This week’s Investors Breakfast Club was focusing on GovTech. To summarize: the possibilities for startups in this field are very bright – but there are also strong interests with a different agenda. "There are massive forces against scaling and innovation. The big consulting companies don’t want it at all," said Trond Riiber Knudsen.
The 18th edition of the Investors Breakfast Club, focusing on GovTech, was organized by Xplorico and DigitalWell Ventures and moderated by Lina Svensberg & David Holm. Being one of Norway’s most active super angels Trond Riiber Knudsen in a way represented a backwards perspective when asked to speak at the event. GovTech is one sector that haven’t really got the investors’ attention. Basically because of two different reasons.
One is that the fragmented market in public sector makes it difficult for startups to scale fast.
– In Norway we have a big issue with enormous fragmentation in public sector. There are 365 municipalities making independent decisions about tech solutions, said Trond Riiber Knudsen, making a funny remark of municipalities rejecting existing solutions from other municipalities, even when handed over for free.
He also pointed out the dichotomy between buying from an external tech company and building with help from a consulting company, where public sector tends to be very focused on building with consultants. That’s been creating a monolithic system giving no room for startups enhancing public services.
Two of the keynote speakers of the event was Trond Riiber Knudsen and Liza-Maria Norlin. To the right the hosts David Holm and Lina Svensberg, of DigitalWell Ventures.
This creates the second big hurdle: The big consulting companies’ satisfaction with the current situation. This makes it profitable to create isolated solutions for each customer, but also stops public sector and startups benefiting from scalable services.
– These companies are living of the public sector and makes huge deliveries, but they are all one off’s, said Trond Riiber Knudsen.
Though, the need of new digital and scalable services is great. Liza-Maria Norlin of Govtech Sweden was the opening speaker of the breakfast seminar and pointed out the EU’s ambition that all key public services should be available online in 2030. The effect of those ambitions, in Sweden alone, would require 10 000 new digital services.
Need of rapide transformation
The potential for startups with innovative services looks great even when you put it in economical terms. In the report “The State of European GovTech” the European GovTech market in 2021 is valuated to 116 billion euro.
– We are in the very beginning, which makes this interesting. The heart part, the ethics, is very important in GovTech. Not the technology itself. The shift that we can see is that governments have become more willing to adopt to new approaches to solve public problems. We cannot work the way we have done for the past decades, said Liza-Maria Norlin, also mentioning a trend in public of favouring working with smaller companies.
Karlstad is a Swedish municipality where this seems to be the case. Thomas Wernerheim, Development Strategist, told that about half of the tenders in Swedish municipality’s procurements comes from smaller companies. Karlstad is also shifting to a more innovative approach when trying to solve their public challenges.
– The ones who can provide that best is the small companies, so I would say this is a obvious trend, said Wernerheim.
And even Trond Riiber Knudsen in the end presented a much brighter future for startups considering the GovTech sector. Strong arguments are the mixed economy, where state-owned companies have a mandate to invest in innovative startups, and the digital maturity in public sector in the Nordic countries.
– The fact that public sector has a good digital maturity in Norway makes it possible to build on top. That means when you have digital map and building data you can create companies like Spacemaker, to model much better how you can optimize plot of lands for apartment buildings. This company could only be started here, and it grew globally and become a wonderful success.
Many thanks to all speakers also including, Lars G Fröjd, Virtual Management, and Jenny Thalin, DigitalWell Arena.
The Investor Breakfast Club will return January 27 – focusing on Extended Reality. More info on Investor Breakfast Club´s LinkedIn page.