B2G: The Excitement of an Old-Line Industry (8VC)

Summary

• Government is one of the most challenging sectors to build a business in, and winning requires patience, deep pockets, and cutting-edge technology.§1
• Government IT is notoriously antiquated, with code-bases in most enterprise platforms dating from the 1970s.§1
• The nearly $60 billion spent in the US by 80,000 state and local governments on IT will grow around the rate of inflation (3%+).§2
• Opportunities are ripe for SaaS models, business intelligence, and waste and fraud prevention technology.§2
• A startup in the mobile world might expect 5% attrition per month, while in the government space less than 5% attrition per year.§3

Key insights

1. Old technology provides opportunities for order-of-magnitude improvements across whole enterprises.§1
2. The United States has 50 states, 3,000 counties, 12,000 school districts, 19,000 cities and towns, and 38,000 special districts.§2
3. Software sales will grow faster than the overall government IT pie, while hardware and consulting spending will shrink.§2
4. Three cities in California went bankrupt in 2012, and in 2013 Detroit set the record for the largest Chapter 9 filing.§2
5. Long sales cycles increase barriers to entry and foster customer retention.§3
6. Selling to bureaucracies often requires creating a network effect.§3