I am often asked about my work with Startup in Residence (STiR), a novel program run by the San Francisco Mayor’s Office of Civic Innovation to encourage and support startups tackling civic challenges. I’ll briefly describe “govtech" as a preface to explaining STiR and why it is a unique program for govtech entrepreneurs.
Govtech refers to technological innovation targeted at modernizing government and its services so it can better serve its citizenry. Governments spend $400bn annually on their technological infrastructure, which has largely been defined by legacy systems that promote inefficient processes and are incompatible with the modern interfaces to which citizens have become accustomed. Recent momentum in the space is driven by the realization that technology has empowered enterprises and consumers with a new suite of tools, but has not attended to the public sector.
My personal interest in govtech stems from its significant scope and potential for impact. Based on the figure above, a 1% efficiency gain from new technology results in $4bn of recurring savings. Surely productivity improvements are among the least controversial ways of increasing the efficacy of our public spend?
Perhaps, but acting on this opportunity has not been easy. Unfortunately, failed efforts to build govtech businesses have stigmatized the government as a slow-paced, budget-constrained, and often resource-intensive client. Consequently, entrepreneurs have elected to focus their efforts on other industries. Below is a list of some of the challenges that have hindered development in the space:
- Procurement - it takes too long to sell into government. They may move too slowly for a sales force to be productive, and in some cases, the sale may be stalled further by a required RFP or tender process
- Switching Costs - any single piece of software you might want to replace probably interfaces with several others (which also may be outdated); the switch may be impossible to do piecemeal and without large scale disruption
- Requirements - even if a switch is possible, they may require a highly-customized solution, not the templated offering of a scalable SaaS company
- Internal Resistance - people are afraid of change, are skeptical of the private sector, and do not want to lose their jobs
- Budgets - many departments need to evolve their thinking on IT spend (SaaS vs. License + Maintenance)
However, these barriers to entry also highlight the opportunity in govtech. Governments are awaking to their need to adopt newer systems and re-brand their image as a client. They want to move quickly and understand that there are feasible approaches to implementing new technology. Entrepreneurs who are bold enough to test the integrity of their stance may be heavily rewarded. But where do they begin?
Introducing STiR. Effective solutions that solve real pain points will not emerge if entrepreneurs and governments do not interact, and we have observed that this gap is often too wide for either party to close independently. Structured as a 16-week program, STiR seeks to solve this by connecting departments within city governments to startups who want to build technology products addressing civic challenges. The success of the program hinges on the close collaboration between both parties and the subsequent symbiosis. The desired outcome for the departments is not only to co-develop a product they will want to consume, but also to learn about the iterative development methods of startups that might be effective internally. In return, startups receive direct interaction with a potential government client, regular mentorship, and access to the extended STiR network.
I am especially proud to support our team at STiR because we have converted this theory into tangible outcomes. Take our experience with Binti and San Francisco's Human Services Agency (HSA). HSA has many objectives, among which includes the support of foster care. They recognized that their parent identification and verification process, while valuable, was inefficient. The Binti team, equipped with skills desired by any tech startup, chose to work closely with the HSA staff to understand the intricacies of foster family placement. Binti and HSA subsequently co-developed a mobile-friendly, cloud-based solution that streamlined the process, making social workers 20-40% more productive and reducing approval times by 50%. The Binti team secured a contract with San Francisco, is expanding to counties across the state, and will have the potential to spread their results country-wide.
The potential for the Binti team to build a meaningful company is worth highlighting explicitly. Impact may not be a direct correlate of profit, but it does not exclude it either. Entrepreneurs who are passionate about improving government will find that there are significant opportunities to build large and sustainable businesses while also making a difference.
I look forward to contributing to our efforts at STiR in the years to come. We are just starting. Please get in touch if you are interested in learning more about the program.
Applications for the 2017 Startup in Residence program are open! Apply today to transform government through entrepreneurship: http://startupinresidence.org/apply/