Why Indigov Walked Away From Traditional VC: A Contrarian Path to Building in GovTech
“I had venture funds and individual investors, GPs at funds who had made a lot of money with me in the past,” Alex Kouts revealed in a recent episode of Category Visionaries. Their response to his new venture? “We love you. Anything but government.”
This rejection from investors who had previously offered him blank checks marked the beginning of Indigov’s contrarian approach to building in GovTech. The problem wasn’t lack of market size – with 570,000 elected officials in the U.S., the opportunity was vast. The challenge was convincing investors to bet on an unproven category.
“Venture capital funds generally are pack hunters,” Alex explains. “I think the analogy I’ve heard in the past, it’s like they’re like penguins standing on the edge of an iceberg waiting for another penguin to jump in to see if they get eaten by a seal or a shark.”
Instead of chasing traditional VCs, Alex developed a three-part strategy:
- Build Revenue First “We were revenue generating and had significant traction and growth before we raised any money for the company,” Alex notes. This approach gave them leverage in fundraising conversations and validated the market opportunity.
- Find Mission-Aligned Investors Their breakthrough came through connecting with investors who understood the government space. “Our first money into Indigov was a bunch of the founders of Palantir,” Alex shares. These investors became valuable advisors, helping navigate the complexities of selling to government.
- Use Customer Validation During due diligence for their Series A, investor Bradley Tusk asked Alex to pitch to elected representatives he knew. “Everybody that he put us in touch with bought the product in the diligence process,” Alex recalls. “I’ve never actually gotten customers from a diligence process.”
The strategy paid off. “We’ve posted really healthy triple digit growth every single year of this company,” Alex notes. “We started scaling during COVID when every other company was dying.” This success has led to increased investor interest, with Alex noting they’ll “probably get preempted” in their next fundraising round.
For founders building in unconventional spaces, Alex emphasizes the importance of targeting the right investors: “Look for intellectual capital that’s been produced or articles written by venture funds about your space or anything that is closely related to it.”
He also suggests considering earlier-stage funds: “Maybe don’t go directly to Sequoias, Andreessens and everybody else in the world. Go to a smaller 100 or a couple hundred million dollar fund, get them on board, and then have them set up meetings for you with validated friends.”
The key lesson? When building in an unconventional space, sometimes the best fundraising strategy is to ignore conventional wisdom about fundraising altogether. Success comes from finding investors who understand your mission and validating the market through early customer traction – even if that means walking away from seemingly easy money.