Hongsuhyeon

Govtech, or government technology, is a body of technology infrastructure that governments use to manage internal operations and deliver services to its citizens.

Definition

There are various definitions of govtech, especially in relation to civic tech.

The Govtech Fund defines government technology is a body of technology infrastructure that "governments use to manage internal operations and deliver services to its citizens. ” Operations and services include various functions such as permitting, pension management, tax collection, and budgeting. Companies in the govtech 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 sector."

According to an Govtech Industry Primer, govtech companies primarily focus on the operations of the city, state, and local governments and focus on 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 channels like email, text, and social communication – would be considered a govtech company.

According to the E.Republic, there are several categories of technologies under the definition of govtech:

• 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.

Ecosystem

The govtech report analyzes the burgeoning ecosystem of the industry. The players are the following:

• Government
• For profit companies
• Investors
• Accelerators and Foundations

Recent Developments

Government

Governments are organized in the federal, state, local and agency level.

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 districts [Dustin Haisler, “Defining the Govtech Market” E. Republic. April 2015. http://labs.erepublic.com/govtech-market-2/]. 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 level [Dustin Haisler, “Defining the Govtech Market” E. Republic. April 2015. http://labs.erepublic.com/govtech-market-2/].

In recent years, there has been changes in the government in relation to govtech. 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.

San Francisco and New York are 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 customers. ” 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.

For Profit Companies

There are four types of for profit companies in the govtech space:

• Traditional 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

Many govtech focused companies have emerged from 2010. The Govtech Primer, for example, shows that 68 of the 98 most notable govtech companies have emerged post 2010. Existing govtech focused companies are also scaling through acquisition, especially because scale is a competitive advantage for govtech companies. Moreover, large technology 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.

Investors

Investors can be categorized into: venture and growth capital, govtech focused venture capital, strategic investors, impact investors, private equity

Traditional venture capital firms look for investments that will yield above market returns. They generally have a diversified portfolio with strategic pillars. Govtech focused funds, like the Govtech Fund, focus exclusively on govtech investments. Strategic investors invest for strategic purposes beyond market returns. 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. 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. The Omidyar Network is a fund that is active in the govtech and civic tech space. Private equity investors participate in later stage deals.

In recent years, there has been an increase in private capital flow in earlier stage companies. Many govtech focused companies were able to raise capital within 2 years of their foundation [1]. 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 [2].

Accelerators and Foundations

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. Foundations like the Knight Foundation, Citi Foundation, and Bloomberg Philanthropies also play a role in shaping the industry through activities like grants and acceleration programs.