Gov Tech's Moment with Private Equity

GovTech100 companies are likely to have an outsized role in making government better. Many now come with deep pockets thanks to investments from private equity.

Government Technology's ninth annual list of gov tech companies that are changing the way government works comes with an added twist — the injection of large sums of capital through the private equity market. Agencies are attracted to the promise of increased capacity and agility but are not always prepared for the disruptions that come from these increasingly well-funded players.Private equity's bullish embrace of gov tech hinges on its recession-resistant allure and pivotal role in digitizing the way governments work, seeing opportunities in closing the innovation gap between the private and public sectors in delivering services and optimizing operations. This year’s GovTech100 features companies with the majority of their revenue coming from sales to government and reflects a diverse mix of established names and newcomers, like CivicEye and Versaterm. This episode features Government Technology Associate Editor Ben Miller, who helped curate this year’s list, and Thad Reuter, who wrote the cover story on the impact of private equity on the gov tech market.SHOW NOTESHere are the top takeaways from this episode:Gov Tech's Appeal to Private Equity:

• Resilience: Gov tech's perceived recession-proof nature and essential role in providing digital services for governments contribute to its attractiveness to private equity.
• Digital Transformation: Increased cloud adoption and the shift from analog to digital processes in government services make gov tech an appealing investment.

Factors Driving Gov Tech's Fertility:

• Software-as-a-Service Growth: The expansion of SaaS and cloud-based services contributes to gov tech's appeal for private equity investors.
• 'Amazon Effect': Consumer expectations for quick, efficient services influence gov tech companies to emulate Amazon's one-click model.
• Modernization Needs: The push to bring governments into the 21st century creates ample opportunities for growth and investment in gov tech.

Challenges in Emulating Amazon's Efficiency:

• Customer vs. Constituent Service: Varied expectations and differing service models pose challenges in replicating Amazon's efficiency in a government context.
• Limitations of Consumer-Based Models: The unique role of government in serving all constituents, regardless of choice, presents limitations in mirroring corporate models.

Private Equity's Focus on End-to-End Platforms:

• Investment in Growth: Private equity's interest in developing end-to-end platforms drives investments in companies like Accela and Granicus.
• Potential for Similar Growth: Notable growth in certain companies indicates potential for similar patterns in the gov tech sector.

GovTech 100 — Mix of Established and New Entrants:

• Shift in Focus: This GovTech100 list emphasizes emerging startups and serial entrepreneurs committed to public service innovation.
• Notable Newcomers: Public safety entities like CivicEye, Fieldware and Versaterm, alongside niche-focused companies, join the GovTech100.

Engaging with Gov Tech Startups:

• Disruptive Solutions: Startups bring innovative solutions and responsiveness to pressing government needs.
• Potential for Uncovering New Approaches: Engaging with startups might reveal new perspectives and methods to address long-standing issues.

Anticipating Evolution in Gov Tech Companies:

• Flexibility and Adaptability: Agencies engaging with startups should anticipate shifts in focus, offerings and potential expansions as these companies evolve through investment cycles.
• Evolution in Offerings: Growth might lead to changes in services and expansions, offering both challenges and opportunities for agencies.

Our editors used ChatGPT 4.0 to summarize the episode in bullet form to help create the show notes.