Like so many startups with great new capabilities and not much experience selling to government, the AI company was increasingly frustrated at its inability to break in at the IC [intelligence community] agency. The staff either didn’t know about or was unable to tap the vaunted and rapidly expanding ecosystem of government innovation brokerages created by the Pentagon, IC and civilian agencies…
Instead, the AI firm’s VP took an old-fashioned, circuitous route.
He went to an alumni event at his college hoping to snag a few minutes with an IC leader who was speaking to the group. He polished his elevator speech, jammed business cards in his pocket and muscled his way into the line of alumni awaiting a word with the speaker after the speech.
And he scored.
The IC leader connected him with an internal innovator at the agency. That fellow sent the startup guy to the agency’s Silicon Valley tech scouting organization. Folks there helped the company break into the target agency, and finally, the firm hit pay dirt.
That was from the excellent Anne Laurent over at Government Executive, “So Many Innovation Hubs, So Hard to Find Them.”
It sounds like a long journey from a firm having marketable capabilities to actually getting a contract obligated to them. The firm not only had to find the IC leader, but was passed around to a couple other offices before work was found.
The reason, I am supposing, that this process took months rather than years is because we are talking small dollars. The agency’s Silicon Valley organization probably had very limited money, or were using SBIR funds, to get the firm on contract. Otherwise, if it were a significant effort for new capability, then the agency would likely have required a long budget justification process perhaps taking two years. That would have subjected the firm to scrutiny of its AI capabilities, as well as business systems and pricing methods. All the while the firm would have languished without cash flow.
But in the case the firm won some work, probably valued in the hundreds of thousands or maybe low millions. For this situation, there doesn’t seem to be any light at the end of the tunnel. The firm doesn’t face any prospect of scaling into major systems or big dollar contracts, especially if they are tethered to small business SBIR funding. AI, after all, is an application to defense systems and each system probably requires a unique AI configuration.
And so the firm, having satisfied the limited requirements of one IC agency, would have to troll back out into the great unknown to replicate that success again and again, at increased rapidity, if it wants to start scaling. It will find, in such a case, that its cost of customer acquisition is very high. It will also find that it cannot make large enough profits to justify such an adventure, as the government will want to pay the marginal cost of “production” for the AI, regardless of the leaps in effectiveness that might be obtained.
Here was another good part from Laurent:
Innovation is messy and relies on unpredictable, serendipitous collisions among ideas, inventors, practitioners, and experts. Sometimes, utterly unexpected folks make conjectures about combining unconnected innovations that result in unimagined new capabilities.
But that doesn’t mean that the innovation hubs is knowable to startups which lack the expertise to navigate such a convoluted ecosystem, as Laurent argues. Everyone knows they can go to FedBizOpps, but if you only see and pursue RFPs once they hit the street there, then you’re already dead. The small companies need to shape opportunities on the front end, but first, they need to know where the front begins.
I think GovTech is kind of a scaled up version of selling to enterprises like Procter & Gamble or Aetna. You have to understand their business first and where to go. But then for GovTech, not only is the enterprise larger and more complex, but even after a successful pitch the laws and regulations can really slow down cycle times.
Be sure to check out Anne Laurent’s excellent Acquisition Innovator’s Weekly.
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