(Bloomberg) — Startup OpenGov is acquiring Cartegraph Systems LLC, a software provider for public agencies, in a deal that could benefit from the efforts of local governments to modernize their technology.
The combined company has a valuation of about $1.25 billion, according to people familiar with the matter who asked not to be identified because the information was private.
OpenGov, which gives cities tools to manage budgets and resources, was valued at $750 million in 2021, according to data provider Pitchbook.
The acquisition signals a growing interest in cities upgrading their systems. There’s also an influx of capital rushing into municipalities from the federal infrastructure bill signed by President Joe Biden last year.
“We are bringing together two incredible, mission-driven teams to meet the needs of the public sector, now and for the future,” OpenGov Chief Executive Officer Zac Bookman said in a statement.
OpenGov is using equity to finance the deal, Bookman added in an interview. The San Jose, California-based company is backed by Cox Enterprises Inc., Andreessen Horowitz and Emerson Collective, the firm started by Laurene Powell Jobs. Marc Andreessen, the co-founder of the venture capital firm, sits on OpenGov’s board, as does former Cisco Systems Inc. CEO John Chambers. Joe Lonsdale, one of the entrepreneurs who started Palantir Technologies Inc. is also one of OpenGov’s co-founders and his venture capital firm 8VC is a backer.
More than 1,100 state and local agencies, including Minneapolis and Pittsburgh, use OpenGov’s software, according to the company’s website. Its software is used for data portals, budgeting and citizen services such as permit applications and utility payments. Cartegraph, based in Dubuque, Iowa, manages operations and analytics for cities, utilities, parks and schools. It’s backed by private equity firm Pamlico Capital.
The two companies began working together about a year and a half ago. Bookman said he has been interested in Cartegraph since he first met CEO Josh Mallamud three years ago.
Cybersecurity threats, as well as old mainframe systems becoming obsolete, have been pushing municipalities toward cloud-based solutions.
“There are folks out there using clipboards and Excel to manage these decisions,” Mallamud said. “They can’t keep up. We refer to local governments as heroes. They deserve modern cloud software.”
Cartegraph will sit as a largely independent division within OpenGov and plans to ramp up its research and development with the added resources. No cuts to the team are planned through the year and the group will continue to report to Mallamud, Bookman said.
The investment bank William Blair & Co. represented Cartegraph in the deal, while OpenGov’s financial adviser was Shea & Co.
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