B2G - How to Scale Your Startup By Selling to Government
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This document discusses how startups can scale by selling to government. It notes that government sales cycles typically take 90 days for discretionary spending but 12-24 months for procurement. Some strategies discussed are pursuing pilot projects with early adopter cities, seeking sole source procurement if unique IP exists, and establishing partnerships through software licensing or master agreements. Key qualities of successful government-focused startups identified are patience, empathy in understanding problems rather than just selling solutions, strong teams with government experience, and innovative products like AI and mobile technologies.
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B2G - How to Scale Your Startup By Selling to Government
- 1. B2G How to Scale Your Startup By Selling To The Government Stonly Baptiste @StonlyB Partner & Co-Founder at Urban.Us
- 3. Why Cities Matter >50% - Population 70% - Carbon 80% - GDP
- 4. Buildings Resources Transport Gov Cities are people and...
- 6. 5 out of 23 portfolio startups sell to Gov
- 7. DINOSAURS
- 8. DISRUPTION
- 9. MARKET $8.5B $7.5B $25.9B $10B $7.3B $7.5B Source: e.Republic (2016)
- 10. DISTRIBUTION
- 12. USERS
- 14. As a startup, selling to government is complex but not impossible.
- 15. Enterprise SaaS “You typically need 6 to 18 months to close an enterprise deal.” - Steli Efti, Chief Hustler @ Close.io B2G SaaS (Discretionary) “Government sales cycles are an average of 90 days.” - Marc Ende, Dir. of Sales @ SeamlessDocs.com B2G (Procurement) 12-24 Months “Selling to government is hard and takes too long” - most people
- 17. Allies City Council Mayors Department Heads Buyers City Admins Chief Procurement Users
- 21. Pilot Projects Co-development with a city / Early Adopters Pros: + case studies + valuable marketing/press, and, most of all, + word of mouth among city operators Cons: + high CAC
- 22. Sole Source Procurement You have unique IP Pros: + larger value contracts + removes competition Cons: + not as easy to get and keep
- 23. Partnerships Software Licensing Program (SLP) Master Service Agreements
- 24. Marketing & Sales + Events + Competitions + Grants + Freemium / Easy Onboarding + Cold Calling
- 25. “Your Existing Systems Suck” and similar messages don’t work for B2G
- 26. Messages that work + Save time and money + Save lives + Get more budget + Attract more businesses + Domain expertise + Gov / Social background
- 27. To B2G or not...
- 28. You can B2G without selling to Gov + Sell to citizens + Sell data + Sell ads REMEMBER REMEMBER REMEMBER REMEMBER
- 29. Stonly Baptiste @StonlyB Partner & Co-Founder at Urban.Us
- 30. BONUS The best B2G Startups have key qualities
- 31. Patience Getting your first reference cities may take time. Scaling may take longer.
- 32. Empathy They reach out to understand the problems not to sell a solution.
- 33. Great Teams Founders, Investors, Advisors that understand (or want to understand) Government
- 34. Great Products A.I., Mobile, UI/UX - and other unique innovation that they bring to Government
Editor's Notes
- “Government is broken”, “Selling to government takes too long” These are two sentiments I’ve heard over my career investing in Business to Government or B2G startups. We’re going to discuss how these sentiments aren’t true. We’re also going to talk about why and how your startup can sell to the government.
- Before we start, I want this out of the way. FOG is very real. We see it in the data and I see it in faces when talking about startups selling to government. I’m not trying to gloss over the fact that selling to government is hard. Working with government can be hard. But especially in these times, your solutions are needed and startup founders are greatat doing hard things
- Why this is important? First, at Urbsn.us when we talk about government, where normally talking about local government. Cities. Cities are more and more important because of the day to day impact the way a city is run has on our lives, such as our safety and the opportunities we have to work fruitfully and live where we want. and collectively, on the world, how we collectively impact our environment.
- But what are Cities? They are comprised of a lot of infrastructure, aggregate resources, networks of people, and systems of organization. Local Government is an important part of what makes cities work. It’s how we come to agreement over how we manage living so close together. Local Government is how we plan and help coordinate the deployment of the other components of cities.
