The Importance of GovTech to the Startup and Scaleup Community


GovTech, the modernisation of public sector organisations through technology, has significant implications for startups and scaleups. For many tech companies, selling to the government is an attractive market due to lucrative, long-running contracts that are less likely to be cancelled compared to other sectors. The large and complex nature of public organisations often requires software solutions best provided by startups or small companies, whether for prototypes or bespoke products handling specific tasks. For example, GDS’s use of armchair testing by SimpleUsability revealed user confusion and poor visual signposting on their website, highlighting issues that could be solved with targeted software solutions or by companies selling relevant services.

Benefits of GovTech for Startups and Scaleups

Despite limited academic research and statistical evidence, it is widely believed that GovTech positively impacts small technology businesses. As the public sector is the customer, GovTech is generally assumed to reduce government costs and improve service quality, providing supplier firms (mostly SMEs) with greater opportunities to secure government contracts.

Challenges and Opportunities in GovTech Adoption

The government, as a customer, is diverse and does not represent a single entity. Companies may find it easier to focus on a narrower agency or problem area initially, building a track record of success while creating internal networking opportunities. Pursuing prime contracting is a common strategy for small technology companies entering the government IT market, particularly in countries like the United Kingdom and United States, where outsourcing and commercial technology use is encouraged. Meeting stringent qualifications can lead to large multi-year contracts, bypassing the need to understand government procurement procedures, but this high-risk, high-reward strategy may not suit all companies.

Adopting government technology can be challenging for startups and scaleups due to the complex, public-interest-driven nature of the sector. Enthusiasm for public service may fade as entrepreneurs and employees experience bureaucracy and red tape, exacerbated by the highly political and risk-averse culture in public agencies, limiting external entities’ access. While the government is a significant vertical market worth pursuing, startups and scaleups should first assess their core competencies and long-term goals, only pursuing the government market if they find a good strategic fit.

Case Studies: Successful GovTech Integration in Startups and Scaleups

Palantir Technologies, a data analytics company launched in 2004 with significant funding from the CIA’s venture capital arm, In-Q-Tel, is a GovTech success story. Palantir has raised over $900M and worked with numerous government and non-government organisations to analyse, integrate and visualise large data sets for decision-makers, without replicating failed software projects.

Another successful GovTech company is OpenGov, offering cloud-based, integrated solutions for public sector budgeting, reporting and open data. Launched in 2012, OpenGov has raised over $47M, acquired several companies and become a leader in the budgeting software space with over 100 public sector customers.


Many startups and scaleups overlook the potential of leveraging GovTech solutions to enhance their growth due to initial inertia and scepticism towards these solutions, perceived as low in maturity and lacking proven results. However, adopters found GovTech solutions to be competitive, cost-effective, highly customisable and responsive to community feedback, governed by service quality rather than profit margins.

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