While there may be an attractive market, selling to the government is a byzantine, frustrating process that puts startups and small businesses without in-house contracting expertise at a disadvantage.
Before you commit to anything, study the processes that govern this space. There are lots of requirements for getting into the system — my company (not a tech startup, FWIW) needed to register for SAM (“The System for Award Management is the Official U.S. Government system that consolidated the capabilities of CCR/FedReg, ORCA, and EPLS”), Fedbizopps, GSA Vendor Support Center (VSC), ACES (the private company which issues a digital certificate), Duns & Bradstreet, etc. Then I had to bone up on general contracting requirements and pass some tests before I could bid … and then discovered individual solicitations have their own requirements, pricing restrictions, vetting processes, and sometimes huge delays (for one that I was interested in, the solicitation said “it may take up to 12 months or longer before an offer is evaluated.”) (1)
I am assuming that the Govtech fund has in-house expertise that can help smooth the way for new companies, but there will almost certainly be complicated processes, time-consuming bureaucratic requirements, and huge delays that cannot be circumvented. My advice would be to ask hard questions about these issues before going down this path.
It's not that hard once you get used to it, and your industry seems to be an exception to the case as what you experienced is not typical in IT. The upside far outweighs the bureaucracy when you land your first $1M+ contract (or you could just subcontract and avoid the bureaucracy altogether). It is, however, a market that requires a lot more commitment than most startups are accustomed to, which is why they try to enter and then give up shortly thereafter. It requires a lot of relationship-building, learning, and such.
I've noticed, however, that military veterans tend to be very successful in this space because they are accustomed to the jargon, the processes and the requirements. Like I said, it's a learning curve, but one that pays huge dividends if you stick with it.
Plus, your local SBA office has a special government-procurement officer in there who will actually sit with you and go over things one-by-one, so no need to ever go it alone if you get lost. They offer free training courses as well in government procurement. The resources exist, but too few people are using them.
That's the point though. "Getting used to it" is a serious effort that a small team doesn't have the time or bandwidth to take on. You have to stop doing other things to work on the process, which may not yield anything because it's such a complicated space to compete within.
Trolling FedBizOpps doesn't tell the whole story about prime vs subcontract vs SBIR etc...and by the way the USG is net-60 or net-180 so you need to have the runway to deliver on a contract for up to 6 months before you see any payment.
I know for a small team like ours (4 people) it's just not possible given the uncertain outcome.
I disagree. The half-dozen agencies we work with are net-15 to net-30 at most. We started out as a 4 person team just a year ago, and are now a 24 person team working in this market. So it can certainly be done if you just put in the effort to make it so.
Like I said, there are resources available to walk you through everything step-by-step FOR FREE, you just have to reach out and take advantage of them. No one can force you to do that, but you won't get anywhere if you don't start somewhere.
Agreed. With enough spare time spent looking, you can find all kinds of resources to hand-hold you through this process. Also, it is incredibly easy once you know what to do.
Absolutely. It's like learning a new language - once you have the rules and flow down pat, the rest comes a lot easier. For as hard as people think the market is to break into, there are an abundance of FREE and funded resources to help, but almost no one takes advantage of them unfortunately.
The government itself spends tens of millions of dollars trying to get small businesses to participate, basically like saying "I'll leave the front door to this massive market unlocked, you just have to walk up the stairs and open it" but these startups all turn up their nose at them because they want to ride the business escalator (e.g. whatever is low-hanging fruit/revenue), even if it only takes them up a single floor in the long run.
I personally know more than a dozen privately-held and even family-owned companies that I bet almost no-one here has ever heard of, yet each one takes in more revenue than all of Twitter. These companies used no VC or investor funds whatsoever and were "mere startups" just a few short years ago. And people continue to ignore this market?
All it takes is a little bit of effort and commitment to reach astonishing heights unparalleled in the B2B market. Add to that you also get to make your own government more efficient, cost effective and innovative over time, so what's the issue here?
Now, not all of them are good. Ours was incredibly supportive, even referring work to us that led to long-term contracts. If you can't find someone decent, go to another center if you have more than one in your area. The ones affiliated with larger universities seem to have the best results in my opinion.
I'd be happy to share any other insight as well. I've been working in and around this market for about a decade. Reach out through the website in my profile and mention HN (please note, I am NOT a consultant and do not seek any sort of fee for advice. I'm just willing to help get capable startups into this market that needs innovation).
>that military veterans tend to be very successful in this space
Most, if not all agencies, have a mandate to prefer veteran run businesses. That means, you may have a great product with great pricing and a great reputation, but the mediocre product or service owned by a veteran will win out 100% of the time.
