If you’ve ever received an email from your city’s public works department during a snow emergency or from the IRS during tax season, chances are you didn’t notice GovDelivery’s logo in the bottom right-hand corner of the message.
But the St. Paul-based software company is getting harder to overlook.
GovDelivery’s digital communications tools are used by more than 1,000 government entities in the U.S. — from federal agencies all the way down to local municipalities — and the U.K. to send emails, text messages, voicemails and social media updates to their citizens.
There are a handful of similar products on the market to serve businesses, like Constant Contact or ExactTarget, but GovDelivery CEO Scott Burns says his company has distinguished itself by tailoring its tools to the complexities of government.
“We have to serve a very broad range of needs,” Burns said. “If you think about just the city of St. Paul, it’s an entity that’s as complicated as if you put Wells Fargo together with Allina together with Subway.”
And while businesses all have the same goal — to increase sales — governments are trying to accomplish many different ends, such as reminding citizens to get flu shots or warning them of impending natural disasters.
Burns and GovDelivery co-founder Zach Stabenow, both Minnesota natives, have known each other since they were kids. In the late 1990s, Stabenow approached Burns with a concept for a web-based business. The
two founded a company called GovDocs in 1999, during the heady days of the dotcom boom.
“Back then, everybody was trying to be everything on the internet,” Stabenow said. “We took a different approach. We stayed very focused on doing one niche thing really, really well — even when it was tempting to go off and do something else with a quicker return.”
GovDocs’ niche was labor law posters — those sheets of employment legalese that hang on break room bulletin boards at businesses across the country. GovDocs made them available to employers online, either as a downloadable PDF or as a laminated hard copy they would ship directly.
After about a month of working out of Stabenow’s basement apartment, the pair moved into office space above what is now the Bulldog bar in Lowertown. They also brought on a third employee, Dave Sommerness, as operations manager.
To help clients stay up to date with the frequent revisions to the federally mandated posters, Burns developed software designed to deliver an email alert when a new poster was published.
In early 2001, Sean Kershaw, special projects manager for then-St. Paul mayor Norm Coleman, visited the office and took an interest in Burns’ new software.
Kershaw told the three entrepreneurs that the city had just undergone a complete overhaul of its website, but was having difficulty in getting up-to-date information into the hands of St. Paul residents.
Stabenow, Burns and Somerness saw an opportunity to turn their company’s new software into a separate product — one that would allow governments to communicate directly with citizens. Soon after, they launched GovDelivery.
“Whether it’s labor law posters or snow emergencies, it’s the same fundamental problem,” Burns said. “You have government creating a lot of information and people wanting to stay up to date.”
Over the following six months, while other tech companies were falling victim to the dotcom crash, GovDelivery signed up about 10,000 St. Paul residents for email updates from the mayor.
This attracted interest from other nearby government entities. Soon, Stearns County, the city of Minneapolis and the Minnesota Department of Health had signed on, encouraged by the company’s work with Coleman’s office.
Although the post-bubble skepticism of web-based business models proved to be a stumbling block for their new service, they doubled down, shifting resources away from GovDocs to support GovDelivery.
Once the fledgling company had a firm hold on the Minnesota market, it began expanding its territory into other states, and eventually began taking on clients at the federal level.
“If we couldn’t prove it in our own state, we didn’t think it was worth taking on the road,” Stabenow said. Burns says Minnesota is still the company’s fourth most productive market among the 50 states.
By 2003, the company’s annual revenue reached $1 million for the first time. But by 2010, they realized they needed more cash if they intended to sustain their growth. Burns and Stabenow orchestrated the buyout of about 100 of their shareholders by Internet Capital Group, a Pennsylvania-based venture capital firm.
Following the buyout, Stabenow spun off the GovDocs business, which had been operating as a GovDelivery subsidiary, into a separate entity. He still operates the company, which is now headquartered in St. Paul’s Energy Park.
The next year, GovDelivery’s annual revenue hit $13 million. The company has not disclosed exact figures for 2012, but the company’s roughly 30 percent growth would put last year’s revenue in the $17 million range.
About 80 of the company’s 120 employees work out of its 19,000 square foot headquarters in the Hamm building in downtown St. Paul, while the rest are spread out across the U.S. and an office in London.
“The whole philosophy of how we do things … is small teams making fast decisions and communicating openly,” Burns said. “As much as possible, we want to avoid 20 people sitting in a meeting deliberating. Even as we’ve grown, we’ve tried to avoid getting sucked into that bureaucratic mindset.”
This structure helps them stay agile in a market where the demands are constantly changing, Burns said. And their clients can’t afford to fall behind — arguably more so than their private sector counterparts.
“We’re sending you a message about a flood that’s on its way to your house, rather than a coupon for a new Indian food restaurant,” Burns said.
Their software handles an average of 10,466 of these messages every minute, with 1,358 new people signing up for updates every hour. Consequently, dependability ranks high on GovDelivery’s list of priorities.
The company tests its software constantly, spending more on quality assurance — making sure their products are working properly — than many other communications software companies. And because their software is cloud-based, they can ship fixes faster than they would be able to if their clients were downloading it.
And they’re adding new services all the time. In 2012, the company introduced one-to-one communications software, which allows their clients to send automated messages to individual citizens. They’ve also released a platform that handles inbound communications, allowing their clients to take questions from their constituents.
“We’re doing the same thing we’ve always done, but we do it on a bigger and better scale, now,” Burns said. “In technology, you’ve got to be growing, or you don’t make sense as a stand-alone business.”
In his own words: Scott Burns
On working with government agencies as clients:
“Outcomes in the public sector are almost always subjective, whereas outcomes in business are almost always objective. If it’s Best Buy and we helped them sell more stuff, they would value our service greatly. … But in the public sector, we have to make sure we translate reaching more people into something of value — say you want people to adopt more lost pets, get flu shots. Not just, ‘How do you get the press release out?’ but ‘How do you move the needle on what really matters?’”
On the benefits of producing cloud-based software:
“The old way of producing software was to build something for a long period of time, test it extensively, and then, ship it out. The new way — the way we’ve adopted —
is to build it and release it in smaller increments, testing it constantly along the way. Literally, every hour of every day.”
On selling software as a service:
“Our revenue model is much more like a Life Time Fitness than a Microsoft. … We’re much more oriented toward ongoing success than up-front sales. Our renewal rate is over
On the importance of growth in the technology industry:
“The difference between being an innovative growth company and being irrelevant is razor-thin. Even a Microsoft is going to be graded on how well they’re able to drive future growth.”
Nick Woltman can be reached at 651-228-5189. Follow him on Twitter at @nickwoltman.