On Tuesday, August 20, 2019 Public Spend Forum (PSF) convened experts from government and industry to discuss barriers to entry that small and emerging companies face when trying to enter the public sector market.

Featuring the perspectives of startup and federal agencies, the hour-long panel session quickly identified certain barriers that startups face that aren’t always discussed in such a frank, straightforward manner.

With host Raj Sharma moderating the panel, our discussion started with perspectives on the biggest hurdles that face startups and concluded with suggestions on how both sides can improve. This blog contains a summary of the topic areas and key points discussed in this exciting discussion. For a look at the complete conversation, we invite you to watch the full recording of the webinar, below.

Single Biggest Hurdle Facing Startups

• Navigating a long sales & procurement lifecycle
• Inherent lack of trust; government leaders don’t necessarily believe startups can get the job done
• Startups and government officials do not speak the same language
• A misconception that startups automatically know where to find government business opportunities
• A lack of appreciation for what a “meeting” implies; startups may assign significant value to a meeting that a government official may deem as simply a “professional courtesy” 
• Myths and realities about incumbency, what a “wired” contract actually is, and when short proposal timelines are just a function of the procurement process
• A lack of awareness from startups about how to find business opportunities outside of traditional contracts (e.g., challenges, other transaction authority, micro-purchases)

A Trend Towards “Smaller” Opportunities

• Modular contracting is a USDS priority because it helps them identify early solutions and determine whether they can scale, but it’s not standard practice across government
• Large vehicles are a barrier unto themselves; agencies should consider smaller deals and vehicles that can enable startups and small businesses to have an opportunity to compete
• Beware of the prime strategy – startups can get trapped under a prime’s culture…you don’t want to access a tech company only to find them stifled below a prime
  • However, some agencies just aren’t comfortable with startups and won’t consider them unless they are buffered by a “steady prime”, making prime contract relationships a viable channel strategy

Communication Breakdowns

• Trust and respect and perspective: there is a lack of awareness on the government’s part about what startups are enduring as they build their solutions along with their company. Startups don’t fully appreciate the limitations within which government employees operate.
  • For instance, you invite a startup to come present to your team. Are you actually considering them for an eventual relationship? If not, you are not being respectful of that startup’s time and effort and ignorant of the “emotional tax” that can result from a meeting that doesn’t lead to a concrete opportunity
  • On the startup side, don’t shift your entire company strategy or divert resources to appease a govie or provide a meeting. Seldom do these opportunities lead to a “liquidation event” or even a contract, so don’t be swept away by excitement here.
• Startups need to be aware of the timelines that exist in the government procurement world. There will absolutely be delayed communications, things simply don’t happen nearly as fast in the government space (months, not weeks). 
• Don’t hinge your business on a contract. Develop relationships, but set expectations, and be ready for the long haul.

State and Local Perspectives

• Find your champions at the agencies – they can help you.
• Sometimes the same solution will be applied state to state, and not in a holistic manner, with unique/distinct applications based on the locality. However, the opportunity does exist because state and local agencies have smaller budgets, more manageable opportunities, and different rules that provide flexibilities that startups can leverage.
• They are also using No Cost contracts, where the solution can help solve a major problem, but the startup builds the system without upfront investment from the government. The startup gets paid back when the savings are realized from the new system they delivered.

Solutions and Opportunities

• Long contract periods and large contracts (because contracting is cumbersome) but without onramps, you can’t access innovation
  • OTA and SBIRs are an outgrowth of the above issue
• Understand your target market and end customer
• For government, keep in mind that you may need the flexibility to pivot, which is significantly hindered when you’ve just awarded a massive contract
• Become aware and track things on Challenge.gov. Winning a challenge can be a great way to start a relationship with gov
• Also, the increased micro-purchase threshold (now $10,000) provides both parties with an opportunity to try things without a full purchase first. A great way to get a toehold in this market.
  • Check out VA’s Micropurchase Repo
  • Vendors can also package these solutions and resell them to other agencies
  • Finally, these small deals are a great way to circumvent the barrier that government cannot accept free services. 
  • Therefore, a small-dollar “micro consulting” engagement can get you meetings, help you develop relationships, and most importantly help you to build a record of past performance
• If you are a gov professional, know that you don’t have to be an SES to create positive change. You can make a difference for a startup if you just take the time to think with them, to provide innovative ideas, etc

Final Thoughts for Startups and Government Officials

• Encourage agencies to implement a 3rd party API strategy so you can create independent solutions that support the primary program
• Know that people in the startup world all mean well, they want to make an impact.
• Be coachable. You may know your business well, but you may not know how to navigate the government process. 
• For government officials, be respectful of startup’s time and funding. 
• Familiarize yourself with your buyer intelligence. Are buyers asking you to help them solve a problem, or do they already have an idea of their solution and just looking for someone to build it?

As Raj mentioned, this webinar also kicks off Public Spend Forum’s global study of barriers to entry in the public sector. If you are interested in participating in the study, please reach out to Raj directly!

Check out the webinar recording above and watch other relevant videos from Public Spend Forum on our YouTube channel!