[ilamont]

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.

1. http://in30minutes.com/selling-to-the-federal-governmentgsa-...

[USNetizen]

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.

[AndrewKemendo]

It's not that hard once you get used to it

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.

[USNetizen]

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.

[fapjacks]

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.

[USNetizen]

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?

[aswanson]

I'm shooting you an email. I'm in your area of the country, have worked for large defense primes in data security, and need some guidance.

[newman314]

Would you be able to share pointers to some of these resources?

I don't typically operate in this space but have run into this in the past before and would be useful to know more. Thanks.

[USNetizen]

Your local SBA office, ask for the PTAC rep: https://www.sba.gov/offices/headquarters/ogc/resources/36238...

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).

[drzaiusapelord]

>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.

[USNetizen]

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.

[RonnieB]

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... :)

[USNetizen]

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.

[RonnieB]

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.

[ilamont]

... [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.

[rdtsc]

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).

[anthonybsd]

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.

[USNetizen]

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.

[logicallee]

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.

[USNetizen]

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.

Nothing of any worth comes effortlessly.

[USNetizen]

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.

[USNetizen]

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.

[logicallee]

thanks (to anyone else, the comment ordering is messed up in this thread, each of USNetizen's replies is to the sibling comment below it.)

[USNetizen]

No problem. Yeah, I'm not sure how the comment ordering got messed up.

[logicallee]

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).

[stephendicato]

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.

[1] https://en.wikipedia.org/wiki/Federal_Technology_Transfer_Ac...

[logicallee]

thanks - you say "I'm happy to talk about my experiences", any chance we could do it off of here? you don't list a contact.

[logicallee]

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?

[1] http://www.businessinsider.com.au/how-a-box-of-cereal-and-be...

[2] https://medium.com/@bchesky/7-rejections-7d894cbaa084