GovTech Founder Series: From Shipping Container to OpenGov CEO

Welcome to the 2nd installment of the GovTech Founder Series. This interview is with Zac Bookman, the CEO and co-founder of OpenGov. OpenGov is a leading govtech company, with close to 1,500 public agency customers. Additionally, they have attracted significant investment from some of the world’s best venture capitalist. Zac is one of my favorite CEOs in the space and has great insight into what it takes to be an effective leader inside a fast growing company. Enjoy.

The interview has been condensed for clarity.

Nick: How did you get into entrepreneurship, specifically govtech?

Zac: I grew up near “government,” in Maryland. My father worked at the National Academy of Sciences in Washington. I was an entrepreneur from a young age, but growing up in DC influenced me — government is to DC what tech is to the Bay Area. I studied government in college, then went to law school, and completed a master’s degree in public administration as well.

After grad school I went to Mexico, and studied corruption in the Mexican government on a Fulbright Fellowship. I had a brief law career as a law clerk for a federal judge on the 9th Circuit and then a trial litigator here in San Francisco. Then I went overseas to Afghanistan. I served as an advisor to US Army General HR McMaster on the Anti-Corruption Task Force.

We started OpenGov in 2012. I was living in a shipping container at the time in Kabul. The “we” is a group of technologists from Stanford, including our chairman and co-founder, Joe, who is a co-founder of Palantir and other companies.

From about 2009–10, We had been running a nonprofit out of Stanford that was using then-new web technologies to figure out what was going to happen to the governments in California as their revenues dried up during the recession and the California Budget Crisis.

We started talking with the City of Palo Alto and the State of California, and said, “Hey, give us your budget data and we can help you drill through it, see trends across the years, share your financial and performance data on the Internet.” They said, “Wow, that sounds really useful. How do we get you our budget data?” We were like, “What do you mean, how do you get us your budget data? You’re the budget director!”

They were like, “Look, come sit with us and look at our back office systems,” and we did. The state of California was using a Cobol system. The city of Palo Alto had paid 10 million dollars to SAP for an ERP system that was delivered on 20 disks. We were like, “Holy crap. The people running these governments are working hard, they’re smart, and they are banging their heads against 30 year old technology. They can’t see where their money goes across very complicated enterprises. They can’t share data with their elected officials, who are supposed to use it to govern. Their citizens are losing trust and getting disengaged. Their staff can’t use data to make decisions on how to fight fire and crime and deliver water and power.”

“Wow. There are a lot of problems in government. Institutional, incentive, bureaucracy, political, but there’s a huge technology problem. We’ve got to do something.”

So, we started OpenGov and the vision was a government performance management suite in the cloud above the tens of thousands of legacy, on-premise ERP, accounting, permitting, billing, other back office systems in use by every city, county, school district, special district and state agency in the country. If we could ETL the data out of their old systems, get it into the OpenGov cloud in a structured way, we could make available a bunch of applications to help them run a more effective and accountable government. The three pillars of our suite are budgeting, reporting, and open data, and those product pillars map to what we think of as the three key management processes of a government: Planning, Operating, and Communicating.

N: That’s incredible and seemingly so obvious at the same time. So what’s the long term vision?

Z. The vision is even more grand than that, because we think as we get to thousands of governments, we will further network the platform so governments can keep learning and sharing from each other. Imagine getting comparisons with other governments as you build your budget or performance benchmarks when you do your management reporting. We think we can build the world’s largest repository of financial and performance data and that will be very good for the network of governments and probably in time good for the whole ecosystem from policy and regulatory folks to bond traders and rating agencies.

It’s an exciting time. We have about 1,400 governments now in 47 states using some segment of the platform. Our deal sizes have tripled year over year, and our new budgeting product is showing tremendous momentum. We’re bringing on really smart people, building a lot of software, we’ve raised more than 50m dollars, and built one of the best boards in the Valley. And it’s all mission-driven toward powering more effective and accountable government.

N. You’re now five years in. It’s compelling, it makes sense. Take me back to day one. You’re in a shipping container. You have this idea. You’ve seen the inefficiencies. It’s part personal interest, part professional interest. How do you go from, the state of California’s got this massive problem of inferior technology, how do you go from seeing that to getting the first step?

Z. There’s a lot of building brick by brick by brick. You’ve got to get some money to afford the right people. You’ve got to have some money already if the right people are going to come. You’ve got to have the right people if you’re going to get the right advisors. You’ve got to get the product to get the right people, but you’ve got to get the right people to get the product.

Everything’s dependent on everything else, and you’re just trying to build it brick by brick.

