A police chief in a mid-sized American city told me recently that his officers spend upwards of three hours per shift on paperwork alone. Not investigating crimes, not out on patrol, not doing anything that resembles what they signed up to do. His records management system was built in 2001. His dispatch terminals still require manual faxing. When I asked how his department shares data with fire and EMS, he just laughed.
This chief is representative of the overwhelming majority of the roughly 90,000 state and local government agencies that together spend $3.7 trillion annually to administer essential services in this country. Public safety alone accounts for roughly $250 billion across police, fire and EMS. And yet the technology underlying these agencies looks nothing like what you’d find in any comparable private-sector vertical. Seventy-three percent of local governments still run on decade-old financial software held together by spreadsheets and manual workarounds. Many state governments still rely on accounting systems written in COBOL, the programming language most popular in the 1960s.
And in the field, the picture is arguably worse: 911 centers that can’t receive text messages or video, permit workflows that require in-person signatures, fire departments that depend on PDF documents for building layouts and pre-incident planning.
The modernization window has opened
I’m a partner at Pathlight Ventures, an early-stage VC fund that invests in govtech, public safety, cybersecurity and healthcare IT. We’ve spent two years mapping every layer of state and local government technology, from police records to permitting to disaster response. What we’ve found is a sector that is simultaneously one of the largest addressable markets in American enterprise software and one of the most thoroughly neglected by venture capital.
The reason, historically, has been obvious: Government procurement is slow, budgets are political and sales cycles can be measured in geologic time. But the landscape underneath these assumptions has shifted in ways that are genuinely unprecedented.
Let’s start with money. The American Rescue Plan put $350 billion in direct aid into state and local hands. The Bipartisan Infrastructure Law added $65 billion for broadband and public safety upgrades. For the first time in decades, agencies have earmarked capital specifically for digital modernization, and in many cases they are mandated to spend it.
Then consider the political environment. The NASCIO State CIO Survey has placed legacy modernization among the top technology priorities year after year. The conversation around government efficiency, whatever your politics, has made “doing more with less” a bipartisan expectation. Americans rank government services dead last among ten sectors for customer experience, and elected officials feel that dissatisfaction at the ballot box.
And perhaps most important, the groundwork that made govtech sales historically impossible has largely been completed. Cloud migration, security certification, budget appropriation for software — these were once multi-year ordeals that killed startup momentum before the first pilot. Today, 911 systems routinely run on cloud services like RapidSOS. Police departments partner with private camera and Automatic License Plate Recognition networks. The cultural resistance to public-private technology partnerships, which was once the defining obstacle, has eroded substantially.
Building the public safety stack
The impact case is also quite clear. Our LPs, which include endowments, health systems and family offices with deep roots in public institutions, have a direct stake in how well these services function. Public safety failures, slow emergency response times and inefficient civic infrastructure affect the communities and beneficiaries they serve. When we talk to LPs about govtech, the conversations are about the systems that protect their employees, serve their constituents, and undergird the communities they invest in. That alignment between financial and civic interest is rare.
For impact-minded investors, the thesis here should be intuitive: Public safety and civic infrastructure are essential services that never go offline, administered by agencies that are dramatically underserved by the technology available to them. The capital to modernize, the political will and the cultural readiness are all present simultaneously for the first time in at least a generation. And the founders who solve the coordination problems at the infrastructure layer — the ones who actually unify dispatch, resource allocation, and reporting across departments that have never shared data before — will build companies that are both enormously valuable and almost impossible to displace.
The absence of traditional venture capital investment here also speaks volumes. The neglect of this sector, beyond being a missed financial opportunity, represents a validation gap that compounds the problem. When private capital avoids a market, it signals that the market isn’t ready, which makes it harder for agencies to attract innovative vendors, which makes the infrastructure worse. The handful of funds that do commit here are helping legitimize the category and accelerate the ecosystem of founders willing to take on government sales.
The startups gaining traction in these categories share a common playbook that is worth understanding. They deploy fast, in days or weeks rather than the multi-year implementation timelines of legacy vendors. They deliver provable, quantifiable ROI that justifies renewal without a political fight. And they anchor on use cases that are urgent enough to shortcut traditional procurement altogether.
For example, Peregrine deploys real-time analytics dashboards that unify fragmented public safety data, reducing the hours analysts spend manually pulling and cleaning data for CompStat meetings and giving command staff operational intelligence that was previously impossible to assemble. Mark43 is rebuilding the cloud-native records management and CAD stack from scratch, targeting the same pain points that have kept officers stuck in front of computers instead of out in the field.
We spend a lot of time in venture talking about “picks-and-shovels” opportunities. State and local government is the original picks-and-shovels market: the machinery that makes cities run. The fact that so much of it still operates on fax machines and filing cabinets is not just a business opportunity. It is a civic failure, and one that technology is finally positioned to correct. If you are building in this space, we want to hear from you.
Kasra Khadem is a partner at Pathlight Ventures.
Guest posts on ImpactAlpha represent the opinions of their authors and do not necessarily reflect the views of ImpactAlpha.
