Civic Tech & GovTech: An Overlooked Lucrative Opportunity for Technology Startups

Civic technology, or Civic Tech, is defined as a technology that enables greater participation in government or otherwise assists government in delivering citizen services and strengthening ties with the public. In other words, Civic Tech is where the public lends its talents, usually voluntarily, to help government do a better job. Moreover, Omidyar Network (which invested over $90 million across 35 civic tech organizations over the past decade) emphasizes that like a movement, civic tech is mission-driven, focused on making a change that benefits the public, and in most cases enables better public input into decision making.

As an emerging sector, Civic Tech is defined as incorporating any technology that is used to empower citizens or help make government more accessible, efficient, and effective. Civic tech isn’t just talk, Omidyar notes, it is a community of people coming together to create tangible projects and take action. The civic tech and open data movements have grown with the ubiquity of personal technology.

Civic tech can be defined as a convergence of various fields. An example of such convergence has been given by Knight Foundation, a national foundation with a goal to foster informed and engaged communities to power a healthy democracy:

Source: The Emergence of Civic Tech: Investments in a Growing Field

In the report called Engines of Change: What Civic Tech Can Learn From Social Movements, Civic Tech is divided into three categories:

  • Citizen to Citizen (C2C): Technology that improves citizen mobilization or improves connections between citizens
  • Citizen to Government (C2G): Technology that improves the frequency or quality of interaction between citizens and government
  • Government Technology (Govtech): Innovative technology solutions that make government more efficient and effective at service delivery

In 2015, Forbes reported that Civic Tech makes up almost a quarter of local and state government spendings on technology. More importantly, spending on Civic Tech is growing 14 times faster than spending on traditional technology. The third category, GovTech, is a particularly interesting one given that governments spend $400+ Billion dollars a year on GovTech. The US government, in particular, is a massive entity that requires collaboration from the tech community to run it effectively (it employs roughly 15% of the entire US labor force, making it the single largest enterprise in America, as the Govtech Fund reports).

Civic tech initiatives address a diverse range of industries – from energy and payments to agriculture and telecommunications. Mattermark outlines the following top ten industries associated with government and civic tech:

A company that's not been mentioned yet, but certainly deserves a special attention is Ayasdi, which counts the US government as a client among major consumer brands and financial institutions. While the world is looking for the next big thing among newcomers, the real big thing – Ayasdi – is gradually conquering the most powerful players across industries.

Ayasdi helps companies around the world use artificial intelligence to automate business processes formerly thought of as exclusively in the domain of humans, to enable intelligent applications that augment and even surpass human capabilities and to make new discoveries in big data and high dimensional data. Developed by Stanford computational mathematicians, Ayasdi’s unique approach to machine intelligence leverages breakthrough mathematics, highly-automated software and inexpensive, scalable computers to revolutionize the process of converting big data into business impact.

The company gathered quite an influential ‘fan club,’ counting among clients Credit Suisse, Citi, United States Federal Reserve System, Siemens, The US Department of Homeland Security, UCSF, USDA, The Intelligence Advanced Research Projects Activity (IARPA), United States Department of Defense, Merck, and more. Ayasdi built partnerships with companies like Deloitte, Cloudera, Hortonworks, Intel, Teradata, among others, not mentioning notable investors.

There are certainly much more examples of GovTech/civic tech companies, and just tech startups offering solutions across the board that can significantly improve the way governments are run, and services are delivered to citizens and businesses. More importantly, GovTech should no longer be considered a charity and solely non-profit type of venture. Recently reviewed global P2G payments flows only, for example, are estimated to be at $7.7 trillion and represent a significant feature of the global payments landscape. For the low- and lower-middle-income countries alone, the number hits $375 billion (~50% of annual government expenditure).

As we have emphasized earlier, governments spend $400+ billion dollars a year on GovTech, and a range of startups are already shaping their businesses models to take advantage of a largely overlooked around the world opportunity.