Looking back, it’s amazing how naïve I was about the market, about people, about how to do it all, and realistically, that’s why it takes five years to get to the point we’re at now. It’s why we’re not three times our size at this point, because you just make so many mistakes and things take so much more time that you’d like or think. I thought that building a company was going to be a three to five year endeavor, then I thought it was going to be a five to ten year endeavor, and now I see it’s really a 10 to 20 year endeavor.

N: You and I agree, the biggest misconception among first-time founders is great companies get built fast. It actually take a decade or more to build. Knowing that, what’s one piece of advice you’d give a new founder or someone contemplating starting a company?

Z: It’s that annoying dual piece of advice. On the one hand, it’s okay to be naïve and jump in. In fact, you kind of have to be because if you knew how hard it was you just wouldn’t do it. There’s a lot of “brain damage,” as they say. It’s okay to be naïve and bold and courageous and stupid. Just jump in.

On the other hand, if you’re not ready to cut your left arm off for the business to succeed, the chances of succeeding are significantly less likely. You need to kind of understand that you’re starting a journey and come hell or high water, you’re going to have to stay the course and stay in the pocket.

N: What do you think is the biggest mistake early founders make?

Z: It’s usually people related. I’d say the biggest mistake is choosing poor partners or poor hires. It’s costly in time and energy to make the wrong people decisions. It’s easy for disagreements, confusion, and mistrust to start to creep into an organization, and it can be very painful to deal with. That’s number one.

Number two is probably not to talk to customers enough. You’ve got to engage with the market, put stuff in front of prospects, and start iterating.

Three might be to bite the bullet and raise money. It’s almost fashionable among entrepreneurs to say they wouldn’t raise money again, and I can see the appeal in the simplicity of bootstrapping, but raising money is a forcing function. Once you do it, you’ve got to be all in and go hard. It also brings a stronger sense of governance to the organization.

N: How do you pick a good co-founder?

Z: You need somebody who’s a technical genius, but for me the number one value at our company, and it’s not accidental is that we do what we say we’re going to do. We do it for customers. We do it for each other when we’re working together. I just don’t want to work with somebody who doesn’t do what they say they’re going to do, and there’s two sides to that.

First, enter a commitment thoughtfully. So, if I ask you something unreasonable or not doable or the plans are not there, don’t say you’re going to do it. It’s okay. We’ll talk that through, or you’ll just disagree. On the other hand, if you say you’re going to do it or get it done tomorrow or “I got it,” it needs to get done.

I feel like so many problems come from that dynamic and not following through can breed a lack of trust and reliability. I’ve seen a lot of people in tech that leave when the going gets tough. But in my mind, partnership is kind of like marriage. It’s not cool to be like, “I changed my mind. I just feel differently now.”

Yet, technical talent is the name of the game.

If you’re a tech company, the competitive differentiation often starts and ends with the technology. So having a strong technologist or tech team is just critical. In GovTech, there’s a lot more to it, but technology chops on the team is a sine qua non.

N: Do you think open data is a fad or a trend? Why?

Z: I thought it was a fad two years ago, and I think it’s pretty clear it’s a trend now. Potentially a juggernaut. Just look at the market demand. The number of RFPs for open data dwarf probably any other technology except maybe ERP. Being in the market with multiple product offerings and seeing what governments want and are interested in, it seems to have become a category.

N: Interesting. I’m not sure I agree. Say more.

Z: We started with transparency and built the market for financial transparency, and some people thought this was different from open data. Over the course of the last couple years, it’s become apparent that it’s all one category with different solutions for different size governments and different use cases.

When you see cities like Boston evolving their thinking on the value of open data and migrating to OpenGov, that’s a city that is on the leading edge of applying technology to the challenges of government. Cities are just starting to prove the value as they leverage open data both externally, but also internally.

N: You really think open data is a sustainable category?

Z: It’s not clear that it will be its own category for long — we increasingly see governments want to link open data with their reporting capabilities and their budgeting process because ultimately its all about using data to make better decisions throughout the year. Governments care most about software that impacts their daily workflow and open data doesn’t always rise to that level.

N: Is open data getting commoditized?

Z: I don’t know if I’d say commoditized. The prices are still relatively high, but a fair amount of it is services. You’ve got to get the data in, you’ve got to set the thing up, you’ve got to teach people how to use it. That’s the services stuff. I think there is something there, but it’s going to take more time to figure out the exact long term value.

N. This highlights one of the systematic challenges in govtech, legacy systems are so deeply embedded. It makes building new systems of record incredibly difficult. Is it fair to say future govtech companies will need to be workflow oriented tech on top of legacy SORs?

