Good enough for government work? General Catalyst to back startups tackling the U.S.’s biggest problems

May 17, 2021, 1:00 PM UTC

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The business of selling to the government is often disappointing.

Known for being slow and tangled in red tape, government agency work is often a cultural mismatch for startups, which operate in a world where move-fast-and-break things is the norm. It’s no wonder so-called govtech funding has remained muted.

So, rather than invest in the traditional idea of government technology that is, say, seeking to fix the Internal Revenue Service’s software backend, General Catalyst is announcing a new area of focus for the venture capital firm. It is seeking to invest in startups that fill a gap where the authorities have fallen short. In other words, it will back businesses tackling problems traditionally left to governments, but with all the innovation the private sector brings to bear.

“We think civic technology is going to be a growing sector,” says Katherine Boyle, the General Catalyst partner who will lead the unit. Such companies, she says, are “either working hand-in-hand with the government to solve problems, or building in a way that augments the function of government to help society.”

While the focus is new, the roots are not. For a clearer idea of what General Catalyst means by civic tech, Boyle points to several of the venture firm’s existing investments. Cities including San Francisco face a rampant housing crisis, giving rise to startups such as Cover that build guest houses in backyards.

Another investment area that fits the bill is professional training. As tech and globalization upend traditional industries, workforces in the U.S. will need re-skilling. In 2019, former American Express CEO Kenneth Chennault—now Chairman at General Catalyst—led an investment in Denver-based Guild Education, which works with companies, including Walmart, to send employees to high school or university.

Boyle says her focus on civic technologies can be broken down into five areas. While Guild falls into its idea of education and re-skilling and Cover slots into the arena of manufacturing and infrastructure, General Catalyst is also looking to invest in companies tackling transportation and logistics, aerospace and defense, and public safety.

“When you think about the big challenges Americans face, whether it’s the cost of education, or healthcare, physical infrastructure is a part that Silicon Valley hasn’t historically touched,” she said. “We think there’s going to be much more investments from Silicon Valley in those sectors in the coming decades especially given the Infrastructure Bill.”

Notably, General Catalyst has and will continue to invest in companies that sell directly to the government—but it will focus on businesses that work with agencies that are more friendly to private-sector partnerships: think defense and police work. Boyle led an investment in Anduril, a unicorn defense-tech company with a self-piloted drone, in 2017. General Catalyst has also invested in Mark43, a maker of police software.

“Certainly over the last five years, there’s just been a sea change and how defense companies and particularly venture-backed defense companies are working with the Department of Defense,” says Boyle, giving credit to the Secretary of Defense Ash Carter under President Barack Obama’s administration, for reinvigorating the relationship between tech and government.

Still, these sorts of partnerships have not been without controversy. Under duress from employees worried their work could be used to create weapons or to violate human rights, tech companies such as Google have shied away from defense contracts. Meanwhile, Microsoft, Amazon, and IBM have said they will not sell their facial recognition software for police use.

Even so, behind the headlines, tech companies still largely maintain ties to the military. And a growing set of investors are willing to back defense tech startups, including those in Founders Fund, Andreessen Horowitz, and Lux Capital.

“Since the early 20th century, the U.S. government has relied upon private industry and technologists to support U.S. defense initiatives,” wrote Boyle via email. “We believe venture investors and companies should be supportive in building defense products that help keep Americans safe.”

Despite its focus, General Catalyst’s new fund won’t be based in D.C. Boyle recently moved to Miami, following the flight of other venture capitalists and investors who have made their way to Florida during the pandemic—including, most vocally, Founder’s Fund’s Keith Rabois. Boyle says she was drawn to the flow of tech talent, and believes she can make more investments outside of California by moving to the city.

“There are just so many companies that are built in the non-tech hubs,” she says, noting that her new home could help her spot more investment opportunities that are further afield from Silicon Valley and Wall Street.

“It’s really easy for venture capitalists to say, ‘Oh, we’re investing across America,’ and then live in a penthouse in New York or San Francisco,” Boyle says. “I don’t think that’s the right way of looking at it.”

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