Some then have preferred women or minority run business as well. Then the bureaucracy, connections, patronage, etc on top of that. Its a very different game than what you're used to in the private world. This also explains why fed technology is so terrible. Its not remotely a meritocracy.
That is a stereotype. Of all procurements in the federal government, 23% are supposed to go to small businesses (i.e. startups) in general. Only about 8% actually goes to veteran owned companies.
Plus, that is not how it works. They set aside contracts for veteran owned, minority owned, small business owned, etc. Companies compete within those circles, of which there are thousands of them. The competition is very intense in many areas. It is, contrarily, the large billion-dollar "integrators" that develop that horrible software, not small businesses.
So, stop blaming people and perhaps do something about it. Veterans are not the issue. Startups that would rather make a few quick bucks short-term and sell out, not wanting to put in the time and effort to approach a great market over the long term, are the real issue. Complain all you want about bureaucracy and such, but what are you doing, or even trying to do, to improve it? Complaining won't fix anything. Do something, put in the effort, and you'll see change happen.
Indeed -- and this will be a topic for some follow up posts (if I can actually get the time to write them :) -- much of the govtech innovation is happening today at the municipal level. I would encourage you to start there as there are tens of thousands of potential customers. None of our companies contract, sub-contract, lobby, etc and sales are done directly to the departmental buyer.
The good news is that we're starting to see many of the same industry trends mentioned (eg. adoption of the cloud, new wave of gov't employees/buyers due to retirement cycle, riding the cost curve, etc.) at the State level but that will, in our estimate, take the next 5 years to mimic what we're seeing at the municipal level.
Re: the Federal level, our expectation is that we will see the changes start to appear 5 years from now. I know that's a little depressing but a $400 Billion global spend does not turn on a dime.
All of this to say: the govtech revolution is very real as we see from the performance of our startups but it's happening bottom-up not top-down AND this will be a multi-decade technology replacement cycle (not to mention the govtech transformation globally where time cycles will vary).
Honestly, not to sound like we're overhyping, but the rewiring of government is inevitable. The major tech trends are just too powerful in both the consumer and enterprise spheres to skip government. And frankly, we deserve better.
It's also why we're pretty sure there will be Govtech Fund II, III, IV... :)
I'd only change one thing about your response, which was great by the way and is exactly like my own views of the space. The changes are happening NOW in the federal space, and quite quickly in some sectors, you just have to know where to look. My company has actually seen more of it at the federal level than at the state or local levels. It may not be widespread for another 5 years, but it is going on now in many agencies.
The change you mention is definitely inevitable. People just have to understand it a little better and push a little harder to break their way into the market. I've been working in this space for a while, but my latest company is relatively new to it. Even though, we've made incredible headway. Growing VERY fast from government contracts, pushing innovation at every turn and finding some very receptive federal customers for the ideas we are offering up to them.
Agreed. I should have qualified my comment as you are here. Indeed, what I'm referring to is a systemic shift ie. visible easily across a landscape. In that context, I think my comments make more sense. But I'm thrilled to hear of your success! Please share any stories with us on Twitter @GovtechFund.
... [On] the Federal level, our expectation is that we will see the changes start to appear 5 years from now. ...
Can you share the evidence or reasoning on this particular point? I would expect that reforming the federal contracting system would require major legislative and organizational changes ... and I simply don't see that happening with the current Congress or slate of presidential candidates.
Selling to DoD specifically is even more fun. Well depending on who's buying you might get to play fast and loose for a while but eventually you'll get bogged down in certifications.
Also security clearance helps if you have to send people onsite to debug.
Also if you think <insert log aggregation as a service> is slow try doing that over the phone from a secure facility where you can't get logs sent to you, just have someone read them to you.
Oh and you get to use Python 2.4 and RHEL 5 a lot if you work on Linux.
Yeah startup people would run for the hills.
However once you break through and get your devices listed on approved list of devices, you can fun overpricing the crap out of your services: https://aplits.disa.mil/processAPList.action (kind of like going to medical school -- pay lots of money upfront, then extract later through overpriced products and services).
Even after you get in the process doesn't get any easier. A friend of mine is a CTO of a successful software company in D.C. that specializes in government contracts. However multiple agencies do a separate bidding process for the software development phase and for the UAT/QA phase (waterfall ughh). So often when they land a software project, the QA for that project will typically go to their direct competitor. The QA phase frequently gets billed based on time spent (with allowances for overruns specified), and so it's in the interest of the QA company to spend as much time in the process as possible. As you can imagine, this does not yield a very productive QA process. I.e. JIRA tickets for "The last letter on this form title is too curvy" are not uncommon.
