Over the past 15 months or so, a California-based venture capital fund has been quietly raising millions of dollars for a handful of technology startups designed to make the government work more efficiently.
It’s called the GovTech Fund, and it’s the first-ever venture capital fund to specifically fundraise for startups dedicated to improving and empowering government technology.
As of Monday -- the official end of the first round of funding -- the fund has raised $23 million and invested in four initial companies, including a tool to help contracting officers at all levels of government make smarter buying decisions and an online platform that backers think could eventually replace the traditional town hall meeting.
What do they all have in common?
"When we think about ‘govtech,’ what we're talking about are those software and some hardware tools that effectively enable the day-to-day of government” -- or the “operating system” of government, as Ron Bouganim, managing partner and founder of the GovTech Fund, told Nextgov.
The four companies receiving investments in the initial round are:
- SmartProcure, a procurement-intelligence platform, which has aggregated more than 100 million purchase orders from about 3,800 different agencies at the federal, state and local levels.
- MindMixer, a community-engagement platform used by local governments and civic organizations to convene virtual meetings.
- AmigoCloud, a next-generation smartphone mapping tool built on open datasets that allows local officials to quickly map city sewer lines, for example, or the effects of a natural disaster.
- SeamlessDocs, a new tool for converting static government documents into easy-to-use smart versions, which allow users to fill out and sign forms entirely online.
Selling potential investors on the idea of government technology as a business opportunity wasn’t exactly a cakewalk.
"I think it's true historically that most investors … have been skeptical about encouraging their startups to work with government, and I think for very good reasons, frankly,” Bouganim said.
But Bouganim points to a couple of factors that have flipped the conventional wisdom on its head.
An Opportunity for Startups 'Like Never Before'
First, austere budgets at all levels of government are pushing agencies and local government to look for smaller and smarter solutions.
“They have to do a hundred things and they have very little money, and they just don't have $50 million or $100 million -- you know big dollars -- to give to the legacy, traditional vendors,” Bouganim said. “They just don't have it."
The other big trend is the emergence of the cloud, he said. “The startups that we invest in are built from the ground up on the cloud,” Bouganim said. For agencies, that’s no longer an unfamiliar concept.
"When you add up all those trends, what that leads to is an opportunity for startups like never before,” he said.
And he’s not alone in that realization.
The multibillion venture capital fund Andreessen Horowitz announced this spring a $15 million investment in OpenGov, a cloud-based platform that allows agencies to track budgeting and spending in real-time. Another firm, Captricity, which digitizes government documents, received $10 million in financing in July from Atlas Ventures.
“I think at the end of the day, there’s a genuine desire for government to work well,” Bouganim said. “People are pro-government -- they want it to work.”
Correction: An earlier version of this article misstated facts surrounding the creation of the GovTech Fund. Tim O'Reilly is an advisory board member. Abhi Nemani helped Ron Bouganim launch the Code for America Accelerator in 2012 but has no official connection with the GovTech Fund.