GovDelivery

Is government the biggest, worst customer in the world? And is that a reason for venture investors to back companies that sell to government or to stay away? It had been seven years since Scott Burns joined his friend Zach Stabenow to get a company called GovDocs off the ground. In that time, they had evolved from a provider of government-mandated labor law posters to the country's largest sender of government-to-citizen emails. GovDelivery, as the company became known, was one of the first companies to move governments into the cloud, one of the first to sell them software as a service (SaaS), and in 2007, the only one with 3 million registered citizens using its platform to receive communications from federal, state, regional, and city governments and public authorities. In those seven years, Burns had raised capital from many sources: friends and family, angel investors, strategic partners, banks, and the investment arm of a major family fund. He and Stabenow had also grown the business through operating revenue and by keeping a tight watch on costs. They had to. Because growth capital had come in from almost all corners, expect one: major venture firms. Now, with roughly $6 million in annual revenue and projections to double that within three years, Burns was prepping for discussions with half a dozen Tier 1 firms. In doing so, he was anticipating what he thought would be the "elephant in the room." GovDelivery's business-to-government revenue model had been a conversation-stopper with major investors looking at Burns' company and companies like it. What would he tell potential backers?