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Investor Confidence in Cloud-Based Government Apps Grows

Equity fund pumps $40 million into California-based civic technology provider.

by / October 17, 2013

Thursday’s announcement that Accela Inc. has secured $40 million in new funding may signal emerging investor confidence in cloud-based services for government – and perhaps marks a step toward creating a sustainable civic hacking marketplace.

The California-based firm, a leading provider of self-service permitting and licensing applications for state and local agencies, received a $40 million commitment from Bregal Sagemount, a New York-based growth equity fund. The infusion of cash lets the company make investments and acquisitions aimed at building an ecosystem of applications, developers and users that live on the cloud-based Accela Civic Platform, said Accela CEO Maury Blackman.

“We see ourselves as the Salesforce of government permitting and licensing,” Blackman said.

The company’s on-premises software products historically have been popular with government customers, but the company is focusing more energy on hosted offerings as public-sector resistance to subscription-based services diminishes. The shift to the cloud reacts to growing demand from the company’s traditional customer base of large to mid-size agencies, and potentially opens its products to smaller jurisdictions.

“One challenge for our business has been that the market is relatively small. There are 18,000 permitting and licensing agencies in the U.S, but only about 1,000 of them can afford a solution like ours if they buy it in a traditional model,” Blackman said. “If you start selling these things in the cloud, it really changes the dynamic.”

Until now, relatively few investors have been willing to pump money into hosted apps aimed at the public sector, he added. “This validates that investors see government as a viable market for cloud technology.”

Besides strengthening its own service offerings, the company is positioning its Accela Civic Platform as a vehicle for developers to market and monetize innovative government applications. Open data and civic hacking activity has grown steadily -- and drawn widespread media attention -- since former Washington, D.C., CTO Vivek Kundra launched his groundbreaking Apps for Democracy contest in 2008. But many have questioned whether hackathons and similar events can generate apps that are truly valuable to governments and sustainable over the long term.

Last year, Accela released mobile software development kits that let third-party developers -- and government agencies -- build custom applications on its platform. And Blackman contends that growth of his and other cloud-based development platforms is one key to turning civic hacking into a viable marketplace.

Apps developed for the Accela platform, for instance, can be adopted relatively easily by any jurisdiction that subscribes to the Accela service, giving app developers access to hundreds of public-sector customers. As these hosted platforms reach critical mass, they offer government agencies a growing selection of civic apps that are both affordable and quickly deployed.

The platform-based approach potentially makes it easier for developers to launch new companies built around innovative government applications. It also may help government agencies turn their own apps into revenue sources. Cities like El Paso, Texas, are creating custom apps on the Accela platform that could be marketed to other platform users, noted Blackman. “They developed an app that gives citizens faster information about missed garbage pickups that could easily transfer to other cities.” 

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