Govtech Fund, one of a handful of investment firms that focuses specifically on government-serving tech startups, has launched a $25 million second fund and announced the two startups it has put money into through the vehicle.
The firm, led by Ron Bouganim, now has about $50 million in investment money, which it focuses on early stage companies that home in on administrative government operations. As it brings its second fund online, Bouganim has also pulled together a product advisory council with some very high-profile members that will work with Govtech Fund’s portfolio companies to improve their products.
The council’s first five members are:
- Jascha Franklin-Hodge, Boston’s former CIO
- Luke McCormack, the former CIO for the U.S. Department of Homeland Security as well as the Department of Justice and Immigration and Customs Enforcement
- Jay Nath, co-executive director of the City Innovate Foundation and the former chief innovation officer of San Francisco
- Stephanie Rawlings-Blake, mayor of Baltimore from 2010 to 2016
- Kirk Talbott, Atlanta’s current deputy CIO and executive director for smart city initiatives
According to Bouganim, this is just the beginning for the council. He wants to fill it up with around a dozen people with expertise and backgrounds involving specific levels of government or specific verticals like law enforcement and procurement.
“There’s so many fantastic individuals who are former government employees … that we want to leverage all of that,” he said.
But he doesn’t want the council acting as a lobbying corps or a sales channel. So Bouganim had all the members sign a non-lobbying pledge stating publicly that their role is to help Govtech Fund’s companies with their products, not to introduce them to government buyers or pitch on their behalf.
Bouganim has invested in four companies so far through the second fund, though two of those companies are still in “stealth mode.” That brings Govtech Fund's total portfolio of companies up to 19.
The two Fund II companies he’s publicly announcing are Glimpse, which aims to help education administrators calculate return on investment for what they’re doing, and Sema, which uses artificial intelligence to help customers refactor and modernize their legacy systems.
That’s an approach that could help any organization with legacy systems, but the government IT world is especially familiar with the problem of maintaining legacy systems.
“In government there are many platforms that are run on COBOL,” Bouganim said. “So how do you modernize that? And the traditional answer is it’s very expensive, very human-intensive and it’s very long.”
It’s such a widespread issue in government that Bouganim views Sema as a potential foundation for the rest of Govtech Fund’s portfolio.
“We look at Sema as potentially an enabler for many of our other portfolio companies,” he said. “Many of our portfolio companies run into these challenges [with legacy systems] when deploying their products.”
Bouganim has also announced the funding of a company led by former co-founders of the startup OpenGov — through the first fund, not the second — called Camino. Mike Rosengarten is serving as CEO of the early stage company, and Nate Levine is chief strategy officer.
Camino, which has a handful of beta-testing city partners at the moment and plans to formally announce a project with the city of Santa Clarita, Calif., in a matter of weeks, has built a tool called Permit Guide. The tool walks builders and developers through local permitting processes using methods reminiscent of TurboTax — asking users simple questions and pulling on outside data to help automatically fill out the forms they will need to submit to government agencies.
Permit Guide also lays out the steps of the process and estimates how long it will take and how much it will cost in fees.
It’s in the same area of government work as big companies like Tyler Technologies and Accela, but Levine sees Permit Guide as a front-end complement to those companies’ back-end systems, rather than as competition.
“We’ve built this to work alongside the existing permit systems,” Levine said. “So whether it’s Accela, whether its TRAKiT, whether it’s a Tyler permit system, we’re working with all of those through existing customers that we’re already engaged with.”
Then, as customers go through the process, Camino will be able to tell the city which parts are taking the longest. Then they can compare benchmarks with other governments.
Many governments already do that, Levine said. It’s just not done very efficiently.
“They’re already sharing that, but it’s very ad hoc and it all sits on … listservs,” he said.
Rosengarten said he and Levine came upon Bouganim more or less through referral. As the duo were going through user research in 2017, people kept telling them they should talk to the Govtech Fund founder about the spaces they were exploring. So they did, and then kept in touch as they honed in on a product.
As an investor working exclusively in gov tech, Rosengarten said Bouganim has valuable insight into the nuances of the space Camino will be working its way into.
“In gov tech … you can’t just spend money and hope it works,” Rosengarten said. “And Ron understands that.”
For Bouganim’s part, the introduction of a second fund doesn’t mean the firm will be changing all that much. He’ll still be looking for early stage companies in the same spaces and still writing checks in the $250-500,000 range.
“Fund II is a continuation of Fund I,” he said. “I think we’ve learned a number of things from Fund I, that we had as sort of a hypothesis going into Fund I, and now doing it for four years we’ve found that this is truly a massive market. Any time we invest in one space we find half a dozen more problems.”
In fact, the people who put their money into the second fund are pretty much the same that made up the first. But it was easier this time. The first fund took 16 months and hundreds of meetings to set up.
“Fund II, by contrast, was basically an email to my existing investors, who signed up again,” he said.
Since the firm began, Bouganim said he’s found that most investments give him insight into an area with more problems than a single startup is trying to solve. Those are where the opportunities are.
“We’re just barely scratching the surface,” he said.