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Startups focused on government don’t exactly attract a deluge of early-stage investors, largely because of how hard it is to sell new products to unhurried bureaucrats.
That may begin to change. Earlier this summer, Andreessen Horowitz invested in a government-focused startup, and now there’s a fund devoted solely to the sector.
Govtech Fund, a $23 million fund managed by entrepreneur and Code for America mentor Ron Bouganim, officially launched Monday, announcing it has already invested in four companies.
“Historically, VCs have looked at government as a challenging place for startups,” Bouganim said. It used to take startups several years to get through the government procurement process before they could make sales.
Things began to change, however, as government officials became more comfortable with cloud-based technologies, which lowered the cost of providing services, Bouganim said. “The adoption of the cloud and other things means startups can sell into government in 60- to 90-day sales cycles,” he said.
Startups that can save the government time and money could have a profound affect on how Washington, D.C., and other municipalities operate, helping to slash spending.
The federal government alone spent approximately $82 billion in 2013 on technology services. And that doesn’t include what the roughly 89,000 local communities spend on technology each year.
Several of the new startups focused on government are providing services that help local officials better track their spending or save money.
In May, Mountain View, Calif.-based management software startup OpenGov landed a $15 million Series B round led by Andreessen Horowitz. OpenGov’s cloud-based software lets government officials better visualize their budgets and track spending.
One of Govtech Fund’s first investments, SmartProcure, collects and provides government purchasing information that helps local officials to see if they’re getting the best deal and allows vendors to see rivals’ pricing information.
Bouganim launched the fund with the help of Tim O’Reilly, the CEO of O’Reilly Media and a vocal proponent of using open source technologies to make government more efficient and accountable to the public.
Bouganim has spent the last few years as an angel investor, mentoring startups at Code for America, a nonprofit devoted to encouraging the development of more apps or services that can help modernize government and civic participation.
Two of the companies that Govtech has funded so far, SmartProcure and MindMixer, participated in Code for America’s incubator program. Another, AmigoCloud, is in the nonprofit’s current accelerator class.
AmigoCloud is a mobile mapping technology that provides wireless Geographic Information System services, while MindMixer provides an easy way for local officials to poll or get feedback from residents about proposed actions. The company’s other investment, SeamlessDocs, is a cloud-based document service that allows users to create online forms and e-sign submissions from mobile devices.
The companies that have received investments from his fund are gaining some traction, Bouganim said, because they appeal to local “chief CTOs with an iPad in one hand and this 1980s technology in the other.”
“Legacy technology is a problem in government around the world,” he said.
This article originally appeared on Recode.net.
