Instead of ARR, Vulcan reports on 'total contract volume' (guaranteed money in signed deals) and annual cash collected. Softer but critical metrics include the number of states and agencies penetrated and, most importantly, how many times their product's requirements are written into law, creating an undeniable moat.
Vulcan's strategy is to first completely own the small, underserved market of "regulatory streamlining" for governments. This focused entry point builds credibility and a strong foothold, creating a wedge to expand into the much larger government consulting market and displace incumbents like Deloitte.
By scanning entire regulatory codes, Vulcan Technology discovered that roughly 5% of state regulations are illegal because they reference statutes that have already been repealed. This finding creates a massive, immediate value proposition for governments: instant risk reduction and cleanup of their legal code.
Following the playbook of healthcare software giant Epic Systems, the most durable competitive moat in GovTech is to have your product's specific features and requirements written directly into state or federal law. This tactic makes your company an essential, legally-mandated vendor, effectively locking out competitors.
An AI application can be a powerful business, even as a 'wrapper,' if it serves a niche audience that is unlikely to use a frontier model like GPT directly. The defensibility comes not from unique technology but from a deeply tailored user experience for a specific market, such as language-learning for children.
Describing GovTech revenue as 'annually recurring' is misleading because government contracts are often legally prohibited from extending beyond a political administration's term. This makes traditional SaaS valuation models based on ARR fundamentally flawed for the GovTech space, forcing a different approach for founders and investors.
By first helping government agencies craft regulations, a startup gains deep expertise and credibility. This naturally leads to high-value inbound interest from private sector firms needing help complying with those same regulations, creating a powerful two-sided market flywheel with built-in demand.
Vulcan's product, which ensures administrative regulations align with legislative intent, appeals to both parties by framing its value as restoring the constitutional separation of powers. This high-level, philosophical positioning resonates with both sides' fears of executive overreach, creating a surprisingly large and politically diverse market.