What is Govtech?
In 2014, in France, the public sector was employing 5.6 million people, which represents approximately 20% of the total job pool. In Europe, more thank 25 million people are working for an administration, a lot more if we take into account indirect jobs. Govtech refer to all the tools used by those public servants to accomplish their mission.
The Govtech Fund illustrates really well what Govtech is by talking about a spectrum, with citizens on one end and administrations on the other. On one side, we have Civictech, which is all the tools used by citizens to influcence the public space. Civictech helps citizens organize, improve their city, participate to public consultations... On the other side of the spectrum, there is the infrastructure and the tools used by the administrations to provide services to citizens. This is Govtech. To paraphrase the Govtech Fund:
"Govtech is the operating system of government"
Some examples of Govtech
- SeamlessDocs, an american company, helps administrations digitalize their forms
- OpenDataSoft allows administrations to publish and share their data online
- You guessed it, Manty is a Govtech startup helping public administrations make better decisions with data.
There are many more Govtech companies, you can look at the great report compiled by Public.io to have a complete overview of Govtech in Europe.
Govtech is a huge opportunity
The world's biggest organizations
In France, the public sector accounts for 20% of the entire job pool. It is by far the biggest french employer. Despite popular belief, France is not an exception in western countries, and even in the United States, 15% of workers are employed by an administration. The european median is at 24%, which means that for half of european countries, more than 24% of professionals are working for the public sector.
Governments are the world's biggest organizations
Not only are governments the biggest organizations in the world, they are also the most influential. Despite all the alarmists statements about the tech giants and the mega-corporations, the EU still fines Google, not the other way around. The french parliement is still the one voting laws, not Total. Governments have a profound influence on the life of the citizens, which can be experienced every day, when we walk in a street that was cleaned during the night, when we register our child to kindergarten, when we book a football field to play with our friends.
Massive investments in technology
According to Gartner, administrations spend 400 billion dollars each year in technology. So governments are the biggest and most influential organizations in our societes, and they invest massively to become more efficient and more modern. No one enjoys working with ancient tools, no one enjoys wasting resources, and public servants are not an exception. No one wakes up in the morning asking themselves how to misuse tax-payer money.
Govtech represent 400 billion $ a year
Why isn't anyone talking about it?
First of all because of lack of funding. Most VCs want quick returns and exponential growth. Administrations are notorious for demanding customized, unscalable products and decision cycles are sometimes measured in years, which are red flags for investors.
The slow decision cycles would not be an issue if the contracts were big enough, but that is not the case. A company can spend a year and several thousand euros working on a huge request for proposal and simply loose it, which is absolutely unconceivable for a startup.
The slow cycles, combined with the technophobic image of the public discourages entrepreneurs, investors and media. Why start a Govtech company when fintech will bring faster returns, better valuations and more attention? Why spend months in sales processes, when private deals can be struck in a few hours?
The next european unicorn will be a Govtech startup
An ecosystem is appearing
The first Govtech-only funds and accelerators appeared in the United States several years ago, and some are now emerging in Europe, such as public.io. Several Civictech or Govtech startups have been quite successfull and raised substantial amounts of money.
Novoville, OpenDataSoft or CityMapper are examples of european startups that are helping the emergence of an ecosystem that helps the diffusion of innovation in the public sector.
Moreover, politicians are also eager to develop this ecosystem. The city hall of Paris announced the creation of a Civic Hall, modeled after the one in New York. The Govtech Summit recently brought Govtech to the attention of the general public for the first time, bringing together governments, startups and investors.
European Govtech startups have an edge
Europe is the ideal place to build a Govtech startup. The european market is the biggest market in the world, european regulations harmonize obligations, and the digital single market allows a rapid development of european infrastructures.
The Family wrote an excellent article on the specific advantages of Europe, and the main point for Govtech startups is the following: B2B sales are forever. It is especially true for governments. The sale is hard, long, but once you have a client, it is easy to keep. A Govtech startup capable of delivering value to its customers year after year will keep 100% of its clients, and will generate enough revenue to attack more versatile markets.
The main problem is that most european entrepreneurs still think national. Borders have vanished for goods, people, capital and services, but they still exist in our heads and prevent the emergence of european unicorns. Opening a bank account in Germany feels like a hazardous process. Building a commercial team in Italy seems unrealistic at best. But it is actually perfectly possible to create a company with several teams in several countries, tailored to the specific advantages of each city.
A unique timing
The Govtech industry is still young, but with an immense market, customers investing massively in technology and a strong trend pushing for new product adoptions, it is certainly one of the most promising industry for the next few years. Budget constraints, cloud pervasiveness and transparency demands are pushing public administration towards technology. It is hard to imagine a modern government that would not take advantage of the latest innovations to define and implement public policies.
European companies have unique advantages, and if regulations keep moving in the right direction, the environment will be ideal for a Govtech european unicorn.
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