Topics: Serent Sectors

Serent Capital's GovTech Sector Update

New GovTech Investments and Upcoming GovTech Conferences 

April 30, 2020

April 30, 2020

Jacob Zimmer

While we undoubtedly face uncertain economic times, at Serent we maintain a strong belief that the government technology sector will be one of the few resilient sectors of the economy. Citizens are dependent on their state and local governments more than ever for essential services, and governments need to swiftly adapt to providing those services while in crisis-response mode. Organizational IT budgets are yet to be determined, but we believe this crisis is an opportunity for state and local agencies to re-evaluate their IT priorities and shift their technology portfolio away from costly system integrations and legacy on-premise solutions to lower-cost, nimble and adaptable cloud-based technologies.

As a teacher, I was always looking for a side-gig because teacher pay is so marginal

 

How GovTech is Mobilizing

With the sudden need for remote options, GovTech has enabled state and local governments to find digital solutions to organize and respond to the crisis. Some governments are utilizing technology to create a centralized set of resources for its citizens, like California. Others have been working to find predictive and proactive solutions to minimize the impact, like Kansas, who recently rolled out a social scoreboard tool that shows users where people are obeying stay-at-home orders or not. As the situation continues to develop for state and local governments, the demand (and necessity) for technology is likely to continue to grow. 

Mid-Range and Long-Term Impacts

e.Republic recently held a webinar where local, state, and GovTech leaders came together to discuss how the current situation will have an impact on selling technology in the medium-term and long-term into government agencies. In the 3 to 6 months that follow, leaders anticipate a major shift in how agencies approach technology, from transforming entire IT portfolios to focusing on greater collaboration among different silos. In the long-term, there will need to be measures taken on IT modernization and disaster recovery / business continuity infrastructure to ensure state and local government leaders adopt best practices to be prepared going forward.

Resources for GovTech

As events continue to develop quickly, there has been an onslaught of information from the national level down to the city level that has impacted GovTech. Government Technology has provided a resources guide to equip leaders and solution providers with the latest information on counts, federal guidance, government and state responses, and companies that are offering COVID-19 Solutions.

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Healthcare Investments - By the Numbers

Since our founding in 2008, Serent has invested in ten healthcare software and services companies, including Axiom Medical, Cardon Outreach, Equinox Healthcare, Pondera Solutions, Professional Health Care Network, Senior Dental Care, and United Allergy Services.

7
Platforms

3
Add-Ons

10 
Transactions 
Since 2010

Serent Portfolio Update: Sale of Pondera

 

Portfolio

Pondera

We believe our recent exit of Pondera Solutions to Thomson Reuters is a great example of the continued interest in the GovTech market.

Serent invested in Pondera in 2017, which is the leading provider of software that detects and investigates fraud, waste and abuse in State-administered federally funded aid programs (Medicaid, unemployment insurance, etc.).

Pondera allows state-employed investigators to detect and manage cases of fraud through advanced analytics and artificial intelligence technology.

During Serent's partnership with Pondera, Serent's Growth Team assisted in recruiting and building a high-caliber executive team and Board, refined the company’s go-to-market strategy across direct sales, partnerships, and lobbyists, and identified new markets and products to sell into.

For more information on Pondera, you can read the press release here.

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Add-Ons

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Exits

GovTech Investment Sectors

Serent’s GovTech team has developed a keen understanding of the various functions in government and how agencies interact with both software and systems. We have identified 5 key aspects that make the GovTech market an attractive investment opportunity:

  1.  Large and fragmented customer base across states, counties, and municipalities
    •  There are over 90,000 local governments (38,266 special districts, 19,519 cities, 16,360 townships, 12,880 independent school districts, and 3,031 counties)
  2. Extremely high customer stickiness
  3. The shift to the cloud is still in the early adoption phase and a huge growth opportunity
  4. Changing of the guards – more folks are coming into the public sector from the private sector and look to bring automation along with them
  5. Buyer dynamics – unlike the private sector where companies are competing against each other to be as efficient and effective as possible, governments are looking at what tech other governments are utilizing to automate their processes

Public Safety

  • Law Enforcement
  • EMS
  • Fire
  • E911/Emergency Notifications
  • Court Management
  • Corrections

Government Administration

  • Payments
  • Finance & Accounting
  • Records Management
  • Procurement
  • Compliance
  • Tax
  • Human Resources
  • Asset Management
  • Document Management
  • Fraud Management

Citizen/Constituent Services

  • Licensing and Permitting
  • Parks and Recreation
  • Utilities
  • Citizen Engagement
  • Transportation
  • Waste Management
  • Human and Health Services
  • Elections

Meet with the Serent GovTech Team at Upcoming GovTech Conferences

With the current situation, we understand that several conferences will be delayed and/or canceled, but if you were planning on attending any of the events below, we would love to set up virtual meetings or get together with you live to discuss industry trends, our views on partnership, and our experience in the market. Please let us know if you are planning on attending or request a meeting with our GovTech investment team below:

Schedule a Meeting

Founded in 2008, Serent Capital is a leading lower-middle market private equity firm focused on investing in high growth service and technology businesses. Our operating model is distinct in its focus on business building. We strive to be an involved, value-added investor, capable of providing significant operational and strategic support to our portfolio company CEOs on the most critical issues that they face as their companies scale.

- Investment Criteria -

Focus

Vertical Specific B2B Software, Data, or Tech-Enabled Services Companies

Enterprise Value

$15m to $250m
(Smaller for add-ons)

Company Size

>$5M of recurring or reoccurring revenue
(Smaller for add-ons)

Geography

USA & Canada

Growth

10% - 1,000%

Profitability

EBITDA up to $15M

Ownership

Minority or Majority Transactions
30-100%

Disclaimer:
Nothing presented herein is intended to constitute investment advice, nor sales material, and no investment decision should be made based on any information provided herein. Information provided reflects Serent's views as of a particular time and are subject to change without notice. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. While Serent has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third party information presented herein. Past performance is not indicative of future results. There can be no guarantee that any investment strategy employed by Serent will be successful. A full list of portfolio holdings is available on Serent's website.

The information contained herein may not be copied, reproduced, republished, or posted in whole or in part, in any form without the prior written consent of Serent.