- Government is our interface to building cities together. We think Government is Beautiful, a phrase coined by the team at SeamlessDocs. SeamlessDocs was one of the first startups we invested in that had decided to focus thier e-Signature solution to helping improve the main interface you and i have with government, Forms,thier mission is to make more beautiful.
- We’ve made a number of investments in startups that sell to government. Instead of FOG, these founders have embraced the challenges of selling to government and now represent the fastest growing cohort in our portfolio. They are taking technologies like machine learning and data analytics and applying it to really old problems.
- And they’re coming after some big dinosaurs. There are a number entrenched companies that have been providing outdated solutions to the government for decades. They represent billions of dollars of market cap and have little incentive or insight to modernize thier solutions or create new ones. The space is ripe for disruption.
- There are a number of great teams building awesome companies focused on solving some of the biggest challenges with government. They are helping city CFO's track and plan the cities finance. They are helping police officers do their jobs more efficiently and happily. They are helping heath organizations track whats working. They are helping improve how we plan our bus routes. They're helping cities track and share airquality data. And they are helping you and other cititzens report issues directly to city administrators.
- And while they are doing all of these amazing things and accomplishing massive public benefits, they are capturing market share and revenue None of these are small problems. They all represent multi billion dollar markets. And many of them are not limited to government.
- Skip And there are plenty of customers to go after. Local governments are more than just cities. And even within cities, counties and towns, there are multiple departments.
- Skip We aren’t going to dig in on the opportunity beyond local governemnt but the possibilities to scale really are massive. Altho the challenges of selling to Federal Gov or Military are several degrees more challenging. Those segments deserve another talk.
- There are a lot of user out there up for grabs
- And they want to work with the best new solutions.
- So how do you actually sell to government? Well there are a few ways, and all of them are within your reach.
- The 2 main routes are either via Procurement or through Discretionary spending. We'll dig in on them in more detail but first let's define then while dispeing one of the myths i mentioned before. Procurement is when you are competitivly or non competitivly bidding for a contracted relationship. Many enterprise customer groups also require procurement and in fact can take longer than government procurement. Discretionary spending is when a government employee or department is able to buy from you at a price low enough that they don't need to get permission. These transactions can happen as fast as a Web session.
- Procurement is what people are normally referring to when they say that government is broken or that the sales prices takes too long. The reason people have this impression is because procurement can vary from city to city. There aren't many commonly used standards. So navigating procurement can be confusing as you scale. Confusing but not insurmountable. And there is a movement towards standardization, with cities like San Francisco and groups like code for America leading the way with templates. And startups like citymart helping cities improve their procurement process.
- The other challenge you will run into, is knowing who to reach out to when you are making outbound sales to cities… Identify the departments focused on the problem you want to solve. Reach out to first understand how they think about the problem in thier city and what tools they are currently using to solve it. The folks you are able to work with through the demo stage may not be the ones who ultimately write the check but they are key allies. Buyers are interested in how stable your company and product is. They are thinking about the budget but also what implications doing business with you might have, good and bad. There are innovators in most departments and cities. They are your in. You can find them by looking.
- One way is to see where they are making requests for proposals. You can find these normally on a cities website but it would be very difficult to scale that. There are a number of useful sites that aggregate opportunities in multiple cities.
- Another way to find innovative cities is to find what they are already buying. There are tools that leverage the freedom of informal act to keep a rolling record of government - vendor relationships. With buying patterns you can see which cities are more receptive to innovation. You can also keep tabs on the competition.
- Ideally your product is priced in tiers and start at a level that an employee or department can buy on the spot because it's below a certain price threshold.
- you can sell to gov without selling to gov, e.g. system for citizens to pay parking tickets. Gov does not pay you, but you take a small transaction fee. Another business model is to operate a service and make money with the data that you collect. connecthings does to get permission (and funding) to roll out urban IT infrastructure under concession and then generate revenue commercializing with private and public sector clients. LinkNYC is another visible example. I would even count "permissive regulation" to be in this space, if you want to be broad.