If you’re familiar with the Arizona startup scene, it’ll come as no surprise that it’s booming. And with all the success, you might think startups would be perfectly poised to win government contracts - but that’s rarely the case.
So on the blog today, we’re covering the most common reasons startups and government don’t end up working together as often as they could.
Move over Colorado, Utah and California. If you have tracked what’s happening in Arizona, then you know it is poised to be one of the most innovative states in the country. Arizona has the third fastest real GDP growth in the nation, the fastest growing county, the fifth largest city, and the most innovative public university. We also have a healthy startup community. Just look at the Arizona Commerce Authority’s Technology Innovation Challenge Winners.
With all of this potential, why can’t government encourage more interaction with the startup community? Based on our experience, there are several obstacles that deter collaboration. By examining the barriers, maybe we can find the solutions.
Lengthy Sales Cycles
The number one concern of startups is how long it takes to secure a government contract. After all, in the startup world, cash flow is king. A company that may be relying on limited funding doesn’t have the time to wait months for a government agency to issue a solicitation and award a contract. Even if government could reduce the time it takes to award a contract in half, it is still too long.
In addition, innovation is a technology startup’s competitive advantage. A company whose emerging technology has a limited “shelf life” before competitors catch up will lose its advantage while enduring the government sales cycle. Startups face a real fear that their technology could become obsolete when a contract is finally awarded. So, when you are racing against the clock, it’s often not practical to bid on government contracts.
Complex Processes and Proposals
The complexity of the contracting process lengthens the time selling to the state. If you think the time and effort of reading through a long and tedious Request for Proposal is a lot of work, the act of responding to one is ten times worse. There is a scope of work, special terms and conditions, standard terms and conditions and multiple attachments to be completed. Just ask us – we help companies respond to proposals all the time.
Timelines are also set in statute with little room for modification. Sometimes, timelines are not provided, which you may think is good because government can make decisions more quickly. However, that typically doesn’t happen. The longer the runway to make a decision, the longer government takes. Add to this the fact that negotiations are structured and there is little room for changes. When the goal is to reduce the government’s risk, the outcome is a complicated, tedious process. For a startup, this is a nonstarter – the entire goal is to be nimble, collaborate and come up with a creative outcome.
Have you ever read a government contract? If you have, then you know that the terms are one-sided in favor of the government who is charged with spending taxpayer dollars. There are unlimited liability, warranty, insurance and intellectual property clauses. It’s hard to fathom a startup signing away its intellectual property to a government in order to ink a deal. And, most startups don’t have in-house legal counsel to enter into tough negotiations with state lawyers to try to modify the terms.
Lack of Knowledge
Governments post bids in different locations. There isn’t one central location where you can find a state, county and city solicitations. Instead, there are hundreds (well, really thousands) of websites containing this information. While a startup can subscribe to various tools to monitor bid releases, startups on limited budgets don’t have the resources to subscribe to these kinds of services or sift through the thousands of opportunities. The search process requires a great amount of effort. Only larger contractors can afford to pay someone to monitor solicitation postings.
No Clear Agency Contacts
It takes time to build relationships with government officials and if you have worked in the public sector, you know it’s not easy to get an officials to meet with you. There are incumbent contractors who have longstanding contracts and experienced salesforces with inside relationships. Add to this that incumbents usually have a lot of knowledge about the technology needs of the agencies that they have worked with for a number of years. Startups are at a clear disadvantage.
These are just some of the challenges facing startups. In next week’s blog, I’ll tackle what we can do to change the tide. And, if you know any startups, please pass along this blog and encourage them to connect with Traversant Group. We plan to begin our IT startup bootcamp soon.