How to Succeed as a Business-to-Government (B2G) Startup
Governments across the world award contracts worth billions of dollars each year. Despite the obvious opportunities that exist here, launching and growing a B2G startup is not for the faint-hearted. For one, the tendering process can take several months to complete. This is not a happy position to be in for bootstrapped startups. Secondly, government agencies tend to favor businesses that have prior experience working on government projects. This is a catch-22 situation that startups have a tough time negotiating.
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For this article, I talked to founders who run successful B2G businesses to understand how they got their first government contract. Here are a few takeaways from my discussions with them.
Register on all the relevant registries.
When a federal or state agency is hiring a new contractor for one of their upcoming projects, they post these opportunities on one of the dozens of government sites including FedBizOpps (for US federal projects) and the NYS Contract Reporter (for New York State).
As a B2G business, you may apply for inclusion on the registries maintained on each of these government websites. Agency users looking for new contractors begin their search on such registries. Being included here provides you with a much-needed advantage over competitors who are not listed. This is especially useful if you are a minority or woman-owned enterprise. Such businesses are favored by government agencies for certain projects, and being listed in the registry helps you stand out from the competition.
Like any client, government agencies prefer hiring a contractor with whom they have the highest chance of success. Prior experience on government projects can thus be a tremendous advantage while bidding on agency projects.
As a startup entity, you can work around this catch-22 situation by partnering with other contractors on their government projects. Subcontracting is extremely common in B2G projects. It's easier to secure a subcontracting project than winning one directly from the government agency.
It is, however, worth pointing out that subcontracting is not nearly as profitable as winning a project from the government agency. Subcontracting on government projects is thus a good strategy to build a portfolio that you may use to bid on future projects.
Having said that, subcontracting is not the only way to gain experience on government projects. Mehul Sanghani, one of the B2G entrepreneurs I talked to, said that he previously worked on an OSHA project as an employee of a larger consulting firm.
After he had worked with OSHA for a while, he was asked by the government agency if he had ever considered starting a business. In short, you can also gain experience on government projects as an employee of an organization that does this.
Establish credibility outside.
You do not always have to work with government agencies to prove your credibility and authority. Working on projects of public interest can help, too. One company made use of big data solutions to analyze over a million vehicle stops in Toronto over a week’s period.
The results of the study, which were made public, helped the local transit authority understand that less than half of the stops were on time. In addition to receiving viral publicity through the assignment, the company also succeeded in working with a handful of government agencies on transit monitoring projects.
Depending on your industry, there are other ways to establish credibility. An organization looking to work on public school projects may pursue private schools for similar projects. This gives them experience and credibility to bid on similar projects. While this strategy may not solely be adequate to help you win government projects, they establish your legitimacy through the vetting process.
Make cold calls.
Cold outreach is often frowned upon. Yet, it can be an extremely effective strategy in pursuing government projects. The trick here is to target the right agency at the right time. Skyler Ditchfield, who runs a telecom solutions company, said that he once read a news article about funds being made available for rural schools in California.
He made more than 16 cold calls before he could identify the government group that was responsible for the fund. His organization then took part in close to a dozen vetting calls before a new RFP was raised and they were asked to bid.
Winning government projects can be an extremely painful process and is definitely not for the faint-hearted. However, the billion dollar projects make the pursuit worthwhile and profitable for interested entrepreneurs.