Could the UK become the Silicon Valley of government technology?

Written by Sam Trendall on 6 July 2017 in Features
Features

Former No. 10 policy adviser Daniel Korski tells Sam Trendall about his plans to create an armada of UK tech players to compete with the best California has to offer – and why he needed to leave Whitehall to do so

Silicon Roundabout in London's Old Street has become a hub for tech startups. Daniel Korski wants to help UK GovTech firms “build a leadership position that Silicon Valley cannot match". Credit: PA

The naval expedition popularly known as the English Armada was an ill-fated gambit. Launched in 1589, in the aftermath of the preceding year’s Spanish Armada, the intent was to obliterate the battered and bruised remains of the Spanish fleet, and sow seeds of sedition in Spain’s neighbour – and new colony – Portugal.

By all accounts the mission was flawed in its planning and disastrous in its execution. After several, bungling months what was left of the English force sailed home with little in the way of tangible political, military, or financial gains. The whole, sorry enterprise cost the Treasury an estimated £100,000 – equating to more than £12.5bn in today’s money.

More than four centuries later, another self-styled armada is planning to set forth and launch a land grab against major incumbent powers from across the sea. But this time its fleet will comprise apps, not ships, and coding not canons. And, what is more, its captain believes that its forays could actually benefit the national purse.

Daniel Korski – former deputy head of policy for then prime minister David Cameron – co-founded government technology-specialised venture capital outfit Public last year. The investment house recently unveiled the tech 10 start-ups selected for the first iteration of its GovStart initiative, a six-month incubator programme intended to give participating firms a leg-up into the public sector market.


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“On the one hand, we can build a massive leadership position in gov tech in a way Silicon Valley cannot match,” Korski says. “And, if we create a digital armada of tech start-ups who can sail out into the world, that can create money for the exchequer.”

The Public chief executive tells PublicTechnology that, during his time in 10 Downing Street, he admired the work Francis Maude’s Cabinet Office did in breaking the public-sector hegemony of large IT vendors and systems integrators, and disassembling large, overarching contracts. But he believes that the benefits of this work could be even more keenly realised if the UK cultivates a more vibrant ecosystem of tech companies. 

“I viewed the government’s progress on their engagements with tech [companies]. But what was missing is the support on the supplier side – a real pipeline of early- and late-stage tech companies. [We thought] ‘let’s go and build that pipeline’,” he says.

“There are people out there, but what was missing was capital and access to networks. Once we decided we were going to do this, we created GovStart to support companies with everything from strategy to working with backers.”

We deliberately went outside the government for this; if I'd had to wait for someone in a committee I have never heard of to approve it, then I would have been waiting forever

Although Korski says that the current administration are “massive supporters” of the GovStart programme, he adds that launching the scheme as a private enterprise was a strategic decision he made early on.

“We have been to Number 10…  [And] everybody’s been incredibly supportive,” he says. “But we deliberately went outside the government for this. I had the idea, [and I knew that] if I have to wait for someone in a committee I have never heard of to approve it, then I would be waiting forever.”

He adds: “My view is that the public sector is getting a raw deal from large companies that aren’t very innovative and demand high margins. I think this could create greater efficiencies and cost-avoidance.”

Perfect 10?

A total of 137 businesses applied to take part in the initial GovStart programme, and Korski says he “was bowled over by the number and calibre of companies we had”. The former No. 10 policy adviser says that he was hoping for an intake covering a range of specialisms, including such areas as healthcare, education, and local government. The following 10 firms ultimately made the cut:

  • Adzuna – a search engine and information resource for job applicants
  • Ask the Midwife – a provider of online health services related to prenatal care
  • Calipsa – creator of artificial intelligence technology used to monitor CCTV footage
  • Cera – an online platform focused on the adult social care sector
  • Eyn – designer of machine learning-based tech visual identity verification tech
  • FlyNotes – a service specialised in consent for dental and other medical procedures
  • Novoville – a platform designed to help people connect with local-government services
  • Red Sift – a technology designed to offer secure analysis of vast data sets
  • RotaGeek – a cloud-based service for creating and sharing calendars and rotas
  • Pockit – an online bank working with those poorly served by high-street peers

“I hope we can help the smallest companies build robust products, source teams, and be able to get some rudimentary traction across the public sector,” says Korski.

