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Zencity Raises $40M to Fund Community Engagement Growth

The funding round is relatively unique, according to one expert, and underscores how community engagement tools are changing as consumer habits shift. Zencity also released an AI assistant tool for local governments.

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The 2023 Green Cincinnati Plan is informed by more than 40 meetings with neighborhood residents and 3,000 of their ideas for making their communities climate resilient. (Groundwork ORV)
Zencity has raised $40 million in a Series C funding round, one of the larger government technology investments so far this year and a sign that community engagement is ready for a new phase of growth.

The company, founded in Israel but with headquarters in both Israel and the U.S., also launched an AI assistant as Zencity tries to gain more local government clients in need of survey, data analysis, messaging, community policing and other tools.

U.S.-based StepStone Group led the venture funding round. It also included Israel-based TLV Partners, an existing investor.

Zencity has raised $91 million since its founding in 2016.

The capital will go toward hiring engineers and data scientists, improving customer service and crafting new products, especially those that work with artificial intelligence, Zencity CEO Eyal Feder-Levy told Government Technology.

“We’ve been doing AI since before it was cool,” he said. “We are doubling down on AI. The majority of the investment is going there.”

Underscoring that push, Zencity has launched its AI Assistant.

It is designed to help local officials create surveys and other engagement tools, answer questions about data in what the company calls “plain language” and perform other tasks that can be vital to engaging and communicating with constituents.

The tool, still in beta, is set for a summer release.

The product builds upon previous efforts by Zencity to bring ChatGPT into daily use for municipal work, part of what is an AI arms race among companies that supply local and state governments with tech.

“We believe Zencity could be the category leader in public engagement for the massive government market,” said John Avirett, partner at StepStone Group, in a statement. “Zencity is already used to support essential functions in cities from New York to Los Angeles and everywhere in between, and we see a significant opportunity for Zencity to consolidate this fragmented market by delivering next-generation, AI-powered tools that will likely displace legacy solutions over the years to come.”

Zencity says it has clients in more than 40 U.S. states, as well as in the UK and other countries. Some of the larger cities that use the company’s community engagement products include New York, London, Los Angeles and Dallas.

The company has headquarters in New York and Tel Aviv.

Feder-Levy, though, moved to Brooklyn late last year, he said, to be “closer to the majority of our customers.” Almost half of the company’s staff now works from the U.S., and new hires are planned for North America in the wake of this latest funding round.

The company also is eyeing “inorganic acquisition opportunities,” he said.

Zencity’s $40 million funding round stands out as “one of the larger later-stage growth rounds in gov tech in recent memory, particularly in the public administration space,” said Jeff Cook, a managing director at Shea & Co., an investment bank that has advised in more than 20 gov tech deals in the past five years.

Recent investment in larger growth rounds have tended to go to public safety tech firms, he said.

Cook said that Zencity offers a way for agencies to engage with constituents as they move toward social media and away from other digital challenges, which provides chances to mine online activities for insights that can shape policy decisions.

“I think in addition to how rare the deal is in the admin space, it’s also further validation of the category and how government is putting real money behind building and measuring trust with their constituents,” Cook told Government Technology via email.

Editor's note: This story has been corrected to show that Zencity has headquarters in both Israel and the U.S.
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.