Impact, Investment And Demand: Three Pillars For Civic Tech Success

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Stacy Donohue

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Stacy Donohue is an investment partner at Omidyar Network focused on innovations in civic tech.

More posts from Stacy Donohue

Last year was one of great momentum for civic tech. We saw more people and resources than ever enter the space, garnering interest from startups, corporations, government agencies and investment firms. Kicking off 2016, civic tech is a fast-growing field with tangible potential to improve the relationship between citizens and government.

As the field works to become a sustainable, scalable ecosystem, there are three key trends to keep an eye on — areas where civic tech can start to cement its impact and provide critical proof points.

The 2016 election effect — proving the power of civic tech

This year’s presidential election will usher in a new wave of citizen engagement tools and platforms aimed at educating voters and boosting voter turnout. These tools and platforms deployed on a national scale in 2016 will provide valuable lessons in what works and what doesn’t work when trying to increase citizen participation.

With the Iowa caucuses and the New Hampshire primary, Change.org is hoping to get more than political pundits engaged this election season. The petition website recently launched Change Politics, a new website and mobile platform aimed at empowering voters with more valuable, curated information — beyond what we typically learn through campaign ads and party affiliation.

Change Politics will allow voters to pose questions directly to candidates, will show candidates’ endorsements and will help users create a personalized ballot guide they can use on election day with their smartphones.

While new tools such as Change Politics will help reshape what it means to be an engaged citizen, what will be truly game-changing is if entrepreneurs can take the lessons learned from civic tech’s application during the presidential election and apply them at the local level, both in the United States and abroad. For cities and states, these lessons can help build tools and platforms that engage citizens on issues they care about — and can help foster these interactions on a regular basis, rather than just every four years.

Increased funding and exits — accelerating growth and scale

From early stage funding to completed exit strategies, today’s civic tech companies have more funding opportunities than ever. A growing number of acquisitions are proving that civic tech is a viable field, attracting real interest from investors and entrenched companies.

A prime example of this kind of investment in civic tech comes from GovDelivery, the 15-year-old digital communication platform for government. Recognizing over the last several years the need for more cloud-based, user-centered tools, the company acquired NuCivic and Textizen in an effort to create more points of access between citizens and government.

These types of acquisitions will enable GovDelivery to deploy civic tech that better fits government and citizen needs. And combining forces with civic tech startups is part of a strategy that propelled the company to its strongest year ever in 2015, with 100 million subscribers and an estimated record revenue of $35 million.

In forecasting for the year ahead, 2016 will likely see this virtuous cycle of investment continue to grow — an estimated $285 million was raised in capital for U.S. civic tech companies in 2015 (according to Omidyar Network’s internal analysis using database PitchBook. Omidyar Network researchers identified 23 companies as related to civic tech and totaled investment capital raised in 2015). For the greater civic tech movement, this influx of funding enables civic tech companies to scale more quickly and reach more people, which, in turn, will grow acquisition opportunities and strengthen investor confidence in the field overall.

Greater government adoption rates — breaking down barriers and driving demand

In many communities around the country, a wall exists between government agencies and civic tech startups. Procurement policies and a general lack of awareness between the two groups often mean that the best solution to a city’s problem may never get discovered and implemented. This divide is potentially the biggest obstacle still facing civic tech in 2016.

We’re starting to see the wall being chipped away in cities like New York, San Francisco, London and Barcelona, thanks to local government agencies’ growing willingness to rethink procurement. Working with online platform Citymart, governments are implementing problem-based procurement, where instead of issuing a list of specifications for a pre-determined — and often quite limited — solution, agencies make an open call for new ideas around a challenge facing their communities, such as excessive noise in residential areas, bicycle theft and food waste.

By the end of 2015, Citymart had completed more than 100 challenges with more than 50 cities around the globe, resulting in 10 times more solutions for cities’ problems and 98 percent of contracts going to SMEs, startups and social entrepreneurs.

As more cities start to bear the fruits of a problem-based procurement, other government agencies will gain the confidence they need to work with civic entrepreneurs. And as cloud, open data and IoT technologies become an increasing need for local government, civic tech companies will find more inroads for successful relationships with local government. For civic tech to truly reach its tipping point, this symbiotic relationship between government, entrepreneurs and innovators is mission critical.

In the year ahead, civic tech entrepreneurs and investors undoubtedly have their work cut out for them. In addition to procurement, strict regulations and varying success metrics leave many at risk of falling into a pilot-stage purgatory, never able to fully scale their innovations. However, if stakeholders can hold tight to the opportunities ahead of us with the presidential election, continue attracting capital and forge new relationships with government, 2016 can be a watershed year for the sector.

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