We are returning this week with another edition of PE Pulse. This one is focused on government software M&A — a hot sector as we near the endo of 2024. Let’s get into it.
PASS Lite / CivicPlus (Oct 2024)
Category: Parks & Recreation Software
Type: Add-on
PASS Lite is a software and consulting company that helps parks and recreation departments improve their cost recovery processes. It was a fairly small operation that knew how to do their one thing really well.
Backing up a bit, parks and recreation departments are responsible for managing a wide range of athletic and recreational services provided by the government. For example, the San Francisco Recreation & Parks Department oversees everything from maintaining Golden Gate Park to running youth swimming programs at the North Beach pool.
Cost recovery specifically is a financial process that makes sure revenue (membership fees, class registrations, equipment rentals, etc.) closely matches the expenses of running said programs (staff salaries, facility maintenance, utilities, etc.). Since P&R departments are public entities, their goal isn’t to generate profit like most businesses, but rather to be financially self-reliant (reducing dependency on other funding sources like the city budget). It’s one part price optimization, one part budgeting.
CivicPlus, meanwhile, is a larger company that mostly has solutions in the civic engagement category of govtech. Think making city hall websites easier to understand, or software to power 311 service centers.
As you might expect, another category of software that CivicPlus provides is recreation management software. Within recreation management, CivicPlus covers a lot of categories that a recreation department would need, including cost recovery and budgeting. The PASS Lite acquisition, then, was likely a way to extend their current customer base rather than bolt on new capabilities. It’s a natural fit.
For context, CivicPlus was founded in 2010 and first took outside capital in 2019 (a minority round from BV Investment Partners). They then sold the business two years later to Insight Partners for $290m. According to Pitchbook, they raised another $76m in 2023 but the investor wasn’t disclosed.
CloudPermit / The Riverside Company (Sep 2024)
Category: Permitting & Licensing Software
Type: PE Platform
CloudPermit is a company that helps local governments with their community development permitting. Community development is a term that covers things like building permitting, planning and zoning, code enforcement, and inspections. Your city (and state) often have lots of requirements on how / where to build new buildings, and how you can change existing buildings. CloudPermit creates software that helps local governments manage that in a better way.
CloudPermit was spun out of a Finnish consulting business called Solita in 2018, which is when Vaaka Partners purchased them. CloudPermit was then purchased by The Riverside Company in fall of 2024. They have a global customer base with offices in the US, Canada and Finland. According to Vaaka’s website, they had €12m ($12.5m) in sales in 2023 and sold to over 850 customers, both of which are likely larger in 2024. The Riverside Company is a multi-billion dollar, multi-strategy investment fund, but they have two vehicles that invest in technology businesses of this size (a minority vehicle called RAC and a more traditional tech buyout strategy).
Large govtech players like Accela, Tyler Technologies, and OpenGov all have permitting and licensing solutions that touch community development. There are some other interesting point solutions too, like CityView and Camino (owned by Clarity as of last year).
SimpleView / Granicus (Sep 2024)
Category: Destination Marketing Software
Type: Transformational Add-on
This one is a bit different than the others in this article because SimpleView doesn’t sell permitting or core operations software, but rather sells software that helps destination marketing organizations (DMOs) and convention and visitors bureaus (CVBs) attract more visitors for the places that they work with (cities and counties). DMOs are usually separate entities, but funded by city revenues (typically through hotel occupancy taxes) and operate as public-private partnerships.
An example might be Discover Los Angeles (DLA) promoting various tourism activities in the city of LA. This is beneficial to the city because it spurs economic activity and revenues for the city. You can imagine that DLA would want to do things like have a high-converting website (content management), coordinate travelers with hotels/restaurants/attractions (CRM), and share their progress with their funding source, the city (reporting / analytics). Software is needed at each step, and SimpleView is the biggest player in their category.
SimpleView was founded in 2001 and was purchased by private equity for the first time in 2013 (by Ridgemont Equity Partners). They were sold to another PE firm, TJC, for $157m in 2018, and now are owned by Granicus. Granicus has hundreds of millions in revenue and is one of the largest government software technology businesses in the world. They offer everything from citizen engagement & digital communication tools to records management, permitting and licensing and many things in between. Granicus is backed by Harvest Partners, Frontier Growth and Vista Equity Partners and is an active acquirer (this is their seventh acquisition since 2020).
OpenCounter / Accela (July 2024)
Category: Permitting & Licensing Software
Type: PE-Add on
OpenCounter is another software company that focuses on permitting and licensing for local governments. They are different, however, in their approach. Instead of just providing the functionality for residents to apply to permits online, they’ve created tools for “permit discovery”. Before you can apply for permitting online, you need to figure out which permits you need, how much they will cost, etc. and that’s what OpenCounter does. For example, you can type in your product (renovation) and address, and OpenCounter will provide a list of permits that you need. It seems like a great product now, and you can also imagine how it could easily be extended with AI.
OpenCounter seems to be an innovative product in a sea of similar solutions, and that’s part of what Accela must have seen. Accela provides city, county and state governments with a number of solutions, permitting and licensing and beyond. They are backed by Berkshire Partners and Francisco Partners. In the early 2010s, under different PE ownership, they made a flurry of acquisitions, but OpenCounter is their first since 2015.
Decision Lens / Diversis Capital (July 2024)
Category: Planning Software
Type: Growth Equity
Decision Lens is a software company that helps government agencies (some local and state, but also the Department of Defense, Army, Air Force and other federal agencies) make better decisions, backed by data. The cost of the project proposals for these agencies often far exceeds their budgets, so they need a way to decide on these long-term projects. Making decisions is hard for any organization, and the government is no exception. There are cost, safety, environmental, economic and many other criteria to weigh, and many different stakeholders that provide input. Decision Lens allows users to create goals based on which criteria are more important, and then receive a ranking of projects based on how they rank according to those long-term goals. They also provide tools for collaboration/communication, scenario planning, and implementation/monitoring.
Decision Lens was founded back in 2004 and took a $6.5m round in 2014. It looks like there was a secondary transaction just a year later for the same amount, effectively returning the company to its bootstrapped origins. This makes Diversis Capital’s investment this summer the first real outside capital the company has taken. Diversis is an investor focused on small technology businesses like Decision Lens. They are investing out of a $680m fund that they raised in 2021 and typical check sizes range from $20-100m+. Decision Lens seems to be their first investment focused squarely on the government end market, but they’ve scaled many vertical SaaS businesses in different niches.
