Oct 29, 2018 · 45m · 20vc
20VC: The 2 Core Roles Played By The Best Seed Investors Today, What To Look For In Potential Co-Investors & Why Seed Funds Can Grow Ownership in Their Best Companies Across Rounds with Ron Bouganim, Founder @ Govtech Fund
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of The 20 Minute VC, host Harry Stebbings interviews Ron Bouganim, founder of GovTechFund, to explore the evolution of seed investing, fund ownership strategies, and the massive untapped potential of the GovTech sector. Bouganim refutes common misconceptions about government software sales cycles and market sizes while detailing how VCs can deliver high-touch operational support to founders.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 24.9% of the talking time here. How this is scored →
Harry as informed peer 3.1 Guest teaching 4.2 Guest disagreement 1.8 Harry pushing back 2.1
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 14:57 Rejection of long sales cycle premise
Ron briskly rejects Harry's framing that government sales cycles are untenable, countering immediately with portfolio data showing sub-90 day cycles across 20,000 agencies.
Hardest push from Harry ▶ 14:40 Debate invitation on GovTech sales cycle sustainabilityHarry explicitly challenges Ron to a debate, asserting that government sales cycles are so long that investing in early-stage GovTech startups is unsustainable without SMB revenue.
Biggest teaching moment ▶ 15:15 Procurement threshold mechanics breakdownRon educates Harry on modern GovTech purchasing dynamics, demonstrating how SaaS pricing below agency procurement thresholds bypasses lengthy RFP and CTO approval processes.
Harry holds his own ▶ 10:37 Ownership dilution counterargumentHarry utilizes venture dynamics framework to challenge Ron on ownership, arguing that seed funds inevitably lose ownership stake when major multi-stage funds lead follow-on rounds.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Welcome and Conversation Opening | 1 | 3 | 1 | 0 | Harry opens with standard background questions regarding Ron's transition into venture capital. Ron provides a lengthy personal background detailing his US citizenship, Code for America work, and founding GovTech Fund out of information asymmetry and spite. | |
| Evolution of the Seed Investing Ecosystem | 2 | 3 | 1 | 1 | Harry brings up a recent quote from Andy at Uncork regarding becoming more conservative with fund institutionalization. Ron explains how capital democratization and institutional requirements alter portfolio mechanics without changing core investment principles. | |
| Building Company Ownership Across Rounds | 4 | 4 | 2 | 3 | Harry challenges the idea of building ownership in later rounds, asserting that first check determines ownership before major growth funds crowd out early leads. Ron politely disagrees, detailing how high founder engagement allows GovTech Fund to double ownership up to Series B. | |
| Debunking GovTech Misconceptions: Sales Cycles | 5 | 6 | 4 | 5 | Harry explicitly challenges Ron to a debate on core GovTech objections, citing long government sales cycles as untenable for early startups. Ron pushes back with hard portfolio data, explaining how sub-threshold SaaS pricing cuts sales cycles to under 90 days. | |
| Debunking GovTech Misconceptions: Founder Demographics and Mission | 3 | 5 | 2 | 3 | Harry raises the assumption that GovTech requires older, experienced founders rather than young graduates. Ron dismantles this assumption, noting that 17 of his 19 portfolio company founders are under 28 and highly motivated by mission-driven software. | |
| The Potential and Marketplace Upside of Vertically Focused Funds | 3 | 5 | 1 | 1 | Harry asks about the outperformance potential of vertically focused funds. Ron details the massive market size of government IT ($150B US, $400B global) and explains how B2G SaaS models capture marketplace upside. | |
| Insertion Point, Traction, and Concentrated Portfolio Strategy | 4 | 4 | 2 | 3 | Harry references LP pushback he received regarding concentrated portfolio strategy versus diversification. Ron defends concentration for specialized funds, arguing that deep domain engagement builds stronger complementary portfolio value than spray-and-pray generalism. | |
| What Makes Great Co-Investors and Deep Post-Investment Engagement | 3 | 5 | 1 | 1 | Harry asks what Ron values in co-investors, referencing Matt Mazzeo and Lowercase Capital. Ron outlines an extensive checklist of intense operational support required beyond superficial value-add promises. | |
| Balancing Professional Distance and Personal Support with Founders | 4 | 4 | 3 | 4 | Harry presents the conventional view that VCs and founders should maintain strict professional boundaries rather than friendship. Ron rejects the strict binary, arguing a investor can serve as an empathetic personal coach while enforcing rigorous board standards. | |
| Quickfire Round with Ron Bouganim | 2 | 3 | 1 | 0 | Harry conducts the quickfire round covering books, common misconceptions, dad's advice, and LP meeting stories. Ron shares an anecdote about a 7-minute LP commitment and explains legacy COBOL code refactoring in government. |
Statements from this episode (25)
GovTechFund was the first VC fund dedicated to government tech
“Ron Buganim, founder at GovTechFund, the first ever venture capital fund dedicated to government technology startups.”
Historical VC data showed government was a terrible sector for venture investment
“For 40 years, VCs had data telling them the government was a terrible place to invest”
GovTech Fund doubles its ownership stake in select early-stage portfolio companies
“Adding to my position, we would invest typically through a series B kind of round, but I would, in some cases, perhaps even doubled my ownership position over those first early stages.”
