Investment in US civic tech startups booming

By December 09, 2013
San Francisco

In the United States an increasing number of companies are being founded with a mission to provide sophisticated digital services designed to simplify and improve civic life.

Since 2011 over $431 million has been invested in a burgeoning new sector – ICT-based companies which are active in a variety of different sectors but united by the same concern: to improve civic life on a day-to-day basis. A report, entitled The Emergence of Civic Tech: Investments in a Growing Field, compiled by the Miami-based private non-profit Knight Foundation in conjunction with Quid,aSan Francisco-based firm that specializes in data analytics and network analysis, describes this complex ecosystem and highlights the profiles of the investors behind this steadfast rise. The report’s authors have tried to shed some light on this as yet fringe market, providing a broad picture of the companies working in this space, which they dub ‘civic tech’. Included in the list are all startups providing tools that enable citizens to interact more effectively with their governments, foster democratic dialogue or promote transparency and openness in the management of public affairs. These companies’ products and services are often based on crowdfunding and/or information-gathering mechanisms, collaborative networks and peer-to-peer technology platforms.

P2P-driven growth

The authors chart 177 private capital and foundation investments that went to over 100 ‘civic tech’ organizations, and identify a number of basic themes. The report reveals a 23% annual growth rate in the launch of civic tech companies since 2008, from 83 to 112 companies. Among these, peer-to-peer sharing of resident-owned goods and services was the fastest-growing civic tech activity, expanding more than 36% annually between 2009 and 2012 and attracting more than $240 million in private capital. The investors backing this trend come from various backgrounds but Silicon Valley is well-represented, including for example, the Google founders and Yahoo! CEO Marissa Mayer, plus several prestigious venture capital funds. The spectrum of investment covered by the Knight Foundation-Quid report is in fact very wide, ranging from Airbnb to neighborhood private social network provider Nextdoor and Code for America, a non-partisan, non-political organization that brings web-industry professionals to work with city governments in the United States, which has just raised close to $10 million. The services offered and the type of social impact they have thus vary substantially.

Streamlining dialogue with public authorities

Mayur Patel, one of the report’s authors, argues that entrepreneurs would do well to focus on opportunities linked in particular to the growing demands for greater transparency and accountability of local government. Services which enable direct gathering and sharing of requests or improve online voting procedures are key areas. For example, a few months ago l’Atelier reported on the SeeClickFix community platform, which provides a channel for citizens to report to the local authorities non-emergency problems and nuisances in their city such as dumped rubbish and faulty street lighting. The report also identifies another important segment: services which facilitate online voting, listing four startups in this market, including TurboVote and Votizen. According to Jon Stotsky, Director of Strategy and Assessmentat the Knight Foundation, this trend is spurred on by the increasingly sophisticated digital services that US consumers are fast coming to see as the norm. People now want the same ease of use and performance in the civic sphere. The recent fiasco at,the online platform set up to underpin the deployment of Obamacare, which crashed just a few days after launch, has only served to highlight the increasing dichotomy between the technological capabilities of private startups and firms and the lagging public services. Over a single weekend a number of Silicon Valley developers built a site designed to plug some of the gaps in the federal health platform. Called HealthSherpa,it provides a free guide that makes it easier to find and sign up for health insurance under the Affordable Care Act. 

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