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GovTech Conference Panel Predicts Continued Market Growth

At the InState GovTech Summit in Austin, a panel of venture capitalists was optimistic about the ongoing trend of growth and investment in public-sector technology, particularly among startups and newer companies.

It’s been a wild ride for the government technology market since the start of the pandemic, and that energy could reach new heights in the coming months and years.

That was among the key messages Monday afternoon from investors at the inaugural InState GovTech Summit in Austin.

A panel of venture capitalists offered their views about why public agencies and their technology departments can expect to face more decisions about technology in the near future — technology increasingly developed and sold by startups and other young companies.

In general, venture capital is the hottest it’s been in recent memory, according to the panel, and that activity is helping to boost investment in government technology at all levels.

“There is a lot of under-penetration of tech and a lot of old business models,” said Chris Grizzard, director of Bayshore Capital, of the government and insurance tech markets.

Combined with the need of governments to quickly deploy digital services during the pandemic, the result of heavy venture capital investment has been a growing industry.

“It’s intense,” said Ron Bouganim, managing partner of the Govtech Fund, which has invested in 30 companies since its launch in 2014. “These past six months, I’ve never seen anything like it. There are more citizens every day who are digitally native and expect a certain level of service. COVID just dumped gas on the fire.”

Indeed, recent analysis from Government Technology underscores the point made by the investors on the panel, which kicked off the conference and whose audience included many technology entrepreneurs. That analysis suggests that in the third quarter of 2021, transaction volume for technology deals hit approximately $2.2 billion, with strategic acquisitions driving much of the activity.

The panel — which also included Scott Murphy, chief investment officer and managing director for Advantage Capital, and InState Managing Director Ryan Brennan — gave some advice to audience members hoping to score fresh capital as more government agencies continue their digital transformations.

Bouganim said that his firm tends to favor entrepreneurs with experience.

“A lot of mistakes can be made,” he said. “One of the biggest issues right now is talent.”

He said the companies that he and his colleagues analyzed often had a hard time attracting or keeping technology professionals and other staff — an issue that can eventually impact what software and other tools public-sector customers decide to buy.

“It’s become a bottleneck for growth,” he said.
Thad Rueter writes about the business of government technology. He covered local and state governments for newspapers in the Chicago area and Florida, as well as e-commerce, digital payments and related topics for various publications. He lives in Wisconsin.