How startups can get a foot in the door of government contracts | Equity Podcast

Introduction and Decode Capital

• Rebecca Javal, managing partner at Decode Capital, joined a conversation to discuss how startups can get a foot in the door of government contracts and secure repeatable revenue (1m13s).
• Decode Capital is a venture capital firm affiliated with an advisory firm called Decode, which is based in downtown Washington DC (3m10s).
• Decode Capital focuses on National interest startups, including those in climate resilience tech, satellites, and biometrics (44s).
• Startups can benefit from working with the government, but it can be challenging to get started (1m7s).

TechCrunch Disrupt Panel and Autonomous Vehicles

• Rebecca Javal was part of a panel discussion at TechCrunch Disrupt, where she shared insights on the boom in National interest startups (42s).
• The conversation also touched on Rebecca's personal experience with autonomous vehicles, including her first time taking a Waymo in San Francisco (1m48s).
• Rebecca overcame her fear of being in the back seat of an autonomous vehicle and learned about the Phantom steering wheel situation (2m24s).
• The conversation was a follow-up to the panel discussion at TechCrunch Disrupt, where Rebecca answered questions from the audience (1m38s).

Company Working with the DoD

• A company with about 30 people aims to bring better technology to the federal government, primarily working with the Department of Defense (DoD) to help them find the right non-traditional tech companies to meet their mission (3m25s).
• The company assists the DoD in understanding the full chain of events required to find the right technology, including gathering requirements, getting end-users and budget owners on board, and complying with regulations (3m52s).

Federal Accelerator Program

• The company also runs a federal accelerator for tech companies, teaching them about the federal market through a low-cost, virtual, and lightweight program that covers key topics such as marketing, pricing, and working with resellers and distributors (4m20s).
• The accelerator program is designed to democratize access to knowledge about the federal market, and has worked with about 260 companies so far, with the goal of helping them avoid expensive mistakes and successfully enter the market (4m53s).
• The program is stage-agnostic and fee-based, with no equity taken, and is designed for busy people who need to manage a federal vertical or make informed decisions about entering the market (5m29s).
• The company has worked with companies of various stages, from early-stage founders trying to figure out how to enter the market to growth-stage companies with federal verticals in their leadership teams (5m32s).
• The program aims to provide knowledge and insights to help companies navigate the federal market, including understanding why they need to sell through partners, price their products with sell-through issues, and deal with long sales cycles (5m56s).

Shift in Tech Industry and Government Collaboration

• There has been a shift in the tech industry, with companies now more willing to work with the government, particularly the Department of Defense, and this shift is attributed to various factors (6m37s).
• One reason for this shift is the ideological resistance to working with the government has decreased, and companies are now more open to the idea of modifying their technology to suit the government's needs (6m56s).
• In-Q-Tel (IQT), the Venture Capital arm of the intelligence community, invests in tech companies and helps them modify their technology to suit the government's needs, with the goal of creating a product that the government can buy directly (7m6s).
• In the past, tech companies were hesitant to work with the government due to concerns about being associated with the CIA or other intelligence agencies, but this sentiment has shifted in the last 5 years (8m0s).
• The shift is also attributed to the realization that the government needs to have systems that can derive insights from data and make good decisions, and that there is room for improvement in the government's current systems (8m20s).
• The Venture Capital Community is also playing a role in the shift, as they are now more interested in defense tech and see the government as a potential customer in an economic environment where it's harder to sell in the private sector (8m45s).
• A Venture fund invests in companies with a dual-use focus and assigns a value to them based on their contracts and revenue in the federal space, taking into account the likelihood of contract renewal and future growth in the government (9m15s).

Advice for Startups and Market Dynamics

• Startups are advised to plan ahead for different scenarios and shifts in the market, and to consider the potential benefits and challenges of working with the government (9m45s).
• Typically, tech companies with technologies that improve government functions, such as data, cyber security, and AI, can find bipartisan support regardless of the administration in power, as no new administration wants to keep outdated systems, and some shifts in priorities and funding may occur (9m49s).
• To navigate government contracts, it's essential to work with careerists, who are the people making contracting and budgeting decisions and are the end-users of technologies (11m0s).

