No One Gushes About Govtech, But It Can Produce Some Nice Returns

When dealing with government entities, consumers and businesses tend to set the bar for success pretty low.

No one is expecting fun and delight interacting with the DMV, planning department, or any other agency charged with enforcing rules and collecting payments. If we can complete a task without a giant headache, we鈥檙e reasonably satisfied.

In recent years, startups have quietly made some major contributions toward meeting this low bar. Whether it鈥檚 modernizing parking payment or streamlining permit applications, venture-backed software and app developers are behind an assortment of tools that give us a bit less to complain about when dealing with the government.

It鈥檚 a theme that鈥檚 resonating with investors and acquirers alike.

OpenGov valued at $1.8 billion

On the M&A side, last week software provider generated one of the biggest exits to date for the govtech sector. The San Francisco company agreed to to existing shareholder at a $1.8 billion valuation.

Founded in 2012, OpenGov develops software for government activities such as budgeting, procurement and permitting. Its tools also often power public-facing functions, including sharing budgets and reports, collecting bids for public projects, or performing more specific jobs, like short-term rentals.

The software platform is apparently seeing growing demand. Per , OpenGov had a 76% year-over-year in the fourth quarter.

Previously, the company鈥檚 business model also proved attractive to venture investors. OpenGov had at least $178 million in known financing from lead backers including , 1, and Cox.

Govtech venture investment going strong

More broadly, developing software and apps for government customers represents a rather large market. worldwide spending in the space will top $17.5 billion this year, with continued growth ahead.

In tandem, startup investors have remained quite active in govtech dealmaking, even as they鈥檝e pulled back funding to many other industries. To illustrate where capital is going recently, we used to aggregate a sample list of 18 prominent companies in the space, most of which last raised funding in the past year.

Some of the larger rounds have been pretty recent.

Last month, for instance, , a Silicon Valley-based alum, picked up $31 million in a . The startup, which was founded less than three years ago, handles permit preparation, submission and tracking nationwide for developers and contractors.

We also saw some good-sized financings in January. One was to Delaware-based , which picked up fresh financing from a couple months after securing a $40 million . The company provides secure software development tools for entities that work with the and intelligence organizations.

Indiana-based , meanwhile, closed a $43 million round backed by growth investor . The company offers a cloud-based system for water management used by many municipalities.

Other prominent funding recipients are later stage, with substantial funding to date.

In this camp is Kansas City-based , a payments platform for government agencies to collect things like vehicle registration fees, fines, utility bills and property taxes. Founded in 2013, the company has raised more than $190 million in funding to date, with as a lead backer.

On the West Coast, , a provider of cloud software for government customers, is one of the more senior players in the govtech space. The San Ramon, California-based company has raised over $215 million to date, and counts private equity firms and as major stakeholders.

Don鈥檛 expect rave reviews

In addition to attracting major cash, govtech startups have also considerably expanded their reach to customers. These days, most of us probably have some interaction with govtech startup products in our day-to-day lives, whether it鈥檚 paying the water bill or looking up taxes.

Typically, it鈥檚 not stuff people gush about. You won鈥檛 be raving to friends about the great user interface for the tax collector鈥檚 website or the app pinging that it鈥檚 time to top off the parking meter.

But, that鈥檚 not really the point. At the end of the day, any channel that helps us spend less time on government payment, permitting and compliance tasks ought to be welcome. After all, that鈥檚 time that could be spent doing anything other than that.