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Why Startups are Afraid of the Government

Why Startups are Afraid of the Government

If you have watched the news recently you have seen a big push from the White House in support of tech startups. Megan Smith, CTO of the United States, was quoted this week as saying “Tech startups shouldn’t be afraid to try to bring innovation to improve the federal government”. While this is a great idea, most startups I know try to avoid working with the government.

Has Smith ever tried to win a government contract? Let’s look at what it takes to work with the federal government:

1.) Find opportunities on FedBizOpps. This website looks like it was built in 1999.

2.) Make necessary preparations for bidding on a GSA contract. This means a lot of paperwork and legal help. You also need 2 years + of financials to show, which is also prohibitive to young companies.

3.) Submit an offer. Sometimes the government buys what is the best value. Sometimes they buy what is cheapest. Sometimes they buy from firms they’ve already done business with. A startup will either win or lose a bid with no middle ground or room for negotiation. When I was in sales at a startup, the negotiation was my favorite part. This doesn’t seem appealing to me.

This is just the start. After you win a bid, receiving payment can take up to 6 months. During that time, you are still expected to deliver services so you need to have 6 months of overhead costs in the bank.

Altogether, winning a bid can take 12- 24 months or longer. Most startups that I have worked with have a sales cycle of 30- 60 days to close a deal and those clients pay within 30 days.

So what is the White House doing to encourage startups?

18F A digital agency changing the way the GSA approaches tech by using more modern code and the Lean Startup method.

Startup America A White House initiative launched to celebrate, inspire and accelerate entrepreneurship.

Demo Day On August 4, the White House held the first ever Demo Day in which Obama met with startup founders.

While I appreciate these and other efforts, it doesn’t seem to be working. The only way to bring innovation to the government is to remove the barriers to entry and help small businesses through the procurement process.

Smith was also quoted saying “We want to have you guys (tech company) serve a term in government.” When the White House has a casual dress code and keg in the break room, call me.

 laura_circleLaura Simmons is Director of Operations of Eastern Foundry.