Navigating Government Contracts and Security Clearances

• Puerto Rico is being promoted as a hub for innovation, offering competitive tax incentives, a highly skilled and bilingual workforce, and a vibrant ecosystem where startups and global players coexist (10m31s).
• When working with the government, especially certain agencies, having a security clearance can be crucial, and it's advised to start with easier targets rather than the intelligence community agencies (11m13s).
• Startups can test the market and see if they have product-market fit in the federal government by looking at where dollars are being spent in relevant tech areas and who the recipients are (12m5s).
• If interest is received from intelligence community agencies, hiring people with existing clearances, such as those coming out of the intelligence community, can be a viable option, as they have a grace period before their clearance needs to be associated with a contract (12m21s).
• Finding people with clearances often relies on networking, as there isn't a specific recruitment agency funneling them to companies in need, and many people coming out of intelligence agencies go on to work for startups or start their own companies (12m55s).
• The NSA has a robust entrepreneurship program that allows people to develop tools, roll them out, and sell them commercially, resulting in many individuals with clearances and experience in the agency. (13m1s)

Strategies for Accessing Government Contracts

• To access government contracts, it's essential to identify the end goal and be efficient with time, focusing on networking inside agencies that have regulatory or decision-making power over the desired sales area. (13m37s)
• In cases where the government isn't the end buyer, it's crucial to understand who the end buyer works with in the relevant agency and use LinkedIn to find org charts and key contacts. (14m18s)
• The best use of an entrepreneur's time is to focus on product-market fit, build a reputation, and then work towards government agency sales if they have buying authority. (14m41s)
• Working with specific venture capitalists (VCs) can be helpful in accessing government contracts, especially if the VC has connections in the desired area, such as defense. (14m56s)
• Some entrepreneurs seek VCs with experience in the federal space to help them navigate government contracts, and having such a VC on the cap table can be beneficial. (15m18s)
• One example of a successful partnership is between a portfolio company, One Nav, and their VC, who helped them make introductions within the DOD to get their technology in front of the right people. (15m29s)

SBIR Program and Resources

• Startups can get a foot in the door of government contracts by utilizing the Small Business Innovation Research (SBIR) program, which is non-dilutive and has been around for a long time, run by the Department of Defense, with the Air Force being the first to leverage it to widen the door for startups (16m47s).
• The SBIR program has an open topic, allowing companies to show that their technology can be used by the Air Force, and if granted a phase one, the government can then sole-source to them in later contracts (17m23s).
• Companies like CBER Advisers can help with proposal writing for SBIR opportunities and overall strategy for entering the Department of Defense market (17m40s).
• To determine product-market fit for the federal government, companies can use tools like GovTribe, GovWin, and BVA, which provide publicly available data on government purchases, contractors, and vehicles (18m29s).
• These tools enable companies to research their competitors, identify potential buyers, and develop a strategy to target specific areas of the federal space where their technology aligns with use cases (18m59s).

Considerations for Foreign Entrepreneurs

• For foreign entrepreneurs, it's essential to note that some Defense Tech contracts require US citizens, which may impact their ability to work with the government (19m18s).
• To get government contracts, startups need to consider the type of contract they are going after, with some contracts like the SB program and open Topic in the US military being geared towards American companies, requiring 51% ownership by a US citizen or legal permanent resident (19m28s).
• Foreign companies can work with the government by setting up a US subsidiary, which involves a host of rules and regulations to follow (19m57s).
• When selling to the Department of Defense (DoD), companies cannot have software developers from restricted countries working on core products, making it essential to have a US subsidiary and 51% US citizen ownership (20m12s).

Partnerships and Accelerator Program

• Startups can also sell through a partner, and having a partner is crucial when navigating the government contract market (20m30s).
• An accelerator program is available to help companies understand the government contract market, and more information can be found at DC O.co (20m46s).

Finding the Guests and Hosts

• Listeners can find the guest on LinkedIn and learn more about the accelerator program (20m52s).
• The host, Rebecca Balan, can be found on X at Rebecca Balan, and the Equity POD can be found on X and Threads at Equity pod (21m7s).