GovTech Fund's portfolio is exclusively comprised of SaaS startups
“So the GovTech funds portfolio today is exclusively comprised of SaaS startups, software as a service startups that, for example, run a police department or manage foster care.”
US government employs 3.5x as many people as Dow Jones combined
“It employs three and a half times as many people as all of the Dow Jones public companies. If you look at the Dow Jones The US government is three and a half times bigger than all of them combined.”
GovTech Fund explicitly avoids investing in voting or lobbying CivicTech startups
“And for sure, I often get pitched companies that, hey, help us with voting or lobbying. It's very important to democracy, but GovTech's not the area we focus on.”
GovTech Fund's portfolio companies average a sales cycle under 90 days
“So the average sales cycle in our portfolio is actually less than 90 days. So let's start with that fact.”
GovTech Fund startups reach 20,000 US agencies, adding 10 per day
“We now in four years across 19 companies Are connected to roughly 20,000 agencies in the U.S. As a group of companies, we're adding about 10 a day.”
Shared procurement vehicles make government software sales faster than enterprise sales
“So I've seen many cases, actually, where it's faster than a traditional enterprise. We will see multiple agencies jump onto the same procurement vehicle, making that sales process look more like an upsell to an existing customer rather than a cold start sales …”
GovTech Fund targets startups hitting $25M ARR within four years of investment
“We're looking for are companies that can hit twenty-five million dollars of annual recurring ARR, annual recurring revenue, Within three to four years of our investment. So that means you roughly need to be growing 15 to 17% per month. We have a number of comp…”
Government agencies actively market software vendors to their peer agencies
“Governments are unique in that when they adopt innovation, one of the things they'll often do, and literally this happens in the U.S. Hundreds of times a day, is once they adopt an innovation in a given department, since they're not earning stock options and b…”
Only two of GovTech Fund's first 19 founders were over 28
“So the data is I've got 19 companies in the portfolio. One is already exited. So of the 19 investments we've made, only two are founders who are over the age of 28.”
Mission is the only way early startups compete with Big Tech hiring
“Well, the only way you compete with it is mission. And what we are finding across the board Is our millennials and folks straight out of school and so on who really are connecting with these missions, and that has been a major competitive advantage in recruiti…”
US government IT spending exceeds the entire online advertising market
“The U.S. Government alone this past year spent a hundred and fifty billion dollars on technology, IT and software. That's bigger than the entire online advertising market.”
Global government IT spending tops $400 billion annually
“Gartner has talked about government spending over four hundred billion dollars a year on IT. That is larger than all of retail, transportation, and utilities combined. That level puts you in the same category as all banking IT worldwide.”
GovTech software companies capture marketplace valuations by connecting agencies with constituents
“What's interesting is they start to capture marketplace valuations as well on top of the SaaS valuation because of the value they're creating by acting as the glue between government and their constituents.”
US government procurement spending is ten times Amazon's Gross Merchandise Volume
“The U.S. Government spends a trillion dollars a year on stuff. Forget about, like, missiles and submarines. I'm talking about, like, paper and pencils. It's 10 times Amazon's current GMV, just what the U.S. Government spends every year.”
GovTechFund maintains a concentrated portfolio of 15 to 16 companies per fund
“Fund one, which we stopped investing out of in December of last year of 20, of 2017, had 15 portfolio companies in it, so we're roughly doing one investment a quarter, Think about a sort of three to five year investment horizon. So, 15, 16 portfolio companies …”
One-third of GovTechFund's deal flow comes directly from the US government
“In fact, probably about a third of our deal flow today comes from the U.S. Government. I think I'm the only VC that can say that.”
Investor and customer introductions are mere table stakes for seed VCs
“Making a few Series A investor intros, or finding a candidate, you know, or making a couple of customer intros. For us, that's table stakes, right?”
Early-stage tech founders do not know how to conduct pipeline reviews
“Even if the entrepreneur thinks they know about pipeline review, they don't, right? And I don't mean that in a condescending way. It's just, I've done this now 20 times with my portfolio companies, plus my own companies, right?”
Chris Sacca hosted three-day founder deep-dive offsites at his Truckee home
“Chris Saka Had his famous offsite over in Truckee, north of San Francisco, in ski country, where he would sequester these entrepreneurs for like three days, living in his home, and all they would do was these deep dives.”
GovTech Fund invested $17M and generated $300M in follow-on capital
“I've invested now seventeen million all in. Our companies have raised nearly three hundred million in follow on capital.”
GovTech Fund portfolio companies avoid lobbyists and custom government contracting
“Our companies do neither. We neither do any government And we don't use any lobbyists, actually, across the portfolio. If we have, it's been extremely rare for a one-off scenario, but no, this doesn't look like anything that's come before it.”
VC funds must be built like products with unique competitive moats
“Because I think a fund is effectively a new product in the context of a ton of competitors. Money's coming from all sorts of directions, and you have to have a unique value proposition that I think will create a long-term competitive moat.”