The government has serious OCI (conflict of interest) concerns so, yeah, QA is almost always a separate contract. However, you forget that the average software development contract is in the millions of dollars, if not hundreds of millions. Try to find that level in the commercial/b2b sector. I think you can tolerate a few picky font change requests in exchange for the vastly increased revenue such development opportunities provide overall.
Most agencies are moving more towards Agile now except for their legacy products. (Pro Tip: there is a huge market in app modernization if anyone is interested in learning arcane languages like COBOL and MUMPS). But, yeah, if you can just hold your nose and get through a waterfall methodology, your wallet will thank you.
There is a huge push underway in government to modernize systems and methodologies, so the next decade will be very dynamic for those companies willing to put in the up front investment and time to earn a spot in the market. Don't get me wrong, there isn't the same wartime spending as there once was (which is a good thing for taxpayers and competitive small businesses), but still some incredible, unprecedented opportunity for innovators of all types.
compare that with setting up a stripe account and starting to charge end-users - you can probably go from a standing start to customer-funded cash flow in a day or two, without having to bone up on much of anything.
Yeah, but the path to $20M+ in revenue is a LOT quicker in the government market. Setting up an "MVP" app with Stripe and such is easy to get some quick pennies, but the investment in going after the government market will get you some serious dollars - long term. Not only that, but the government will fund something if they consider it innovative. DARPA essentially funded the Silicon Valley before the VCs moved in, after all.
Google SBIR, STTR and CRADA. This is how so many of the common technologies that underlie our very way of life were created in the 20th century. Semiconductors, the Internet, database systems, computing in general, etc. etc. etc. People forget the government initially funded so much of the technological foundation of our daily lives through DARPA and other programs, and they are continuing to do so for those willing to take advantage of it.
I'm not very acquainted with other YC companies. But I know of hundreds of others that have gone this route for many technologies ranging from energy production to cybersecurity to sensor devices to materials science to software applications in AI and other areas, you name it.
thank you, this is very interesting. Do you know of any more recent companies that started on this route but continued through private investment (like YC companies etc.) For example, have any of YC's roughly 1,000 companies made use of SBIR, STTR, CRADA, etc? (Which ones).
Technology Transfer[1] is one of the mechanisms that enables collaboration between federal labs and the commercial sector.
Caveat, I am not affiliated with YC. However, technology I invented at an FFRDC was licensed by an investment firm. I choose to follow the work, co-found a startup, and focus on bringing the technology to a wider audience. I'm happy to talk about my experiences.
can you elaborate on the path of the government funding innovation? (your sentence, "the government will fund something if they consider it innovative" - I'd like to hear more.)
I don't think VC's and angel investors ever directly fund innovation (in fact they're allergic to it until proven by the market) and I would not be opposed to exploring the government route toward funding of these innovative ideas. I think there is an interesting space between projects founders are personally able to finance, and the minimum cash needed to prove innovative ideas of merit in the marketplace. airbnb's binder full of credit cards and 7 rejections show this pretty clearly.[1][2]
what does the government route to innovation look like?
And this figure only covers government IT procurement...
When you look at how government has traditionally interacted with citizens, it's indistinguishable from a monopoly service market. In the past, this was the only feasible way to deliver many government services. However, the result is the same as any other market monopoly: inefficient production and above welfare maximising pricing (albeit indirectly paid via taxation).
Government Web APIs fundamentally change this, and I'm not just talking about 'open data'. A whole bunch of monopoly markets suddenly become highly competitive markets (especially since digital service production tends to occur at around 0 marginal cost). The value to the economy could be many times the figure discussed in the OPs article. Tim O'Reilly was so far ahead of the times when he published his chapter on 'Government as a Platform' in 2010 (http://chimera.labs.oreilly.com/books/1234000000774/ch02.htm...)
More recently, in Australia they've just set up their own (kinda crappier) version of the UK GDS and published an API design guide. I think the excerpt from this article basically sums it up (http://www.themandarin.com.au/48771-dto-make-creating-apis-m...):
"However despite all these challenges, the cause [government APIs] is a great one and could do more to transform how government IT operates than many more public steps.
If the DTO [Australian GDS] can pull this off, have agencies fall in line and have APIs start rolling off government IT ‘production lines’, it will have single-handedly justified its own existence and transformed how government works, even if it doesn’t achieve anything else in the next few years."
