That was one of the main messages that emerged during the first day of the State of GovTech 2024 conference in Kansas City, Mo.
Tech officials from the public sector, tech suppliers, investors and others gathered to discuss the latest trends and worries in the industry.
Make no mistake: The state of gov tech is pretty good, according to the experts. And the overall mood was optimistic.
Just listen to Dustin Haisler, president of Government Technology parent company e.Republic, who gave a market overview to help kickoff the two-day event.
“Gov tech as a market is hotter than ever,” he said.
The research he shared found that IT-related spending for state, local and educational bodies will top $143 billion this year, up 4.5 percent from 2023.
Another recent analysis from Jeff Cook, managing director at investment bank Shea & Co., estimated that overall deal volume in the sector during the first half of 2024 was nearly double the amount for the same period last year.
That contrasts severely with the historical experience of conference speaker Tom Spengler. Now executive in residence at private equity firm Great Hill Partners, Spengler made his name in gov tech as founder, chairman and CEO of Granicus from 1999 to 2014.
“In 1999, there was no investment for gov tech,” he said during a panel session. “Everyone thought government was too hard to work with. Now this room is filled with investors.”
There was no sense of doom that the trend toward more investment in this space will suddenly end. But for the other investors on the panel with Spengler — and for Haisler — there exist a handful of potential hurdles that could slow the flow of money into gov tech.
For starters, even as a potential cut to U.S. interest rates loom, money has become more expensive in recent years, noted Josh Rogers, principal at Advantage Capital.
Gov tech firms, including startups, also are facing the reduction or elimination of federal funding for projects, staffing shortages as older professionals retire and younger candidates look toward the higher salaries of private industry, and almost certain regulations around AI.
What that means, at least in part, is that gov tech firms looking for cash need to make sure they are on top of their game — for instance, having a realistic idea of their valuations and a clear path to profitability, said Monique Brown, co-founder and managing director at the Growth Factory, an accelerator.
“There’s a lot of opportunity in this space,” she said, though she added that success in this industry requires strong character from those who want to supply the tech. “It is a slog. You will be in it for the long haul.”
Rogers offered his own advice about what it takes for those tech suppliers to thrive and gain investor backing.
“You need a little bit of bravado, a little bit of swagger,” he said. “But you also need self-awareness — you are not always going be the smartest person in the room.”
As far as longevity goes, AI promises to be part of the gov tech world for the foreseeable future. That’s why some of the speakers not only encouraged a long-term outlook for artificial intelligence but are working to make that happen.
An example came from San Jose, Calif., and Stephen Caines, the tech-focused city’s chief innovation officer. He promoted the GovAI Coalition, founded about a year ago, backed by the city and which now claims more than 1,000 members from local, state and federal agencies.
He mapped out a rough path for other governments eager to do more with AI, using homelessness as an example of a problem to which AI might be applied.
First, officials need to understand a particular problem “at multiple levels,” he said. Officials need to view the problem via a local or reginal outlook — for instance, in San Jose, people without permanent shelter typically congregate along waterways, he said. Finally, the problem must also be viewed as elected officials and managers see the problem.
