Opinion
Friction is a feature: Why GovTech is having a moment
"Interest in GovTech is rising, helped by the tailwinds from DefenseTech and a broader rethink around public sector innovation. But this isn’t just a shift in investor perception. It’s a shift in government expectation," writes Lior Prosor, Founding Partner at Hanaco Ventures.
For years, GovTech was the investment world’s least sexy category. Long sales cycles. Tortuga speed procurement processes. Entrenched incumbents. And enough red tape to circle the globe.
We didn’t see it that way.
While others looked the other way, we leaned-in - backing companies that embraced the complexity rather than avoiding it. From Carbyne to Via Transportation, we’ve bet on a simple truth: in GovTech, friction is a feature, not a bug.
Why? Because once you become the standard in a public agency, you tend to stay that way. Contracts are sticky. Switching costs are high. And when you get it right, win rates can exceed 60% - numbers that would make most enterprise SaaS founders jealous.
Ironically, some of the best-performing companies on the public and private markets today are GovTech players. Palantir and Tyler Technologies have become breakout stories in the public markets. And in the private markets, you’ll find companies like Anduril, Flock Safety, OpenGov, Peregrine, and of course Via - all helping to redefine how government operates in the modern era.
Today, interest in GovTech is rising, helped by the tailwinds from DefenseTech and a broader rethink around public sector innovation. But this isn’t just a shift in investor perception. It’s a shift in government expectation.
Welcome to the Era of the Efficiency Mandate
Thanks to initiatives like DOGE (focused on driving operational efficiency and accountability), public agencies are under pressure to do more with less. A good product isn’t enough. You need to cut costs, improve outcomes, and make your agency buyer look like a hero, all at once.
Efficiency, taxpayer ROI, and impact aren’t “nice-to-haves.” They’re the baseline.
The best GovTech startups today understand that. They’re not just building tools, they’re solving pain. They’re not selling software - they’re delivering wins.
The Winning GovTech Formula: 3 Traits We Keep Seeing
1. Obsessed with Efficiency
Great GovTech isn’t about bells and whistles. It’s about doing more with less - less headcount, less manual process, less overhead. DOGE’s recent review of 8,500 contracts, which led to nearly $30 billion in savings, is a wake-up call. For the right startups, it’s also a massive opportunity to align their pitch with a government priority.
Take Tyler Technologies, for example. By automating property tax assessments and other core functions, they’ve cut costs while actually improving services.
2. Cloud + AI > Legacy Bloat
Government IT is under pressure to modernize, and fast. That’s opening the door for cloud-native, AI-powered platforms to replace bloated, slow, paper-heavy systems. The mandate is clear: fewer people doing more work, enabled by automation.
3. Distribution Is the Unlock
Go-to-market in GovTech is tough. Procurement takes time. Relationships matter. And every agency operates a little differently. That’s why distribution and partnerships are everything. The best companies don’t sell alone, they tap into trusted allies with existing reach.
Palantir’s recent partnership with Anthropic to bring Claude into federal agencies is one high-profile example. But there are many others. OpenGov, for instance, has accelerated adoption by integrating with procurement platforms like Bonfire, streamlining RFP workflows and embedding their solution directly into the tools governments already use. It’s not just smart sales - it’s a structural advantage.
Carbyne: A Case Study in How to Get It Right
We’ve seen all of this play out at Carbyne, which just closed its Series D, backed by Cox, AT&T, and Axon.
Carbyne builds cloud-native platforms for emergency contact centers, modernizing 911 and dispatch systems nationwide. Their product is faster, smarter, and more reliable than the outdated infrastructure it replaces. But what really sets Carbyne apart is who it empowers.
At the heart of every emergency call is a 911 operator, underpaid, overworked, and making split-second, life-and-death decisions. Carbyne helps them cut through noise, route calls intelligently, and dispatch with confidence. That intelligence then carries through to the first responders - firefighters, EMTs, police, giving them better visibility and faster coordination.
In short, it’s tech that doesn’t just serve the system, it serves the people who make the system work.
Their rapid growth has been powered not just by great product, but by smart public-private partnerships, with AT&T, GMR, Converge, Tyler, and now Axon. Carbyne is a masterclass in building with the public sector’s mission in mind, and proving that impact and commercial success aren’t mutually exclusive.
Lior Prosor is a Founding Partner at Hanaco Ventures.
