Why No One Invests in CivicTech, But We Do

When it comes to improving our country and its politics – we typically turn to politicians or protest instead of innovators and tech.

Investors want to back visionaries into space and online, but when it comes to improving the aging democratic infrastructure we are met with pessimism, disinterest, and yawns. If we don’t begin to invest in civic solutions with the same vigor as we do transportation, housing, finances, and food – is our democracy doomed?

The Government Repels Silicon Valley

We can all agree that civic tech is not sexy. Few get excited about unpacking the complexities of government bureaucracy (I happen to be one of those nerds ). Silicon Valley, the home of “move fast and break things,” proudly views itself as the government’s foe. A 2019 Vice article captured startups’ disdainful attitude of the government, “Uber’s ascent to the largest rideshare company in the world was fueled by a recurring cycle in which it blatantly ignored state and local laws, became entrenched and widely used in a community, and then tried to use its largesse to change the laws it was breaking.” 

Businesses’ overall distaste for all things government makes it unappealing for entrepreneurs, creators, and investors and entrepreneurs to pursue civic tech. 

The future of civic tech hinges on the same principle of every startup: proving adoption.

Voting Cycles are Hard on Civic Tech Business Models

Civic tech has a crowded graveyard of startup failures. The business models are challenging because it’s hard to keep users engaged between election cycles. Brigade raised tens of millions from big names, yet it ultimately failed after struggling for years to find a workable business model. Dozens of other venture-backed startups fill out the graveyard including ChangeRoots (my own startup), Jumo, ChangeByUs Voter.com, Ruck.us, and Votizen. The ratio of failure to success in civic tech is probably worse than most categories, which scares off all but the most dedicated investors from the space. 

The Vicious Cycle of Following Investors Instead of Innovators

The combination of unsexiness and frequent failures creates a vicious cycle for civic tech. Talented engineers and operators build products investors want. Investors don’t want civic tech. The best entrepreneurs work on other projects: cyber, crypto, and AI instead of wrestling with the complexity of improving our civic health and democratic processes.

However, all is not lost for civic tech. We see other forces shifting to favor a new generation of successful civic entrepreneurs.

The convergence of three trends makes us optimistic about the future of civic tech:

1. Companies must deliver on social impact or risk losing customers.
Consumers are now demanding measurable impact. Instead of press releases touting big promises with sparse details, companies must demonstrate actual impact or rue the consequences. Buyers wield the power of their wallets. They buy from brands that care and boycott those that don’t. There is real economic pressure on companies to invest actual dollars in social impact where none previously existed. As a result, there is an increase in CSR and impact-as-a-service spending.

2. People are realizing the critical role civic health plays in worsening systemic issues.
Climate change cannot be solved without significant new laws. Systemic racism, economic inequality, or other systemic issues won’t change until Congress passes legislation to enact solutions. While the damage mounts, Congressional gridlock has doubled since the 1950s. In the past, congressional gridlock resulted in voters replacing politicians with new representatives who got shit done. Because the country is currently the most politically divided it’s been since the Civil War, obstructionists are not being replaced.

While the damage mounts, Congressional gridlock has doubled since the 1950s.

In fact, due to the increasing polarization and political gridlock, polls rate Congress less popular than gonorrhea. People are realizing that our civic system desperately needs innovation. Better leaders aren’t enough; the entire system needs an upgrade. Enter the tech startup: a finely tuned agent of disruption who exists solely to innovate. The pent-up pressure to innovate our obsolete civic system is attracting more investors and entrepreneurs to civic tech, flipping the vicious cycle into a virtuous one.

3. Gen Z cares as much about social health as financial wealth.
Gen Z takes social impact into their employment decisions at higher rates than previous generations. Data from tens of thousands of Gen Z workers found “Gen Z considers a company’s social impact initiatives as important as their compensation packages.” This purpose-over-profit mindset from our youth increases pressure on business leaders to invest in civic SaaS tools. Gen Z will soon be in leadership positions at companies turning a small corporate social investment trend into mainstream practice. 

A New Day for Civic Tech

We’ve held hundreds of conversations with politicians, CEOs, nonprofit leaders, investors, and entrepreneurs. We’ve done thousands of hours of research. We are so confident in the long-term growth of the civic tech vertical that we started deploying capital into civic tech. 

Our first civic tech-focused investment is Participant, a startup helping companies fulfill social impact promises through custom impact modules that drive action with behavioral nudges (think Fitbit for social impact). While Participant’s social impact vision goes beyond civic tech, the founders’ launched their venture with a civic tech product focused on increasing voter turnout: Motivote. Motivote helps users build a detailed voting plan and nudges them to complete micro-actions, like scheduling time off work, to increase their likelihood to vote. After their initial pilots with more than 40 clients, Motivote users voted at 14% higher rates than the general public.

The future of civic tech (and all impact tech, for that matter) hinges on the same principle of every startup: proving adoption is an economic advantage for its clients. Participant’s early success exemplifies how consumer demand for impact, the interconnectedness of the civic system, and Gen Z’s impact priorities has created an economic tipping point.

Luckily for all of us, society will benefit too. 

About the Author

Jake Sandler is a principal of Temerity Capital Partners, 2X founder, impact investor, and operations executive.