Veterans will dominate in a lot of these contract bids because they have veterans preferences and many get disability points on their contracts, too. The federal employment system heavily favors veterans and oftentimes lowers standards of employment just to bring in more veterans into companies. Then add in that companies can be essentially paid extra for hiring a veteran on certain contracts and you are left with a heavy bias for employees and leadership whose primary experience in organizations is the old school, rigidly hierarchical military.
Trying to work with some of these guys in a start-up setting outside DoD space is no more frustrating than trying to work with a corporate developer that's never had any job besides at IBM their whole lives. It doesn't mean they're bad or unintelligent, but the rigor and emphasis upon certain organizational structures and workflow processes are just plain useless knowledge in a start-up focused upon execution.
There's a lot of cultural horrors that will keep out motivated, smart folks from working with the government. I've spent well over 10 years of my life hoping to be the change that I was recruited for, but it's just not enough to be smart and motivated as much as well connected to incumbents that are fighting very hard against change because their very expensive meals and Mercedes S500s depend upon keeping things as stable as possible. This is the precise opposite mentality of the technology giants in industry.
Firstly, your perception of veterans is woefully wrong and misplaced. Veterans set-asides in contracting actually do very little to help a company as there is still much legwork to be done. Even then, you stereotype veterans as "rigid" which is simply not at all true. I see envy in your post, not facts. Companies are NOT AT ALL "paid more" for having veterans on contracts. Labor rates are the same regardless of the status of the employee. You're facilitating the spread of rumors, stereotypes and hearsay which is why people think badly of this market. Veterans are given preference for hiring, yes, because they have a skillset that too few private sector employers realize unfortunately. There are studies to prove that point.
Secondly, "focusing on execution" and not processes is why so many startups die in a growth stage because it too often means chasing revenue only with few long-term plans. The government is inherently a long-term market. You need to have a long-term view. True, if you're developing a dog-walking app or glorified to-do list, yeah, it's not a market for you. But if you really want to do something game-changing and want to build something of note, I see no better place for it. Look at Palantir for example. There are hundreds of other examples.
Lastly, you can't just sit around waiting for "change", you have to make it happen. I used to be a GS-13 employee, fairly high up at one of these agencies, and I voluntarily left a secure job to make more of a change and I see it happening. It's rewarding, but you have to push for it and take risks or else nothing will ever come of it. I speak from experience actually doing this. How many else here can?
100% agree. I've seen the same outside of the US too. I've worked with a number of outstanding ex-military consultants on government/agency contracts and it was a uniformly excellent experience.
They come from a culture of doing what you say you will do, with the absolute minimum of BS, applying process and a focus on the final outcome. It's a disciplined mindset that is invaluable in a government procurement process.
> Veterans are given preference for hiring, yes, because they have a skillset that too few private sector employers realize unfortunately. There are studies to prove that point.
This seems a little like hand waving. Can you go into what skillsets you're talking about and what these studies are? For certain jobs I can see their experience helping, but I don't see how they should be given preference across the board, especially for technical jobs (ex: given two DBAs, I would imagine you'd want to hire the one most skilled at being a DBA).
And who better at being a DBA than someone who did it, for example, for the intelligence community processing millions of records per day/hour? Who better for supporting IT systems than someone who did it in the middle of the desert during combat operations? Life stateside has nothing comparable to that level of experience or pressure.
You can Google it. There are dozens of studies showing that companies that favor or are led by veterans are more stable, have higher morale, better cohesiveness, etc. The skills, in particular, they bring are typically "soft" - leadership, adaptability, teamwork, integrity, confidence under pressure, a truer world-view, character, etc. but more and more bring highly advanced technical skills, particularly in the cyber realm. Trying finding those in your average college grad who only knows what he/she experienced on campus and read in a few books.
Technical skills aren't everything - they can be taught comparatively easily. Other skills are ingrained in a person through experience. Those are the skills I speak of. If you are hiring only for pure tech ability at that one moment in time and not for the "whole person" then you have a truly short-term view. Even Google and other tech giants realized this.
You're assuming every military network admin was directly responsible for keeping the system up and running.
The reality is much different. Usually, it's a small minority of exceptional individuals that keep things running while the rest skate or gain merit through other means (ex high PT scores).
Even then, training for a speciality often covers the bare minimum to operate the equipment for a few reasons. First, training must be standardized across each MOS leaving little room for differentiation. Second, training standards are often set by senior ranking NCOs/COs who may have risen through the ranks for reasons other than technical ability.
Any role requires a higher degree of skill (ex engineering) or higher degree of differentiation (ie systems design) are passed off to contractors because the time/money costs of training an entire MOS to a higher degree of technical ability are too high.
It's gotten to the point where security has shifted to civilian-only support because the service members can't be trusted to follow best security practices when their superiors take a 'make it happen or your career will suffer' stance.
