An open letter to venture capitalists frustrated with the federal government shutdown

Photo: <a href="http://www.flickr.com/photos/michaelreuter/4068776519/">historilla</a>
Photo: historilla

Lately, what’s happening between both ends of Pennsylvania Avenue is starting to catch the ire of some venture capitalists who, like many Americans already, are starting to publicly vent their frustrations.

Two in particular stand out.

TechStars founder Brad Feld:

And Y Combinator founder Paul Graham:

As a fellow citizen, I couldn’t agree more with their sentiments, however, I’m equally embarrassed by the VC community’s inability to focus its attention on entrepreneurial ventures that matter and could play a vital role in changing all of this.

Y Combinator, Silicon Valley’s darling startup incubator, has a long list of funded companies, none of which have a significant pitch on democratizing the political process or offering much-needed technology solutions to the bureaucracy.

Likewise, TechStarsportfolio of funded ventures has not one civic-focused startup. According to its own official stats, the average company funding amount is $1.5 million. With 28 companies having failed, that’s a good $30 million dollars that could have easily gone into worthwhile, perhaps less-risky, civic ventures.

From grassroots campaign tools to fixing the bureaucratic minutiae of government procurement and everything in between, there are civic entrepreneurs chomping at the bit to get a fraction of funding in the range of just those losses.

If you’re a VC frustrated with the federal government shutdown, here’s my advice:

  • Fund 10 percent of your portfolio to civic-focused ventures aimed at solving bureaucratic technology issues or the campaigns and elections process.
  • Pivot your expectations for these ventures. The civic vendor market has a much longer sales cycle than those in the private sector. You’ll need patience, but estimates place the government IT market at $140 billion.

Unlike your average citizen (or furloughed public servant), VCs like Feld and Graham can have a huge impact beyond voting or voicing concerns to elected officials. They can play a major role in disrupting markets and if there’s one industry that could use some disruption, it’s the government services industry.

Pundit (amongst many other other notable accomplishments) Vivek Wadhwa effectively summarizes Silicon Valley’s sentiment in a recent Washington Post column “Silicon Valley shrugs off Washington shutdown“:

Perhaps it is best this way. Rather than fighting unproductive and destructive battles about budgets and health insurance, our innovators are chugging along inventing technologies that will make industries more productive and reduce the cost of healthcare. They are doing what they do best—looking forward, competing, and collaborating. Someone has to save the economy after all. Our politicians certainly won’t.

While I couldn’t agree more with Wadhwa on the “chugging along” part, more entrepreneurial and VC energy needs to focus on problems that will solve the state of our civic affairs. Saving the economy is important, but if all we’re left with is another mobile advertising platform or photo sharing social network, are we really better off as a country?

The good news is, appropriately, Democracy.com, a “global social platform for participatory democracy and political engagement,” launched this week with $2 million in seed funding. Other companies, too, have found funding to make a go at it, such as NationBuilder and SeeClickFix.

My intention isn’t to single out Feld or Graham. I have much respect for both of them. They have created amazing communities of innovators and inspire and mentor entrepreneurs everywhere beyond just their work with Y Combinator and TechStars.

I’d just love to see them and their peers take a meaningful lead on leveraging their influence and capital to change the entrepreneurial focus of the startup community. The best way they can do that is to start funding ventures that directly impact foundational aspects to a stronger civil society.

Yes, it will take some serious VC pivoting, but if you care about your country, it’s worth the investment.

Let democracy be your exit strategy.

About Luke Fretwell

Luke Fretwell is the founder of GovFresh. He is also co-founder and CEO of ProudCity. Connect with him on Twitter and LinkedIn or email at luke@govfresh.com.

1 Response

  1. Luke, while I respect your perspective, I think your post missed the target. There are plenty of things in our world that address “bureaucratic technology issues.”

    For example, Patriot Boot Camp – http://www.techstars.com/patriotbootcamp/

    Or UP Global – http://www.up.co/ – including my long term involvement in Startup America Partnership.

    While Foundry Group doesn’t focus on govt-tech (we don’t like vertical markets in general) many of the companies we’ve invested in are working hard to impact government tech infrastructure in a positive way.

    There is a meta issue here – the collision of a hierarchy (our federal government – and government in general) and a network (our society). We’ve shifted from a society dominated by hierarchy (and hierarchical thinking) to one that is increasingly driven by network theory (and – correspondingly, “the network.”)

    Most of our elected officials have no idea how to think about this and many continue to play a zero-sum game that is emblematic of a hierarchy (one side wins, one side loses, “comprise” is necessary on a case by case basis to move forward.

    This won’t sustain for another 50 years. The machines will simply laugh at us.

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