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Pandemic drives £500m into top GovTech start-ups

Core to the boom in GovTech development and investment is the recognition of a new digital focus by governments which have been forced towards digital adoption through the pandemic.

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More money is predicted to be invested in the GovTech sector in 2021
More money is predicted to be invested in the GovTech sector in 2021

Leading global GovTech start-ups alone secured £500m pounds of investment in the past year as a result of the Covid-19 pandemic which saw governments and the public sector forced to digitalise their working habits, a new study finds.

 

According to the research report, StateUp 21, released by public sector insights and advisory firm StateUp, GovTech, has a promising future with “much more” money predicted to be invested into the sector in 2021.

 

Available technologies

 

The report aims to help public servants understand available technologies, and entrepreneurs and investors to understand the government market.

 

Venture capitalists, which have historically seen GovTech companies as long-view “patient capital” investments – investment accepting of long- and inexact timeframes – now realise they are integral to a modern, socially-distanced society, the report reveals.

 

The report provides detailed analysis on the types of start-ups and subsectors that are of interest to governments and stakeholders. For example, it explains how more than one third (36 per cent) of administrative tech start-ups report having some artificial intelligence (AI) or machine learning (ML) or robotic process automation capability while a quarter (27 per cent) claim to make use of some form of AI or ML.

 

Core to this boom in GovTech development and investment is the recognition of a new digital focus by governments which have been forced towards digital adoption through the pandemic and are beginning to focus on recovery efforts.

“Resilience-building in a post pandemic world is the driving force behind new investment into GovTech, a relatively young sector that is growing rapidly”

UK government, for example, announced the appointment last week of three senior digital, data and technology (DDaT) leaders to boost capacity in digital government over the next few years. Meanwhile, the Biden-Harris administration has pledged to invest over $10bn into US Federal Government technology programmes.

 

“Resilience-building in a post pandemic world is the driving force behind new investment into GovTech, a relatively young sector that is growing rapidly,” Tanya Filer, founder and director, StateUp and lead researcher on digital government at the University of Cambridge.

“Although traditionally GovTech has been seen as a long-term investment, 2020 has shifted changed the landscape dramatically, with investors showing a burgeoning interest in technologies to support both public sector efficiency and accountability, and a green recovery. What was once a sector showing low reward over a period of years or decades is now a promising sector that is of growing interest to investors, entrepreneurs and government alike.”

 

StateUp’s findings demonstrate the buoyancy of investments in the sector at the heart of the coronavirus pandemic collectively points towards a specific vision of a post-pandemic world that includes further investment into:

  • a green recovery
  • a culture of continued home-working, including among public servants
  • a need for cybersecure exchanges of data
  • health and social care provision that is resilient to future pandemics
  • a need for inclusivity.

With GovTech being a young sector, a lack of data often means that GovTech companies are lost in the more general category of technology companies, StateUp noted. It responded to this challenge by creating Nebula, a “quality controlled” intelligence database of some 450 GovTech companies, enabling sector-level analysis.

“What was once a sector showing low reward over a period of years or decades is now a promising sector that is of growing interest to investors, entrepreneurs and government alike”

From the initial 450 companies, StateUp curated a list of 21 of the most promising start-ups within the sector, which are profiled in detail. The 21 members of the inaugural StateUp 21 features companies from all over the world, including: UK-based businesses such as Commonplace (UK), a community engagement platform; smart buildings sensor company Infogrid (UK); mobility business Trafi from Lithuania; Israeli-based Zencity Technologies, data-driven decision making for local government; and Indian supply chain management company Logistimo.

 

According to the report, infrastructure and the built environment is StateUp’s GovTech “subsector to watch” this year. The subsector currently accounts for 10 per cent of start-ups recorded in Nebula and focuses on companies developing and managing built assets and infrastructure (bridges, roads, homes, airports) that are sustainable and will last for many decades.

 

StateUp anticipates this share rapidly increasing as policymakers around the world look to the sector to encourage a green recovery and use their procurement power around public infrastructure and public buildings to lead the way.

 

See the full report at stateup.co/stateup-21/

 

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