Editor’s note (15 October 2026): Editor’s note, October 2026: this article was written in April 2024. The spending figures relate to 2020 to 2021 and some programmes mentioned have changed, so please check current sources before using the numbers.
In short: Investors in GovTech companies in Scotland and the wider UK look first at the team, then at scalability, a clear value proposition and realistic financial projections. They favour experienced management, products that can travel between governments, and credible revenue plans that account for every cost of developing and selling to the public sector.
Key takeaways
- Investors are reluctant to back small ideas because the risk is the same but the potential gain is lower, so scalability should be considered from the outset.
- A unique value proposition solves a customer problem, delivers specific benefits and explains why the customer should choose the company over competitors in a specific market segment.
- Outsourcing engineering is generally not viewed favourably by investors, and experience and track record in the technology team matter as much as graduate talent.
- Investors often first evaluate the skills and experience of the management team, and a balance of engineering and business development expertise is essential in the early stages.
- Revenue projections should be realistic and backed by in-depth analysis of all the costs of developing and selling the product, with revenue derived mainly from government customers.
How big is the UK GovTech market?
The GovTech market in the UK is substantial and growing. The UK government is one of the largest employers in the country, spending billions of pounds annually on various services and initiatives. In the 2020-2021 financial year, the UK government’s total managed expenditure was approximately £1,094 billion, with a significant portion allocated to technology and digital transformation. The UK government has also committed to investing £1.9 billion over five years to support the National Cyber Security Strategy, demonstrating the increasing importance of technology in the public sector.
GovTech in the UK caters to a wide range of industries, from healthcare and social care to transportation and environmental protection. With a population of over 67 million people, the UK government represents a substantial and diverse market for technology solutions. As the demand for digital services and innovative solutions continues to grow, the UK GovTech market presents a unique opportunity for businesses to develop and deliver cutting-edge products and services that can improve public services, enhance efficiency and drive economic growth.
The UK government has also recognised the importance of digital transformation in the public sector and has launched several initiatives to support the growth of the GovTech market. For example, the Government Digital Service was established in 2011 to lead the digital transformation of government services and the GovTech Catalyst program was launched in 2018 to support innovative solutions to public sector challenges. These initiatives demonstrate the UK government’s commitment to fostering a thriving GovTech ecosystem and creating opportunities for businesses to develop and deliver innovative solutions.
Why does a GovTech start-up need a unique value proposition?
A unique value proposition is a clear statement that a) solves a customer’s needs or problems, b) delivers specific benefits, c) tells the ideal customer why they should choose your company over the competition and d) describes how the company is positioned in the market compared to competitors, targeting a specific market segment. Communicating a UVP effectively is crucial for securing investment and it should highlight the specific benefits or features of a product or service.
For start-up companies, the first product often serves as a case study or player in a larger vision. The UVP should communicate the benefits of the product while emphasising that the project is a stepping stone to future, more lucrative opportunities, encouraging investors to see the potential of the full project and reinvest when the first project is completed.
Why do investors want GovTech businesses that can scale?
Scalability should be considered from the outset, as investors are reluctant to invest in small ideas due to the same level of risk but less potential gain. Successful GovTech businesses have become major international players by taking widely applicable ideas from one nation to another, often leapfrogging generations of technology in the process. A common attribute of these businesses is a focus on scalability from the beginning.
E-government software vendor Granicus, a key player in the digital transformation of government, started with integrated meeting minute management solutions and progressed to video streaming of government sessions and building entire content management systems for public sector organisations. Their solutions are deployed by over 1100 public sector organisations in the US and Europe. Bloom, another example of scalability with global ambitions, currently offers a unique data analytics product that saves NHS commissioners money by identifying inefficiencies in the procurement of common goods, with the ultimate goal of reducing global healthcare costs through smarter data analysis and purchasing decisions.
What team do investors expect in a GovTech start-up?
The strength of a technology team, including skilled engineers capable of developing innovative products, is a significant factor in securing investment. Outsourcing engineering is generally not viewed favourably and while a team of bright graduates from top universities may seem sufficient, experience and track record are crucial. Industry expertise can also be vital for products targeted at specific sectors.
Potential investors often first evaluate the skills and experience of the management team when assessing the investment potential of a technology start-up. The growth stage of the start-up determines the exact makeup of the management team, but maintaining a proper mix of engineering and business expertise is essential. Avoid having a team consisting solely of pure technologists, as individuals with business development skills can be equally important in the early stages when sales are critical. As the start-up grows, having strong individuals with proven management experience in addition to technology and business skills can be key to securing investment at each stage.
How should a GovTech start-up show financial viability?
Investors seek low-risk investments with high reward potential, meaning a clear plan to minimise the risk of failure without excessive use of their investment while aiming to generate substantial returns. Entrepreneurs should demonstrate an entrepreneurial culture and leadership, a willingness to take advice and learn, a balanced team with varied skills and a successful track record and passion, energy and commitment.
What matters most to a GovTech investor?
An investment in a business or product is ultimately an investment in the team behind it. A strong, experienced management team with a track record of success significantly increases an investor’s faith in the company. Once potential investors are convinced that the team has what it takes to deliver a viable, sustainable product to the state, they will scrutinise the numbers. It is crucial to present a realistic, viable business model for generating revenue that will sustain the business through multiple phases, with the revenue stream derived mainly from government customers if the product is intended for government use. Revenue projections should be realistic and backed by an in-depth analysis representing all the costs associated with developing and selling the product.
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Frequently asked questions
What do investors look for in a GovTech start-up?
According to the post, investors look at market potential, a clear unique value proposition, scalability, a strong and experienced team, and financial viability. They often evaluate the management team first, then scrutinise the numbers. The post concludes that an investment in a business is ultimately an investment in the team behind it.
Why is scalability important for GovTech investment?
The post says investors are reluctant to invest in small ideas because the risk is the same but the potential gain is smaller. Successful GovTech businesses have become major international players by taking widely applicable ideas from one nation to another, often leapfrogging generations of technology. A focus on scalability from the beginning is a common attribute of those businesses.
What makes a good unique value proposition for a GovTech company?
A unique value proposition is a clear statement that solves a customer need, delivers specific benefits, explains why the customer should choose the company over competitors, and describes its position in a specific market segment. For start-ups whose first product is a case study, it should also show the project as a stepping stone to larger future opportunities.
What team do GovTech investors want to see?
Investors want skilled engineers and a balance of engineering and business expertise. The post says outsourcing engineering is generally not viewed favourably, a team of pure technologists should be avoided, and business development skills matter early when sales are critical. As the company grows, proven management experience becomes key to securing investment at each stage.
How should GovTech start-ups present revenue projections to investors?
The post advises presenting a realistic, viable business model that can sustain the company through multiple phases, with revenue derived mainly from government customers where the product is for government use. Projections should be realistic and backed by in-depth analysis of all the costs involved in developing and selling the product, since investors scrutinise the numbers once convinced by the team.