Just as the dust is finally settling from a series of moral debates in the technology community about the circumstances under which firms should work with the federal government, a new argument is making the rounds: even if working with the government makes moral sense, it doesn’t make business sense.
This argument is misinformed, and heeding it will harm both startups and the government. The reality is that new pathways to federal business are helping many startups thrive on government work.
The best startups create things that customers haven’t thought of, then win them over to a different and better way of working. Needless to say, this isn’t how most larger contractors have traditionally done business with the government. Shaped by years of experience with the standard government contracting process, large contractors have teams of lawyers, contract specialists, and bid writers who specialize in maneuvering through the arcane process defined by the Federal Acquisition Regulations, or FAR; they have large engineering teams to develop products so specific that they cannot be resold to other customers; they have decades of previous experience they can use to satisfy “past performance” requirements; they have security clearances; and they have the financial stability to wait out a months- or even years-long award timeline.
For a long time, all this has helped traditional firms corner the federal market, but times are changing. The good news for startups is that the government has a wide variety of critical missions that are in need of the newest and most innovative technology, and quickly. The government is so large that a product that has value in the commercial sector will very often also have value in the government. Virtual reality? You bet. Cybersecurity? No doubt. Data analytics and visualization? Certainly. The key, then, is for startups to see that there is value in what they have envisioned and built not only for commercial clients but for the government as well. To realize this value, they must shift from the traditional way — searching for the perfect Request for Proposal — to finding the early-adopter customer in government for whom their product solves the largest pain point.
While traditional procurement regulations make this search for evaluators and early adopters nearly impossible, the government now offers ways for startups to test and deploy their innovative solutions. Many government agencies have developed funds and contract vehicles, such as the Small Business Innovation Research program, with shorter procurement timelines and rapid iteration cycles to capitalize on startup innovations. Many now have offices in Silicon Valley, such as the Defense Department’s Defense Innovation Unit, the National Geospatial-Intelligence Agency’s Outpost Valley, and the Homeland Security Department’s Silicon Valley Innovation Program.
Once a startup does get its product into the hands of government users, it often finds the user feedback invaluable to developing products for both government and commercial markets. Government users have some of the most sophisticated and intensive use cases in the world and any startup’s product development process would benefit from lessons learned when deploying under such conditions. If your product thrives on rich data sets, the government has those in spades. If your product is designed to be easily deployed, the government can test deployability in some of the most challenging conditions in the world. If you’re working to protect critical assets from cyber vulnerabilities, the government’s expertise and collection of assets is unparalleled.
In fact, given the important missions that exist throughout government and the budgets that support them, the true question may in fact be, why wouldn’t a startup want to have business with the government? If a startup has a product they believe has value in the world, the government is an obvious potential customer for it. Government agencies have mission, need, budget, and long-term requirements that support growth in recurring revenue that few commercial customers can match. Indeed, because of this combination, government agencies have some of the highest customer lifetime values in the world.
With the new doors that have swung open in non-traditional procurement, winning government customers should be an ambitious goal for our country’s most innovative startups. For our national security and national interest, we cannot afford to have technology startups think that working with the government is a losing business proposition. Fortunately, they don’t have to.