Longer-standing firms on the scheme will receive more in-depth help with sales and marketing strategy – particularly as it pertains to obtaining a place on government frameworks. 

“We are based in Camden and, in the first month, we would like them to spend some time every week with us, [after which] the aim is to move off residential,” he adds. “We pair them with a senior mentor, and we have a team of people who have experience selling into the public sector. We also have technical resources on hand, and we have networks who can help get on G-Cloud and other frameworks. We basically want to create a much bigger set of companies on those frameworks.”

In return for this mentoring, Public will take an equity stake in each GovStart participant. Korski says that the size of that stake is negotiated with each individual company. Moreover, the focus is on cultivating a long-term engagement – not quick and opportunistic acquisitions.

“We are investors that offer capital, but we also understand the government market,” he says. “Of course, we take an equity stake, but we are not buying them up [just to get access to] this or that contract. We want to double down and build a relationship. We have a starting point, like all investors, then we negotiate until we have a position that is good for the investor and the investee.”

And GovStart wants to do more than just help build good technology and successful companies, says Korski.

“What we do, which is a perhaps a bit different to others, is we have built a research function,” he adds. “Let’s not just be a venture capital firm or an incubator, but also be the people that can lead the conversation.”

To coincide with GovStart’s first intake, Public published its State of UK GovTech Market report, which predicts that the sector will be worth an annual total of £20bn by 2025. Estimates of its current value range from £6.6bn to £12bn, the report says.

As it grows, government spending will also become more focused on SMEs, the report forecasts, as part of Whitehall's target to increase the amount of money it spends with smaller firms to 33% of its total procurement budget by 2020. The 2015 figure was 27%.

This means that of £14bn of Whitehall cash will be annually spent with SMEs within three years, and Public believes that “a significant portion of this will be GovTech spend”.

And the IT sector has already become significantly less dominated by large companies. 

Central government could save £1bn just by migrating to the cloud – and this represents only a fraction of the potential

Between 2013 and 2015 the proportion of government IT and telecoms spend going through its 10 biggest suppliers declined from 53% to 39%, the report finds.

As it stands, support services and systems integration takes up by far the biggest chunk of overall government technology procurement, with £4bn spent in 2016-17 – equating to one pound in every three of the wider IT budget. This figure will reportedly rise further, to 36%, in the current fiscal year.

Public’s research concludes that spending in this area could be reduced by a quarter if the government moved on-premises technology into the cloud.

“It therefore follows that central government could save £1bn just by migrating to the cloud – and this represents only a fraction of the GovTech market’s potential,” the report adds.

Key players

The report also rounds up the 100 UK companies that it has identified as the most significant players currently operating in the government technology market, split across five different categories: administration; delivery; participation; infrastructure; and regulation.

In the administration category, cybersecurity firm Darktrace is singled out as a key operator, with annual public sector sales in excess of £4.1m. Other firms in this area include Joyride, Lima Networks, and Ripjar.

In delivery, mobile platform-creator Nervecentre is namechecked, with £10m in annual recurring revenues and more than 30 NHS trusts on its client list. Keysoft, Scientia, and Clinisys Solutions are among its peers.
 
It may be more familiar as a consumer brand, but transport app Citymapper is listed as a major name in the infrastructure sector, alongside Optomity, Becrypt, and Lamasatech. Novoville – part of the GovStart intake – is picked out as a key force in the participation sector. Other operators in this space include The Nostrum Group, Spacehive, and HealthUnlocked.
 
Accounting for just five of the 100 firms listed, the regulation arena is comparatively small. Information management software company firm Ideagen is the fastest-growing outfit in this space. Agvesto, Fundapps, PassFort, and Xihelm also feature in the century of gov tech businesses the report collates. 

Such names may not rapidly expand into Google- or Facebook-sized monoliths. But Korski believes the UK has the market conditions and infrastructure to become a global leader in the government technology space in much the same way as it has led the way in the fintech sector in recent years. 

All of which could benefit not just Whitehall or Silicon Roundabout – but society at large, Korski says. “We are not looking for people who come in and say ‘we want to sell into the public sector’. We want people that are focused on the market – we are looking for those that can help transform public services.”

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