Z: Of course you have Tyler and Sungard, the incumbent ERP players. They may sell a new ERP into a government agency, but it’s the same legacy vendor. Workday is an instance of a potential new player in this space. They don’t have a huge number of public sector customers, but they have huge engagements.

There’s a piece in TechCrunch by Aaref Hilaly. It says something like the next great companies are not going to be like SalesForce, though I think what he means is the next great companies will be like Salesforce. Effectively, these companies will iterate to become a new system of record on top of the legacy systems. I think that’s the path to victory. It’s also extraordinarily difficult.

N: Let me give you my pessimistic view of govtech, and you react. I think there’s a lot of interesting and required ingredients for tech to move in to government. You have talented new founders interested in the space. You have more capital than ever. And, you have a younger cohort of public sector workers who expect better technology. But, it’s a hugely capital intensive sector. Hugely time intensive. Very much a service delivery businesses, right now. Plus, 100 to 150 years of legacy bureaucratic workflows that are not tech first. As we both know, that results in heavy deployment and heavy service cycles. In my opinion, for the next five to 10 years, it’s not going to ever be pure SaaS. It’s going to be kind of a hybrid SaaS-service model. A little bit like you talked about with open data. Agree? Disagree?

Z: It’s very capital intensive. These enterprises are so hard to sell into, to work with, and their focuses are not on technology. I think it’s possible that a lot of new GovTech companies fail. The economics just don’t end up working.

There’s just a lot of work to get done, and the only way that that works is if you have a lot of capital. You have to raise 10, 25, or 50 million dollars plus, because you’re effectively subsidizing the deployment and adoption phase through your own staff, not through your customer’s staff. A typical enterprise SasS company would push that adoption onto the customer and potentially charge higher prices out of the gate.

N: How do you combat that? Is the only answer you’ve got to raise 20 million dollars plus?

Z: I was going to approach it from a slightly different angle. There are some realities about how these enterprises work. I spend a lot of time trying to push ropes up hills. You’ve got to charge high prices that reflect the huge value you are offering. Legacy companies charge high prices even though they don’t have fantastic products, because it’s really expensive to work with these enterprises. Market, sell, service, deliver, everything costs money.

These buyers are smart. They’re not going to pay high prices for nothing. But, you have to be attacking must-have categories or workflows. Major pain points; you’ve really got to find the pain. It’s a tricky cocktail.

N: What’s the hardest thing about being a CEO?

Z: People management.

N: Is that a skill you can only learn by being a CEO or can you prepare for that?

Z: You can prepare yourself by working in a successful, well run, early growth company. Being on winning teams is probably the best way to develop pattern recognition and skills for doing this stuff.

N: It’s habit forming?

Z: Yeah, and you just know what winning feels like. When I interview, it’s a major plus for me if someone’s been a part of a winning team. Much less so than being a part of a startup that failed. I’m glad you got that experience but it would be much better if you had succeeded, because then there’s a decent chance you contributed to the success and at minimum you’d know what success looks like.

N: You’re going to make your first hire outside the founding team, do you hire a sales person or an engineer?

Z: An engineer. You’ve got to build.

N: Fill in the blank here. The founder is responsible to get sales to X and ARR to Y before they can hire outside sales management.

Z: I went earlier, and I think it was a fine move. I did it around $200,000 in sales. Now, I made a mistake. I was charging way too little at the beginning. I think the blogs and the books would say, a million or two million, but I did it earlier.

N: What’s one thing you’d do over again based on what you know now?

Z: I’d have less investors, I’d make better hiring decisions, and I’d remove people from the team more swiftly when it’s not working.

N: What’s one piece of advice you’d give to someone that works in government that’s trying to get modern software bought and adapted but can’t get through?

Z: Engage and pressure and persuade and make things happen. But that’s easy to say, because in government the spouting whale often gets the harpoon. Not the squeaky wheel gets the grease. It’s part of the deep tension and the whole public sector dynamic. I can see a world in which the next generation of government leaders take more risk with technology. They take more risk, they’re more engaged with the technology community and their own community. We’ve seen success stories of this.

Our early adopters, are considered the best governments, not the worst.

I think there is a culture shift happening where CIOs, CFOs, and department heads, want to push boundaries, get out of their comfort zone, and adopt new technology. They are being rewarded for that mindset.

N: Last question. Has there been a book that you read that’s made you a better founder?

Z: The Hard Thing About Hard Things by Ben Horowitz, Crossing the Chasm by Geoffrey Moore, The Challenger Sale by Adamson and Dixon, and The Effective Executive by Drucker.