NightDragon strongly recommends emerging technology companies actively pursue the U.S. federal market. We feel there are huge benefits both to vendors and the U.S. government which must have access to leading-edge technologies to support its national security mission.
However, despite the immense potential market opportunity, many small and medium-sized tech companies are often afraid to pursue a U.S. federal sales strategy. Here’s why (in order of scariness):
- The complexity of the decision chain is mind boggling. It is often extremely difficult to navigate the complex web of decisionmakers involved in a singular government procurement decision. For instance, one office or component within an agency is often tasked with procuring the technology, whereas another component of the agency is the actual user of the technology. Vendors often do not have full visibility in how a procurement happens, who is involved and what these stakeholders’ interests are. This lack of visibility is one of the primary reasons the federal sales cycle is so long: veteran sales representatives (“reps’) will tell you success in the federal market takes a three-year investment, minimum.
- Government sales are difficult to forecast. Forecast accuracy is something that all companies, pre- and post-IPO, place a huge emphasis on. Yet, in government sales, there is often budget uncertainty. While government buyers must have identified funds to issue a request for proposal (RFP), I have seen many examples of funds becoming unavailable (“reprogrammed’) after the issuance of an RFP or after the issuance of a contract award. This funding uncertainty makes vendors wary of the federal market in general and, candidly, it is a good reason to be wary.
- Selling to the government requires certifications that can be time consuming and expensive to attain.IT vendors must meet several baseline requirements to sell to the government. To sell at all, vendors must be listed on the General Services Administration (GSA) schedule and should seek acceptance on one or more of the various government-wide acquisiton contracts (for example, Solutions for Enterprise-Wide Procurement (SEWP) or Information Technology Enterprise Solutions – Software (ITES-SW)). Vendors looking to sell to the Department of Defense should also seek inclusion on the DoD’s Unified Capabilities Approved Products List (UCAPL). Additionally, vendors – certainly cloud service providers – should have begun the process for the Federal Risk and Authorization Management Program, or “FedRAMP.” We feel FedRAMP will emerge as a security standard for all technology vendors and, even if not, it is likely to be granted reciprocity with other emergent requirements frameworks. If a vendor is not FedRAMP’d it should have at least attained achieved Service Organization Control (SOC)-II. I have seen companies spend years just trying to meet requirements before any meaningful amount of revenue is generated through government sales.
- Requests for Proposals (RFPs) are often pre-baked for another vendor. Another reason why vendors get frustrated in trying to sell to the government is that solicitations might include language that can appear to steer the procurement toward a particular vendor. This may not be such an irritant if you are the vendor shaping the requirements, but it can get frustrating if you are responding to seemingly competitive opportunities that turn out to not be competitive. This reality remains a barrier to smaller companies from entering the market as they simply feel they will never be able to influence the requirements the way bigger companies do.
- Selling to the government requires specialized talent, which is in short supply. Selling to the government requires salespeople who have experience selling to government buyers, or who have served a government position with procurement responsibilities. These sales reps understand the complex landscape of federal technology procurements and can speak to the motivations of decisionmakers. They literally speak a different language than commercial sales reps. Competition for these sales reps is intense because every vendor wants people with the above characteristics who also have a successful track record and relationships that makes door-knocking easier.
While the above is true – and quite possibly even scarier than I describe – if you have a great technology and you believe the government needs that technology, you should pursue the U.S. government market. Selling to the government can have many significant benefits, including the following:
- Budgets are huge when compared to commercial sales. The President’s Fiscal 2022 budget request included the highest-ever amount for information technology (topline): $109.4 billion, according to Bloomberg Government. This includes $58.4 billion for civilian programs and $38.6 billion for Department of Defense (DoD) unclassified programs. Funding for some cybersecurity procurements within civilian agencies occurs through an approximately $300 million program run centrally by the Cybersecurity and Infrastructure Agency (CISA)on behalf of the other agencies. This is arguably too large of an addressable market to ignore.
- In government, requirements drive sales opportunities in a big way, especially when it comes to cybersecurity. U.S. federal agencies adopt many technologies because either the Congress, the Office of Management and Budget (OMB) or CISA, or all three, has mandated they possess a certain capability, such as endpoint detection and response or vulnerability management. Requirements serve as a major driver of sales and can provide a swifter, easier procurement path. In some cases, funded programs have been created to deliver those capabilities centrally, easing some of the funding challenges noted above.
- There are thousands of places to sell. The government isn’t one entity, it is many, many, many entities. While this can create complexity in decision-making, there is also a benefit in having lots of programs, components and offices to sell to. The best federal sales reps are constantly approaching or pitching many different agencies, as well as multiple components of the same agency.
- The U.S. government is going out of its way to make it easier for smaller, innovative companies to do business with it. The government (especially the DoD) has established several programs that assist small businesses in scaling and selling their capabilities (e.g. Small Business Innovation and Research program, or SBIR), identify and partner with early-stage technology developers and investors to match emerging capabilities to government needs and provide a path to procurement (e.g. the Defense Innovation Unit, or DIU), and provide fast-track procurement methods that can clear some technical hurdles out of the way (e.g. Other Transaction Authority (OTA). Many companies have achieved impressive successes through programs like these.
- Selling to the government provides a certain validation to your product and company. Successfully landing a federal contract signals that you have a product that meets a need, provides tangible value and has survived a decision process intended – in theory – to weed out weaker products. It therefore can serve, to some extent, as a testament to your viability and the viability of your product. A strong use case by at least one federal agency is crucial to getting real traction within other agencies, components and offices where you wish to sell.
If all these reasons aren’t enough to tip the scale in favor of deciding to enter the federal market, then ask yourself how you will feel when your competitors figure out how to sell to the government first. Maybe they already have. Do you really want to cede these opportunities to them because it takes extra time and investment?
No sales strategy is without risk and, yes, selling to the U.S. government is a different ball of wax. You must minimize the downsides and risk by having the right strategies, resources and people in place. We created NightDragon Government Services (NDGS) precisely to help companies put these strategies, resources and people in place. One of the single most important decisions you can make is not to go it alone, but rather to create a strong partner eco-system that includes aggregators like our partner Carahsoft, as well as systems integrators that have the knowledge, relationships, contract vehicles, and track records to help you be successful. I will discuss specific strategies for success in the government market, including leveraging partners, in future posts.
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