administration   GovSense  is  cloud-­‐based  permitting,  licensing  and  financial  software  for  state  and   local  government.   Granicus   Service   Delivery   Granicus  is  a  cloud-­‐based  platform  for  government  transparency,  process   improvement,  legislative  efficiency,  and  citizen  engagement.  
  35. 35. 35     iWorQ   Administration   iWorQ  Systems  provides  municipal  management  software.   Junar   Administration   Junar  is  a  cloud-­‐based  open  data  platform  used  by  public  agencies  to  use  and  share   the  public  data  they  hold.   LegCyte   Administration   LegCyte  leverages  technology  to  make  legislation  easier  to  understand.   LocalData   Administration   LocalData  software  helps  municipalities  collect  and  analyze  information  about  their   urban  infrastructure.   Localisto   Administration   Localisto’s  civic  engagement  mobile  app  allows  government  to  crowdsource  data   about  civic  projects.   Loci  Controls   Smart   Infrastructure   Loci  Controls  helps  municipalities  extract  energy  from  trash  in  their  landfills.   Loveland   Technologies   Administration   Loveland  is  a  collaborative  platform  for  gathering,  using,  and  presenting  information   about  properties.   Mark43   Administration   Mark43  software  allows  police  to  collect,  manage,  analyze  and  share  information.   Maximus   Service   Delivery   MAXIMUS  software  and  services  help  governments  administer  health,  child,  family,   and  community  development  programs.   Measured   Voice   Administration   Measured  Voice  is  a  social  media  management  tool  for  government.   Metropia  Inc.   Smart   Infrastructure   Metropia  manages  individual  and  community  incentives  to  change  commuter   behavior.   MetroTech  Net   Smart   Infrastructure   MetroTech  helps  municipalities  use  data  from  video  cameras  and  sensors  to  manage   traffic.   MeWe   Administration   MeWe  provides  workflow  software  for  government  inspectors.   Munetrix   Administration   Munetrix  is  a  web-­‐based  suite  of  financial  transparency  reporting,  management,  and   forecasting  tools  designed  for  government,  schools,  and  their  citizens.   Municibid   Service   Delivery   Municibid  provides  a  platform  for  public  agencies  to  sell  surplus  and  forfeited   property.   MuniLogic   Administration   MuniLogic  provides  property  management  and  administration  software.   MuniRent   Service   Delivery   MuniRent  helps  local  governments  rent  underutilized  equipment  to  and  from  each   other.   MySidewalk   Administration   mySidewalk’s  platform  allows  cities  to  use  aggregated  demographic  and   socioeconomic  data  in  planning  and  operations.   NextRequest   Service   Delivery   PostCode  is  best  known  for  Next  Request,  a  service  for  managing  public  records   requests.   NIC   Service   Delivery   NIC  (NASDAQ:  EGOV)  develops  and  operates  official  government  websites,  mobile   apps,  and  secure  payment  processing  for  government  clients.   Open  Counter   Enterprises   Service   Delivery   OpenCounter  helps  new  businesses  obtain  their  permits  from  City  Hall.   OpenGov   Service   Delivery   OpenGov  software  allows  interested  parties  to  access,  explore,  and  share  finance  and   budget  information  held  by  government.   OPOWER   Smart   Infrastructure   Opower  (NYSE:  OPOWR)  is  a  cloud-­‐based  technology  for  utilities  and  their  customers   to  help  conserve  energy.   OpportunitySp ace   Service   Delivery   OpportunitySpace  provides  an  online  marketplace  for  under-­‐valued  and  abandoned   urban  real  estate.   OppSites   Administration   OppSitess'  platforms  bring  together  cities  and  investors  on  underexposed   development  opportunities  
  36. 36. 36     Periscope   Holdings   Service   Delivery   Periscope  provides  procurement  services  to  government.   Placemeter   Smart   Infrastructure   Placemeter  helps  cities  measure  movement  of  people  and  vehicles.   Pondera   Administration   Pondera  helps  public  agencies  use  analytics  to  identify  and  remediate  fraud,  waste,   and  abuse  in  large  government  programs   PredPol   Administration   PredPol  identifies  the  highest  risk  times  and  places  of  criminal  activity  in  near  real-­‐ time. m   Service   Delivery   ProductBio  informs  the  procurement  process,  including  how  products  comport  with   city  preferences  related  to  environmental,  social,  fiscal  compliance  criteria.   