It's really common for the most talented/capable service members to leave the service and immediately return as contractors. They get paid more and don't have to deal with all the rank-and-file BS. The system doesn't reward talent in spite of good intentions.
I'm not trying to bag on veterans. I worked as a contractor and personally know many individuals I wouldn't hesitate to follow to the end of the earth.
Some individuals are truly exceptional in terms of leadership and/or technical ability but stating that all veterans can be lumped into that group is naive.
I used to work for one such company. They repeatedly used their 'special consideration' to undercut the competition. Took on the competition's employees. Paid their workers bottom dollar and pocketed the difference (to the tune of 80%-85% of the contract rate).
I jumped on the contract on short notice after my predecessor left with no notice. From the start I was treated as the 'odd ball' because I was the only male employee who didn't have prior military service. Despite that, they kept me on board because my technical skills far exceeded any of my colleagues. When I proposed to improve the systems we used to track logistics I received, 'we don't want to get involved with technical stuff' as a response. When they undercut additional contracts that included a significant amount of 'technical stuff' I suddenly became the unofficial technical SME of the group. Go figure...
When I discovered that my employer didn't give two shits about improving support I shifted my focus to more effectively supporting the Marines directly. Providing technical guidance, technical support, bridging communication barriers, augmenting the leadership, etc...
Eventually, the there was a leadership turnover at my parent unit. The new CO was disgusted by the obvious cronyism taking place and dropped the contract.
Despite walking away without a pot to piss in I don't regret my decisions for a second. I earned the respect of the Marines I worked alongside through hard work and merit, support my country, work with some truly exceptional individuals, sharpen my leadership abilities, and have a measurable impact on their ability to accomplish the mission.
Despite all that, I doubt I'll ever receive consideration for another similar position. Let alone one anything approaching GS13. On paper, I'm a white male with no college degree and no prior military experience. I'm literally the bottom of the totem pole when it comes to government work. That I managed to get in under the radar to begin with was a complete anomaly.
> How many else here can?
I can. I have worked in the trenches, in terrible working conditions, starved of resources, and support. I took a many risks, adapted and overcame the circumstances, integrate and extended the capabilities of those I supported, and made 'drug deals' to get shit done when there was no other option. I would love the opportunity to continue making a difference but I can't afford to continue living hand-to-mouth.
Note: For the uninitiated, 'drug deals' in military-speak refer to trading favors. No, I don't and didn't sell actual drugs. For example I used to trade technical support for military-specific advice and personnel support. I had valuable skills to offer and in return could occasionally 'call in' favors when I didn't have the knowledge/resources/manpower to carry out the requirements of my contract. There are 'formal' systems to request support but they don't extend to non-military members. Contractors exist in sort of a bizarre 'gray area' where they're supposed to operate independently of the system but are screwed without it. To service members, 'drug deals' are par for the course and usually come in the form of a 6-pack of Beer or 4-pack of RedBulls.
What I say next is from hard earned first-hand experience, not speculation, not popular opinion. Military contractors that care about 'making a difference' are the exception, not the norm. The majority of contracting organizations are run by retirees looking to cash out. It's a retirement+ as far as they're concerned.
I heard from one manager at state level that they were going to get another $2k+ per veteran hired as incentives for their department. I do not know if it's illegal or even totally false but the manner in which the financial incentives was candidly discussed made me question the veteran incentive system with grave concern regardless of what written laws / policies say things are supposed to be. There's thousands of stories where civilians get let go from contractors while rank and file veterans are still kept employed. There's some gaming of "disabilities" for everything from IBS to ADHD that can be decisive factors in hiring I know of personally as well that are nonsensical.
For civil service applicants, you can be completely ignored as a well-qualified applicant if you're not a veteran on many, many job postings (particularly GS 7-9 from what I can observe) as well as contract bids due to the volume of veterans applying. If you have 4 billets and 100 veterans apply and 200 civilians (all "qualified"), there will be no interview for a civilian until enough veterans fail the interviews. This is notably different from most affirmative action systems based around quotas I've heard of. Most people that support the veteran system have benefited from it directly or have never had to turn down qualified civilians from consideration talking to hiring managers, so I don't think a fair discussion can be advanced any direction without going into a really long (government-commissioned, ha) study.
