New Smart Cities Funding and Deployment Strategies to Boost GovTech Sector

Local governments face the twin challenges of funding and deploying smart city technologies to guarantee the continuous provision of mobility, communication, energy, water, accommodation, healthcare, education, and security services while ensuring livable, affordable, and sustainable environments for citizens in the wake of fast global urbanization. New paradigms like citizen participation, data capitalization through mobile sensors in smartphones and vehicles for informational services, holistic approaches that leverage vertical adjacencies, and acceptance of the overall sharing economy will allow governments to adopt smart city technologies at minimum costs.

Unlocking underutilized private resources through car sharing, micro-grid home energy networks, charging stations, private parking, and accommodation sharing will allow governments to meet surging demands for services in a cost-effective way while avoiding expensive physical infrastructure extension projects. Such smart funding and deployment approaches will equal fast Return on Investment (ROI), critical for obtaining additional private and/or public funding for more structural smart city platform approaches in the long term.

“This is creating a reversal of fortune for suppliers so far frustrated with dealing with city governments’ complex procurement processes, opaque sales cycles, long decision and implementation trajectories, and the overall lack of smart city technology business development opportunities,” says Dominique Bonte, Managing Director and Vice President at ABI Research. “We see the GovTech industry starting to gain momentum, especially in the U.S. The city tech start-up scene is also developing clout, and venture capital is finding its way into public sectors.”

ABI Research finds that Urbantech, Civictech, and GovTech are quickly becoming established terms for designating the overall smart city ecosystem, technology, and investment environment. Key smart city venture capital players include Fontinalis Partners, General Catalyst Partners, Goldman Sachs, GovTech Fund, Lightspeed Venture Partners, Motorola Solutions Venture Capital, New York Angels, and Vista Equity Partners. The groups invest in technology vendors like law enforcement information management software vendor Mark43 and smart communication solutions provider Avaya. GovTech merger and acquisition activity is also ramping up, as evident through OpenGov’s acquisition of Open Data and Ontodia.

These findings are from ABI Research’s Smart Cities: Funding, Deployment Strategies, and Business Models report.