By combining some of the top SaaS providers in their respective fields with the clout and resources of a publicly traded company, GTY hopes to corner the market for widespread government adoption of cloud software.
Five months after it announced the acquisition of six software-as-a-service companies, GTY Technology Holdings has completed its merger with Bonfire, CityBase, eCivis, OpenCounter, Questica and Sherpa Government Solutions. Each retained its own staff and leadership team while becoming a wholly owned subsidiary of GTY, which started selling today on Nasdaq at $10 per share.
CEO Stephen Rohleder said GTY was formed in 2016 for the purpose of becoming the go-to brand for government cloud software through the strategic acquisition of best-in-class providers. Prerequisites for acquisition included a strong reputation for an SaaS solution as demonstrated by growth; a large client base to which GTY could cross-sell; and a strong leadership team.
“What we’ve done is, over the past 12 to 18 months, really picked some of the best of the best in a very fragmented marketplace,” he said. “We interviewed close to 80 companies, and we picked these guys because of their track record in their specific fields.”
Two of the subsidiaries, Questica and Sherpa, specialize in budgeting; Bonfire focuses on procurement and sourcing; eCivis does grant management; OpenCounter is for permitting and licensing; and CityBase facilitates payments for utilities and other services.
Rohleder said the combined entity now has more than 300 employees and 2,000 clients across the U.S. and Canada, without a lot of overlap. In a referral marketplace, he said, where success depends on word-of-mouth and misfires are costly, the ability to cross-sell is critical.
Regarding GTY’s long-term strategy, Rohleder talked about meeting a “perfect storm” in the gov tech market during the next 10 to 15 years: an increasing demand by citizens for a digital experience, the saturation of available SaaS solutions that have jump-started entrepreneurial development, the transition among IT departments from capital expenditure investments to operational expenditures, and the retirement wave of baby boomers being replaced by millennials.
“We think the total addressable market is somewhere around 40,000 to 50,000 entities, and that’s mid-size cities, counties, smaller states, et cetera. If you look at the competitive set, some of those people are underserved or not served by any solution, so they have spreadsheets and manual operations,” Rohleder said. “All this is coming together to really drive this wave of transformation in the gov tech space, and I think GTY is going to be positioned to take advantage of that.”
He added that GTY will acquire more companies in the future.
Bonfire CEO Corry Flatt said his company, which already had backing from investment firms such as Battery Ventures and Y Combinator, views the acquisition not as an exit but an on-ramp. He anticipated faster growth, along with some collaboration and minor product integrations, under the GTY banner.
“There’s an iconic company to be built that’s dedicated to bringing SaaS and cloud to state and local government beyond just these very narrow, functional pieces, and we fell in love with that idea,” Flatt said. “The public sector is one of the last remaining parts of the economy that has yet to mass-adopt cloud software. Five percent of the typical IT budget of a public agency is spent on cloud software. It’s miniscule … These workflows are going to shift from on-premises, in Excel, or paper-and-pen in a lot of cases, into the cloud. Whatever companies, or company, captures that shift, gets to write the rest of the story.”
Written out of that story last year, at least where GTY is concerned, is cloud software provider OpenGov. Once courted to be the largest company in GTY’s portfolio, OpenGov was excluded from GTY’s final offer and filed a lawsuit in November 2018 with the U.S. District Court of Northern California, alleging GTY breached its contract and wrongfully used proprietary information. GTY filed its own complaint with the U.S. District Court of Southern New York one day prior, denying the allegations and saying OpenGov asked GTY for $50 million under false pretenses of a broken contract.
Rohleder declined to comment on the lawsuits, which are still pending.
Editor's note: A previous version of this story misstated GTY's initial share price as $33.89.