George Dimopoulos, Partner and Co-Founder, VentureFriends
First and foremost, I would like to extend my warmest wishes to everyone reading these lines and share my hope that we will get out of this crisis soon with as few casualties as possible.
In the VC world, when we are referring to GovTech companies, we refer to innovative companies offering technology solutions and platforms aimed at transforming public services. Governments buy technology products and services to meet numerous core business and policy functions, which include offering e-services to citizens. There are at least 18 distinct sub-verticals, including applications of new technology in policing and security, health and social care, schools and education, smart cities and infrastructure etc.
Entrepreneurs and investors have traditionally stayed away from government, seeing the public sector’s ways of working inimical to technology’s pace and agility. Investors have been particularly wary here, considering that government is too slow and difficult of a customer. I have to admit that I was one of those skeptical ones when it came to investing in a company whose main client will be the central or local government. Thankfully, I was given the opportunity to change camps and take GovTech seriously, after my first meeting with a GovTech company that pitched us in our offices. I came to the realization that this is a big market that remains much untapped, and just because of the specific intricacies when it comes to procurement and contracting, it has kept innovation away.
More particularly, the investment opportunity takes the form of governments’ $8 trillion annual procurement budget, $400 billion of which is spent on technology alone. Historically, this gigantic market has been the provenance of large companies with deep enough pockets to handle government tender marathons. This is changing. Millennials, the oldest of whom turn 40 in 2020, are now in high office in government. As digital and network natives, they are reshaping how governments work. Governments including France, Canada, the UK, Poland and India are making their tender processes more startup-friendly, recognizing the benefits to the economy and citizen services. Cloud technology means than a ten-person startup can deliver a service to millions of citizens. Meanwhile, with many of the low hanging fruit in consumer and enterprise markets taken, technology entrepreneurs and investors are starting to look at government with a gleam in their eye rather than an allergic rash. Talent is driving opportunity too: entrepreneurs look at the perilous state of government and want to help transform it, but not from the inside.
“Governments including France, Canada, the UK, Poland and India are making their tender processes more startup-friendly, recognizing the benefits to the economy and citizen services”
In addition to delivering more intuitive, accessible, efficient, and user-friendly public services, GovTech can help governments to save significant amounts of money on their technology spend. Today’s government technology market is largely consolidated and inefficient, with a small number of incumbent consulting companies, systems integrators, and technology companies providing services to government agencies. This has created an environment in which public authorities overspend on complex legacy IT services, which in the long term, are bound to stop. Today there is an alternative to the old, cumbersome legacy system installed in every PC of a municipality from a “dinosaur” company of the ‘90s, it can be a cloud-based software service from a smaller and more competitive team which will not only allow easier maintenance and more functionalities but will also allow governments to realize significant cost-savings.
A decade ago, it was hard to imagine fintech startups taking on the giant banks. Over the next 2 years, public tech will reach that same tipping point, with an even bigger market and even higher stakes. The startup that made me a believer and helped me see the “light” is Novoville (Novoville. com), a citizen engagement platform. In all honesty, I took the first meeting out of courtesy and as a favor to a personal friend who happened to know the two founders. I wasn’t sure what to expect, and up to that point, my personal interaction with my municipality authority was limited to just paying my annual taxes. I avoided engaging with municipalities, and as far as I was concerned, they didn’t really care for me either.
Long story short, that meeting from two years ago was a revelation for me. It showed me that there is a big opportunity out there to bring change and innovation to a part of the economy and civilian life that so desperately needs it. We proceeded to invest in Novoville and have been part of their journey since then. The company started as an e-front desk for the municipalities, facilitating the citizen reporting of problems regarding the municipality, and providing real time progress updates of the reported issues. They have since added additional services for citizen consultation, smart mobility and parking solutions.
The problems that remained stagnant for many years finally found a solution with the right tools and ambition. Based on recent research conducted in UK with 3.5K participants, citizens call for faster resolution of issues in their neighbourhood (27%), improved personal communication (25%), and greater financial transparency (20%). To further expand my point and quoting from the report: “One-third of the respondents stated that they would like to be able to express their opinion on important local issues more frequently. However, the vast majority (81%) have never participated in a public consultation. This percentage is the highest among 25-34-year olds (84%). The significant lack of participation seems to result from the way public consultations are conducted to date. 65 percent of respondents stated that they would prefer to use digital channels, instead of the traditional consultation methods, to give their opinion to their local government, while almost half of those would prefer to use a mobile app specifically.” In an age where internet and mobile technology are prevalent, its counter-intuitive for people to still have problems communicating and sharing their opinions with the local authorities.
Platforms like Novoville are about to change this citizen-municipality disconnect, acting as online matchmakers in a sort of way between citizens and municipalities. Some encouraging data on the demand for such services are now available. From being present in one country just 18 months ago, Novoville is already collaborating with 56 cities across 4 European countries. 150,000 citizens use the app per week while the chatbot consultation solution has already assisted more than 30,000 citizens in expressing their opinion about local matters, thus allowing them to be more engaged with their local authorities.
We are living in extraordinary times as both citizens and local authorities are confronted with unprecedented challenges. The coronavirus crisis has brought forward the dire need for municipalities to have a direct and immediate way of communicating with their citizens for assistance, and collect info and data in real-time. GovTech companies are well positioned to help governments worldwide to bring forth the municipality 2.0 experience for citizens just like what Revolut, N26, Monzo did for banking experience in the last 2-3 years.