GovDelivery cashes in by helping government clients save money

In 2000, Scott Burns, a Duluth native who studied economics at Dartmouth College, was a 24-year-old junior consultant at McKinsey & Co. with thoughts of getting an MBA.

Never happened. Instead, he quit to join his then-business partner to launch a company they'd been contemplating. And they both had wives who made enough to carry them for awhile.

This year, Burns' GovDelivery, an Internet-based provider of software tools that help more than 400 states, counties, localities and international governments automatically interact with more than 100 million citizens annually about everything from getting their veterans benefits to licensing a pet. It will hit a record $35 million in revenue, up about 25 percent over 2014.

St. Paul-based GovDelivery doesn't help mayors craft their messages or get involved in strategy.

"We're about getting the public sector information to citizens [by e-mail, text or social media] so they can access services and improve their lives," Burns said. "That's what government is supposed to do.

"We're proud to help government perform better. You shouldn't feel badly about reminding people when it's time to pay property taxes or to get a flu shot. Amazon and Target remind people to buy things. Our value proposition to our clients is getting the right message to the right people at the right time to help them do what they need to do, whether it's veterans benefits or property taxes."

More than 1,000 federal and other agencies use GovDelivery at an average annual contract cost of about $35,000. And local governments, many of whom employ fewer people than 15 years ago, say the service is cost-effective and reduces the need for more government employees.

Jenna Covey, assistant commissioner of Mn.IT, the state's information technology services provider, said Minnesota just signed a lower-priced contract of about $300,000 for next year that covers all state agencies and gets increased support services from GovDelivery.

"We keep getting more value out of their tools," Covey said. "We can collaborate with other governments and hit a larger base of citizens than just our subscriber base. They also provide a tremendous level of support.

"We used to send … a mass e-mail and hope that we were sending the right e-mails to some of the right people. But, using the analytics in the GovDelivery tool, we are able to segment our messages and get folks the information they want.

For example, the DNR just sent information about state parks and trails that gives folks the option to subscribe by text or e-mail. And some of them just want information for a particular region of the state. The revenue department is able to send businesses very specific information about tax updates or filing for their businesses, even by segment to restaurants and retailers."

GovDelivery employs 225 people, including 45 in Washington and 145 in St. Paul. About 3 percent of revenue is from Minnesota contracts. Its biggest business concentration is along the East and West coasts.

Burns and his former partner, Zach Stabenow, figured out over the early years how to master integrated government communications to constituents. The system essentially grabs government online notices and sends them to affected parties.

In 2009, pressed for expansion capital and trying to determine how to reward patient friends, family and other early shareholders, Burns sold the company for a very profitable $22 million to Actua, a Pennsylvania technology firm. He also sold a smaller, sister firm to his former partner, Stabenow.

Burns and other key employees kept 10 percent ownership of the company by reinvesting alongside Actua.

"Actua has helped us grow by providing us with a lot of outside expertise and also capital and backing so that we could make [three small] acquisitions and grow our staff acquisitions in order to grow," 25 percent over each of the last four years, he said. It also relieved his stress over how to provide a return to early, outside investors.

Veteran Twin Cities businessman Jim Dolan, now an investment banker at Cherry Tree Investments, used his former company to invest about half the $3 million in initial equity raised by GovDelivery in 2000.

"Scott had a vision for what could be done and did things strategically in the right order," Dolan said. "His first customer was the city of St. Paul. And then he got into local governments and state, and I helped him get into parliament in the U.K. because I knew people there. I just took him with me and introduced him to Her Majesty's Stationery Office in 2001 or 2002. He then got into the White House, cabinet level agencies.

"Scott is smart. You never have to tell him something twice. You introduce him to somebody and he's off and running. At one point we wanted to buy the whole business, and we had some negotiations. But at the price he got, we became a willing seller."

Burns said he retains good employees, the key to the business, by paying them well and offering them stock incentives through the management shares he controls.

"Our biggest challenge is keeping our talented team together," Burns said. "We need them to sustain the 25 percent growth we want. In technology, you have to grow or die. And this work is challenging."

Neal St. Anthony • 612-673-7144 • neal.st.anthony@startribune.com