Ibero-America Backs GovTech Startups

This article was written by Carlos Santiso and Enrique Zapata, and was also published in El País.

For some years now, governments have been turning to tech startups to improve the public services they provide to their citizens. There are digital solutions to streamline public procurement, others that improve healthcare services and urban mobility through data intelligence, and others that simplify and improve tax collection or help manage public finances more efficiently.

This ecosystem of companies, known as GovTech, is booming in Latin America. And they could not come at a better time in a region that—despite its heterogeneous nature—is characterized by slow, non-transparent, and often inefficient bureaucracies. All signs point to the fact that their role in public management will be paramount to modernizing governments and, above all, to providing high-quality services tailored to old needs and new expectations of citizens.

GovTech is the latest trend in the public innovation sector, and seeks to set the public sector in startup mode, with three clear winners: governments, businesses and citizens. It is a relationship where governments find innovative products and services to create a social impact, companies obtain financial returns and tap into new markets, and citizens receive high-quality, personalized and intelligent public services that impact their daily lives.

In Mexico City, for example, startup OPI Analytics works with the Digital Agency for Public Innovation to streamline public procurement through “Tianguis Digital”, where suppliers can learn about business opportunities with the government, digitalize tenders, and use algorithms to detect potential risks of corruption. In Colombia, Dasigno developed the “Mi Colombia Digital” platform to standardize public information of various territorial entities, generating savings of more than USD 30 million.

In Spain, Citibeats developed the COVID Observatory to understand people’s concerns and needs during the pandemic and enable agile and intelligent responses from governments. In fact, an indication of the interest in these new public-oriented ventures is that the España Digital 2025 Agenda proposes the creation of a GovTech innovation laboratory to incubate and accelerate solutions for public administrations. The Community of Madrid also has its ownGovtechlab, which seeks to bring innovation developed by startups, scale-ups and digital MSMEs closer to Madrid’s public administrations as they address their challenges.

The GovTech trend is picking up pace for two main reasons. First is the significant rise in public spending on government technology in a pandemic-ridden world with rapid digital transformation of public administrations and people’s growing expectations for better digital services. Government procurement is, after all, a major catalyst for innovation.

Second, because digital MSMEs are key to economic revival and stimulation of the business sector in the new, data-driven digital economy. There is no going back: Our future will be much more digital and the 2020s will be a digital decade. Unsurprisingly, impact and venture capital investors are increasingly interested in this industry segment with high growth potential.

For this reason, Spain strives to become a digital hub and revitalize its startup ecosystem as a driver of economic growth and jobs for young people. This is precisely the focus of the startup bill and the artificial intelligence strategy adopted in December last year, with EUR 600 million pledged for the next three years.

In this global scenario, Ibero-America becomes a leader in the development and roll-out of GovTech solutions to improve lives. There is growing evidence of the potential of these socially-oriented ventures working with public administrations and about this phenomenon in the region, such as the reports on GovTech and the Future of Government or the GovTech Index 2020.

In this regard, CAF—development bank of Latin America—launched last year a first round of impact investments in GovTech startups in Colombia, Spain and Mexico that provide governments in the region with replicable solutions to address the pandemic and its consequences. With the support of the Bank, the Colombian government is promoting its first GovTech Lab as Córdoba, Argentina structures a GovTech investment fund run by the city. We are at a time of consolidation of digital agendas to articulate the talent of public-oriented startups with solutions that governments need and the investment required to close the circle.

To build a post-pandemic world, GovTech is a strategy that builds capacities of governments, especially at the local level, to meet the needs and expectations of citizens, who increasingly use digital channels to engage with public administrations. Today we have the opportunity to rethink the way digital technologies are used within governments to improve their own operational efficiency, enhance the financial possibilities of the public sector, and positively impact people’s lives, when they need it most.