You can't compete for a major contract ($50M+) without a veteran present on a contract among primes (why wouldn't you when you have 10k+ employees?) and the usual suspect major contractors - you don't have enough points probably to make up for that when the quantified terms of competition put everyone remotely competent very close on points. If you don't have a veteran as a head, you're probably a subcontractor to a prime and you're going to be handling most of the boots on the ground engineering dirty work. When everyone routinely winds up rating highest in fulfilling the contract, the folks that got extra credit win by default. Heck, the number of PhDs on staff and number of veterans are considered criteria of selection for many contracts even if none of those PhDs or veterans can be expected to be put on the contract (doesn't matter if the PhDs are in English or computer science!). I've been in several contract bidding strategy meetings where it's abundantly clear that despite all the regulations around privileged access that it is routinely violated with only the most egregious cases resulting in prosecution / disqualification.
The SETA system is pretty interesting but has been thoroughly abused by a lot of people up and down the beltway to short-circuit advance their careers into leadership positions despite (interesting enough) no actual prior government experience or even no successful projects consulted for. If my sorry ass can be strongly considered for several SETA positions, something is wrong with the system meant to emphasize meritocracy as well.
With all that said, I have nothing for or against veterans in a business context - they're just people with skills that have varying relevance and strength. I just see little reason to factor that into anything important like whether to interview someone for a federal position that has zero to do with the military (Smithsonian museum of all places has veteran's preferences for many positions, are we going to have curators in combat zones trying to disarm IEDs? Is a tour guide expected to be able to take down an active shooter without a firearm?).
My criticisms of federal government for applies to large private sector companies as well. I really don't view the public v. private distinction as something like a quasi-Keynsian retirement portfolio of bonds v. stocks at all - there are high risk parts of public sector and low risk parts of private sector, and they tend to correlate very strongly with organizational size.
If there has indeed been a focus on "long-term thinking" in public sector, the sheer number of failed projects with such poor quality output of "successes" should have been remediated somewhat after decades of experience managing enterprise-scale IT projects led by a disproportionate number of PhDs and "government-skilled" veterans had their valuable input while our "short-term" focused private sector would be drowning in operational costs and plagued with problems for every large company and only getting worse. Instead, public IT projects are getting wider in scope and demands ever higher with the Pentagon's procurement strategy now shifting to greater non-traditional private sector sourcing due to exorbitant costs and poor results from their usual contractors.
What have you done to try and fix it? Looking in from the outside you can speculate all you want, but maybe do something to work your way inside and see what it is really all about. There you'll see things can change, but you have to be willing to put in the effort, but too few are unfortunately.
the deeper I get in this thread the more I like you.
I used to do contract work for a number of small businesses (call them startups if you like...at least one fits the term) that sold to FedGov, specifically DOD. They had many of the same complaints I see here, what I saw was a mismatch of priorities and expectations that gets lost in a see of translation problems...especially when you involve the USMC. The process is often the way it is for very good reasons. However, the reasons may not be apparent or operate on the same paradigm as those in the startups world are used to.
As with any subcommunity within culture there is a lingo and a language and a way of doing things. The folks in here have their own (I mean we are on a website hosted by a business incubator named after a math operation). What I feel like is going on in this discussion thread is a classic case of 'I don't understand it so it is bad'. It looks very poorly on the startup community, and reinforces stereotypes about us as a group.
Reframe the paradigm of FedGov not as focused on efficiency but instead on processes and procedures in the name of fairness and the whole thing starts to make more sense. I do acknowledge that fairness in this case being an often abstractly applied and defined process.
About 70% of our revenue comes from the federal government, including cleared work. We specialize in this space and have customers across a half-dozen or more agencies.
The sales cycles can still be pretty long, but mostly for IDIQ's with $30M+ ceilings. We've received small $500k contracts that took over 9 months to award and, on the other hand, $3M+ contracts that took just a month.
A lot depends on the department/agency, and even organizations within the department/agency. It varies so widely but the key is getting to know your customer and anticipating the cycle. Relationships are absolutely crucial to getting government sales - the boilerplate they put out as RFP's hardly ever tell the full story of what the customer needs.
Also, leverage your set-asides and find reputable partners to team with. Can't stress this enough - it's the only way to compete against the behemoths in the market who have far more name recognition amongst contracting officers (who can be extremely risk averse). If the government isn't your target market, you can start winning work as a subcontractor and working your way up the ladder, getting to know your program manager customers who make the purchase decisions.
>Also, leverage your set-asides and find reputable partners to team with.
This is something that I've always wondered about. Contracting officers and large contractors are desperate to team up with start-ups (otherwise known outside Silicon Valley as "small businesses") so why don't more start-ups use government contracts as a no-strings-attached method of raising cash or bootstrapping?
Maybe it just doesn't sound cool or sexy to say that you're basically working for Uncle Sugar...
