Methodology
Calculations are based on the following methodology and assumptions
Defining Europe geographically
For the sake of this analysis, the definition of European countries includes the EU-27, plus Iceland, Liechtenstein, Norway, Switzerland and the United Kingdom.
Defining the public procurement volume in Europe
Figures for the public procurement volume for European countries is available as a share of GDP (source: OECD). Based on GDP figures for 2021, the actual procurement volume was calculated.
Defining European GovTech providers
GovTech providers are defined as companies headquartered in a European country with a market-ready digital or other technological product that is marketed either exclusively to the public sector (‹B2G›) or to both the public and private sectors (‹B2B+B2G›).
The identified GovTech providers address the full spectrum of the public sector, with the notable exception of the defence sector. Products in this sector, sometimes referred to as DefenseTech, are outside the scope of this analysis.
Identifying European GovTech providers
We have identified a total of 2,126 GovTech SMEs and startups that have been founded since 2000 and are headquartered in one of the European countries as defined above (source: GovMind).
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Calculating the revenues for GovTech providers
The revenues of GovTech providers with European public sector were according to the following three steps:
(i) Median revenue of a GovTech provider: As an approximation, the revenue development of a provider over a period of 24 years was estimated based on the median revenue in the SME Software for B2B segment (source: Jefferies, Statista, own calculations).
(ii) Provider cohort analysis: The median revenues were aggregated along 24 cohorts, across which the 2,126 GovTech providers mentioned above are distributed.
(iii) Relevant revenue share: The vast majority of GovTech providers generate revenue from both public and private clients. A survey of German GovTech startups (n=47) from 2022 shows that the share of revenue generated with public clients is 57 percent on average (source: GovMind). This analysis uses this figure to calculate the relevant revenue share.
Estimating the GovTech potential in public procurement
Starting point is a comprehensive study from 2016 on behalf of the German Federal Ministry for Economic Affairs (see here) which aimed at identifying the procurement volume that could be addressed by innovative products. Given the methodological approach of this study, the findings are applicable to other European countries as well.
The study lands at an innovation-relevant procurement volume of 12 to 15 percent of the total procurement volume. This includes procurement in the area of construction services. As GovTech products are primarily digital, their applicability to public construction services ist limited.
Deducting the share of construction services, which accounts for 33.5 percent of total procurement (Source: German Federal Ministry for Economic Affairs), and adjusting for country-specific structural factors, we estimate that GovTech-relevant procurement volume lies between 7.5 and 9 percent of total public procurement.
This estimate also takes into account that since the publication of the study on which this analysis is based, there have been significant technological advances that have dramatically increased the use cases for GovTech.