One of the biggest recent deals in government technology bucks the industry's larger trend of private equity investing in government technology companies while reinforcing two others: the popularity of AI and cloud products. I am.
Cox Enterprises, known for its communications and automotive businesses, on Tuesday acquired a majority stake in OpenGov, a 12-year-old San Francisco company that sells software needed for budgeting, planning, procurement and other critical government tasks. .
The deal valued OpenGov at a staggering $1.8 billion, making it one of the few companies in government technology to reach or exceed the $1 billion mark.
Steve Ressler, managing partner and co-founder of Brydon Group, said this “shows investors that government technology can support venture-scale unicorn outcomes.” government technology on mail. “It's inspiring for entrepreneurs to be able to start from scratch as a startup and build a business that has a huge impact on the market 10 years later.”
The acquisition also highlights Cox's growing presence in government technology, including through its Socium Ventures division. And there's also the fact that OpenGov's other investors, including private equity (PE) investors, have been acquired, a form of investment that is becoming more common in government technology and a mainstream trend in the industry. It becomes. Matt Singer, chief marketing officer at OpenGov, said the structure of the acquisition should facilitate long-term planning.
“Unlike the typical acquisitions we have seen in recent years in the government technology space, where PE firms buy solutions looking for short-term gains, Cox provides OpenGov with long-term stability and a It provides decisions that pay dividends over a decade,” Singer said. on mail. “PE acquisitions tend to focus on cost reduction and profit growth, with R&D investment and customer support making little sense.”
He said OpenGov would operate independently under Cox, and that the company's leadership would remain in place, with Cox retaining a seat on the OpenGov board. Singer said OpenGov trusts Cox to help the government tech company “thrive,” based on how Cox has handled previous acquisitions.
“Cox has done a great job of diversifying over the years, building lasting businesses centered around industries in newspapers, radio, cable television, automotive, and now state and local government,” Singer said. said. “OpenGov is an expert in this field and we look forward to continuing to provide them with the autonomy to apply that expertise.”
OpenGov plans to invest “significantly” in AI for local government, Singer said, reflecting another technology trend in government. The company is already using AI in budgeting and procurement. OpenGov will also enhance its customer service offerings and expand its Transform customer education events, he said. The company is recruiting for his 70 open positions across all divisions, aiming to complete the effort by spring, and is particularly interested in engineers and professional services staff.
Jeff Cook, a managing director at investment bank Shea & Co., which has advised on more than 20 government high-tech transactions, said the deal is a big deal for cloud computing and software-as-a-service in the government high-tech space. The company is also emphasizing the spread of SaaS. Investing in Cox [the] “There have been more significant government technology deals in recent memory,” he said, adding that this is an example of the growth of modern SaaS-first companies and shows how far the industry has come.
“OpenGov is one of the few.” [relatively] “A recent entrant that was SaaS-first from the beginning was able to reach this level of valuation,” Cook said. government technology on mail. “Not to be dramatic, but I see this as a milestone and an indicator in the modernization of government technology as a whole. It’s not just a trend, it’s here now.”
Unlike many companies of OpenGov's size, which generate “massive” cash flow on which valuations are based, the company is focused on “massive” investments in its products, he said.
“In this case, this valuation is justified not by the cash flow, but by the tremendous growth potential the company continues to have as the government continues to modernize,” Cook said. “I think it will be business as usual at OpenGov going forward, and it will be that way for the foreseeable future.”
