Global venture capital surged 150% year‑on‑year in Q1 2026, yet impact‑tech funding collapsed 63% to $33 bn, its lowest since 2017. The cash remains in the market – investors simply miss the signal. VCs have swapped ESG enthusiasm for skepticism, mistaking climate tech for all impact.

VC due‑diligence models that thrive on B2B SaaS falter when applied to public‑sector clients. Contract renewal cycles, revenue recognition, and procurement timelines differ sharply from churn‑based metrics. When the process feels too tangled, investors retreat, labeling the sector as "too hard" and abandoning potentially sticky enterprises that serve public services.

Government contracts deliver resilience. Switching costs spike because agencies risk disrupting essential services. Public‑sector buyers value stability; their retention rates rival top SaaS firms. Yet VCs lack tools to gauge this stickiness, overlooking businesses that score above 50 on Net Promoter Scores and promise durable revenue streams for investors worldwide.

Private equity now fills the gap. Accenture paid $1bn for UK govtech scale‑up Faculty, while Q3 2025 M&A hit $17bn, heading toward a $20bn yearly total. EQT’s $3bn purchase of Neogov shows that, when numbers align, capital follows opportunity, not sentiment, for impact investors and public beneficiaries through sustainable solutions that remain.