PublicStuff   Service   Delivery   PublicStuff  is  an  online  community  service  that  allows  individuals  to  notify  the  right   local  departments  to  get  things  fixed.   Administration   Recovers  provides  a  website  for  community-­‐by-­‐community  disaster  relief.   Remix   Smart   Infrastructure   Remix  allows  city  transit  planners  to  see  the  cost  and  demographic  and  fiscal  impact   of  proposed  route  changes.   Revelstone   Administration   Revelstone  data  analytics  and  reporting  platform  scaled  for  small  and  medium  sized   jurisdictions.   Seabourne   Service   Delivery   Seabourne  provides  data  integration,  consolidation,  and  visualization  tools  for  public   sector.   SeamlessDocs   Service   Delivery   SeamlessDocs  converts  PDFs  and  paper  forms  into  fillable,  e-­‐signable,  secure  online   digital  forms.   SeeClickFix   Service   Delivery   SeeClickFix  allows  residents  to  report  non-­‐emergency  neighborhood  issues  through   its  web  tool,  which  are  then  communicated  to  local  governments.   SmartProcure   Service   Delivery   SmartProcure  aggregates  the  purchase  histories  of  public  agencies.   SnapSense   Administration   SnapSense  provides  dashboards  to  track  data  about  what  communities  want.   Socrata   Administration   Socrata  provides  data  discovery  services  for  government.   SpotCrime   Service   Delivery   SpotCrime  makes  public  crime  data  available  through  a  public-­‐facing  crime  map  and   alerting  service.   SST   Smart   Infrastructure   SST  provides  gunshot  detection  systems  to  cities  across  the  country  to  help  law   enforcement  triangulate  gun-­‐related  crimes  as  they  happen.   StreetCred   Administration   StreetCred  is  a  software-­‐as-­‐a-­‐service  offering  created  by  police  officers  who   understand  how  police  officers  use  information,  data  and  leads.   Taser   Service   Delivery   TASER  provides  Electronic  Control  Devices  (ECDs)  to  law  enforcement  and   corrections.   TransparaGov   Administration   TransparaGov  provides  analytical,  management,  and  outcomes  measurement   software  to  governments.   TriTech   Software   Systems   Administration   TriTech  provides  computer  assisted  dispatch,  records  management,  and  EMS  billing.   Urban  Engines   Smart   Infrastructure   Urban  Engines  helps  cities  understand  how  residents  are  using  transit  services,  and   how  those  systems  are  performing.   Vendor   Registry   Administration   Vendor  Registry  provides  an  online  registration  and  bid  notification  system  that   solves  the  pain  of  both  governments  and  vendors  in  the  $500Bn  procurement  market.     ViewPoint   Administration   ViewPoint  provides  online  permitting,  licensing,  inspections,  and  code  enforcement   for  local  governments.   Village   Defense   Service   Delivery   Village  Defense,  Inc.  develops  a  real-­‐time  mass  notification  system  that  alerts   residents  in  a  neighborhood  when  a  crime  or  suspicious  activity  happens.    
  37. 37. 37     Vision  Internet   Service   Delivery   Vision  Internet  builds  custom  websites  for  city  and  county  governments.   WaterSmart   Software   Smart   Infrastructure   WaterSmart  Software  uses  mobile  and  online  technology  to  help  utilities  and  their   customers  monitor  use  and  conserve  water.   WiredBlue   LLC   Service   Delivery   WiredBlue  helps  police  departments  connect  with  their  communities  and  let  residents   communicate  with  them  securely.   Xcential   Legislative   Technologies   Administration   Xcential’s  software  replaces  paper-­‐based  rulemaking  processes  in  legislatures  and   regulatory  agencies  of  government.                                                                                      
  38. 38. 38     References                                                                                                                   i  Ron  Bouganim,  “Software  is  Eating  Government:  the  86-­‐Day  Sales  Cycle.”  LinkedIn  Slideshare.­‐gv5   ii  Dustin  Haisler,  “Defining  the  Govtech  Market”  E.  Republic.  April  2015.­‐market-­‐2/   iii  Ibid.     iv  Ibid.   v  Ibid.   vi  Solutions  4,  “Chief  Innovation  Officer  or  Chief  Curator?  You’re  your  City  Need  One?”­‐innovation-­‐or-­‐chief-­‐curator/#.V0XTD-­‐eDGko   vii  Ron  Bouganim,  “Govtech:  the  $400  Billion  market  hiding  in  plain  sight.”,  Jan   2016.­‐the-­‐400-­‐billion-­‐market-­‐hiding-­‐in-­‐plain-­‐sight/   viiiviiiviii  OpenGov,  “Marc  Andreessen  Joins  OpenGov  Board  of  Directors,”  OpenGov  Blog,  October  2015   (­‐andreessen-­‐joins-­‐opengov-­‐board-­‐of-­‐directors/)