I think too few of them realize how powerful (yet easy) SBIR and CRADA programs are - free funding to develop a product, courtesy of DoD, HHS, etc. Up to $750k per year. I know entire $50M+ companies that specialize in SBIR R&D alone even, then license their product patents.
Heck, Oracle started out as a DBMS for the CIA. Almost all of the founding semiconductor companies of Silicon Valley were funded in large part by defense work (missile guidance). People forget this, but I think the realization of its potential coming back around. (https://www.sbir.gov/about/about-sbir)
What's cooler than developing products used instantly by up to millions of customers all at once? Once you overcome the stereotypes of working with the government, you realize how truly amazing and transformative it can be if you do it right.
So much software I've written for DoD customers becomes shelfware it's an embarrassment to the country. Half a billion dollars of taxpayer money going into random big data projects that mostly line the pockets of commercial software sales engineers and so few incentives to finish the job correctly in the current funding atmosphere (the squeaky wheel gets the grease) that almost all the DC area boutique, "elite" developer shops have had to sell to attempt to try to stay afloat.
Just look at the insanity that is DCGS and how useless it's been compared to our old friend Palantir when 80% of the point of DCGS was the government wanted to own the software itself and have it work on its own terms. It's almost a billion dollars in and last I saw the active user count was in the dozens - they counted test users in those figures. This is almost exactly the path of repeat failure I've seen in private sector when everyone was laughing at AWS as "not enterprise ready" then proceeded to spend millions on some random cloud-ish solution of hodge-podge software by contracted teams and now the same vendors are scrambling to match features or cost with AWS as sunk cost fallacy rears its ugly head. My current F50 customer is a major AWS proponent and is whittling down its legacy in-house IT after the massive savings and performance improvements over the internals mired in decades of worthless IT manager-centric designs and their associated failures. The same kind of transformation is what needs to happen in government but the machine is too invested in bureaucracy-ware companies that always get the funding over really hard tech companies. The current Pentagon procurement model is shifting toward more commercial partners and moving away from the companies that did their bidding historically and contributed to the mess (Trailblazer ring a bell? That's a VC's entire cap portfolio blown out in like 7 years for zero business value gained).
Getting meaningful things done will always win over bureaucracy and cronyism in the long run, and the current federal climate is nothing like it was decades ago that actually took real risks for some pretty great gains.
I'm sure things can be done in the federal system but the change is so slow and I'm not getting any younger while I wait for approvals and market confirmation from people that lost their passion for technology decades ago.
The issue is, product development in the DOD is a high risk low reward proposition. It puts the careers of individuals who have dedicated their careers to the government on the line.
Nobody gets a merit boost for successfully fielding a new tactical system. If they do a good job, their accomplishments are dismissed as 'business as usual'. If things don't go well, it could irreversibly tarnish a lifetime of hard work and dedication.
The bureaucracy barriers are in place to protect people's careers. The 'move fast and break things' mindset will never be accepted when somebody's career is on the line.
Contracting fills the gap because if things go bad, blame can be shifted to the contracting organization. It's not uncommon for contractors to continue picking up new work despite a trail of failed projects. They're just 'playing the game'.
This is exactly why more people need to get involved. Back then, government contracts were a major part of many leading-edge companies' business plans. Now, not so much. It needs to change so more innovation can reach these people and systems in such desperate need - they can't keep relying on the same "integrators" time and time again, yet expect different results. They need new blood, but few startups are willing to put in the effort unfortunately.
But the outcome is far greater than anything in the private sector. We could never have grown by 20 people in less than a year without external funding in any other market.
I think you just need to get out and attend some events, talk to people, get to know them - don't view them just as a customer. Listen to their problems and, above all, have a solid value proposition and you'll see things differently.
Not all statements have a source, these are first-person experience from a person who runs a successful government-oriented startup. Just because it requires more work than you're used to doesn't mean it's untrue or an impenetrable market. People thinking it's too much work is what is keeping it a market of "insiders" because no-one else wants to give it a shot.
At a recent event, Ms. Laverne Council, the CIO for the VA who oversees a $4.1B IT budget, actually talked about how a two-person company in San Francisco was able to get her attention. They focused on solving a problem the VA was having, not just their offerings. She flew out to meet them personally and it became one of the most successful tech rollouts in the agency history.
All it takes is a little hard work. Opportunities exist in abundance if you can see through all the stereotypes people throw out there. It's too bad people just give up so easily and that often lets their less-than-worthy competitors reap all the rewards. Don't give up. That's all you have to do.
Reach out to other companies doing business with the government and try to set up a meeting. If they are above a certain size (typically in the $30M range for IT functions) they will have mandatory requirements to work with small businesses (up to or over 25% of the total work depending on the industry and government customer).
Get to know the small business rep at that company, and work your way up the chain. That's how we started out.
Other ways are to attend government events. There is lots of elbow-rubbing going on and you'll surely meet someone willing to bring you on as a sub so long as you have a solid value proposition that sets you apart from the rest out there. Be personable with them - don't ask for work right out of the gate, have a long-term view of the relationship.
Relationships are crucial. Meet people, vet their quals, and then maintain the relationship. "Give first" is a good mantra to have, as many large companies look for market intel from their subcontractor small business partners in exchange for getting recurring work with them. Sharing openly and offering something of value first has worked very, very well for us.
+1 to that. Marc and the entire team at SeamlessDocs are killing it. We're so proud to be investors there -- amazing company with tremendous impact. What more can we ask for?
I wish we could! Unfortunately Govtech Fund I is focused exclusively on US-based startups. This is purely a function of scale today -- as a $23M Seed/Series A fund, we just can't spread ourselves too thinly. But there WILL be a Govtech Fund II, III, IV, etc. down the road and I'd love for Brazil will be top of the list!
In any case, if you find yourself in the Bay Area, please drop us a line -- happy to grab coffee. In the interim, if we can ever be helpful, don't hesitate to ping! @GovtechFund on Twitter always a good way to reach us.
It's a tough market for a startup. I've worked for state .gov, and probably oversaw about $20M-50M in purchases annually.
Some downsides:
-Our procurement cycles are very long, sometimes as long as a year.
-Procurement contract vehicles are a horror show. The contract terms and conditions are often not negotiable, and may impact your ability to get credit, etc.
-You may find difficult to deal with services terms imposed by some procurement regime.
-If you don't have a field sales force, you'll probably need lobbyists to get meetings.
-You'll need to deal with all manner of crazy compliance regimes. HIPPA, FERPA, IRS 1075, CJIS, etc. Plus local policy.
-If you "partner" with the IBM/Unisys/Dell/EMCs of the world, you may find yourself screwed holding recievables for the big vendor, used as a straw man by the vendor sales team, forced to use high cost/low quality consultants from the big vendor, or otherwise messed with.
On the upside, .gov is usually terrible at negotiations, and they look at spending differently than commercial customers. You can make a fortune selling stuff, but you're not going to do it with traditional SaaS business models. You need to invest substantial time, energy and dollars into the pre-sales process.
There is a reason most banks exclude government receivables from line of credit borrowing bases. It is a legitimate market, but it is hiding in red tape and not plain sight.
That's not true at all and simply more hearsay and rumor. Banks see government receivables as reliably as if you invested in treasury bonds with cash assets. It's the only customer in the world that is 100% guaranteed to pay, on time, as long as you perform to standard. You're speaking to the wrong people if someone told you that. I'm speaking, however, from experience.
I want to build "organizational operating systems" for govts. (incorporating "best practices") using FLOSS ERP software (I've done e-Government research in academia, and I can also code).
People who have experience in this space: is there a market for such a thing or do govts. prefer commercial (i.e. non FLOSS) software systems?
GovWorks was focused on only a small subset of the government market and rode the dot-com boom. I've personally known companies grow from $1M in revenue to over $100M in revenue in a span of only 5 or 6 years in the government space, even in a lousy economy. It's the hype of Silicon Valley that you have to avoid. Government, especially Federal, is a market that is driven by different principles than most others out there, which many startups don't understand before they try to enter it. So they expect immediate returns and just give up. It doesn't work like that.
Before you commit to anything, study the processes that govern this space. There are lots of requirements for getting into the system — my company (not a tech startup, FWIW) needed to register for SAM (“The System for Award Management is the Official U.S. Government system that consolidated the capabilities of CCR/FedReg, ORCA, and EPLS”), Fedbizopps, GSA Vendor Support Center (VSC), ACES (the private company which issues a digital certificate), Duns & Bradstreet, etc. Then I had to bone up on general contracting requirements and pass some tests before I could bid … and then discovered individual solicitations have their own requirements, pricing restrictions, vetting processes, and sometimes huge delays (for one that I was interested in, the solicitation said “it may take up to 12 months or longer before an offer is evaluated.”) (1)
I am assuming that the Govtech fund has in-house expertise that can help smooth the way for new companies, but there will almost certainly be complicated processes, time-consuming bureaucratic requirements, and huge delays that cannot be circumvented. My advice would be to ask hard questions about these issues before going down this path.
1. http://in30minutes.com/selling-to-the-federal-governmentgsa-...