Startup interest in serving government users is at the highest point in decades; certainly, levels never seen before for virtually all living founders and investors. While it is good news that more companies are figuring out how to make the Public Sector a valuable part of their businesses, it remains one of the best ways for companies to make the kinds of destructive mistakes that threaten cash runway and even ultimate success.
With this in mind, and based on many years of working with companies to access government customers, we’ve established a few key recommendations to help founders navigate both the upside and risks.
So, first the upside. Government markets are giant: A prime example is the scale of the U.S. Federal IT budget, which exceeds $65 billion. In addition to scale, certain government buyers can be early adopters of advanced technology and serve as an irrefutable test of a product’s scalability and resiliency.
Next47 portfolio company Skydio presents one of the best recent examples of successful Public Sector execution. From working with Adam Bry, Abe Bachrach, and team over the last several years, I’ve been able to see it build from early and bespoke adoption to larger and more dependable contracts—across federal, state, and local buyers and in different geographies around the world. This Public Sector impact provides a meaningful addition to all of the compelling applications within Skydio’s industrial and commercial customers.
With such an attractive market, many small companies acknowledge the value of a successful Public Sector sales strategy. And just as many rightfully fear the downside of government engagement: deathly slow sales cycles, obscured customer feedback, competition from proprietary programs, and costly security and compliance requirements.
Each company demands a tailored playbook, but the most basic elements of a Government engagement strategy can be boiled down to:
Do not fear (engage!). When there is product-market fit, the Government is too meaningful to your long-term revenue trajectory to ignore. Do not let fear of the downsides of Government engagement keep you on the sidelines.
Be deliberate. Whenever possible, don’t make the Government your only or even primary target market. Instead, prioritize strong commercial growth. Further, start slow: test product/market fit and be laser-focused on a small number of agencies and even user groups within agencies.
Brace for heartache. This last part is important, both to set expectations and to underscore the need for structured and measured Government engagement. Expect frustratingly long sales cycles and plan accordingly, especially in terms of revenue forecasts.
With these overarching assertions in mind, the rest of this article will build out a Government sales strategy.
Five Imperatives of Government Sales
There are many ways that the Government markets are the same as any commercial ones: sales cycles benefit from trusted relationships, finding the right buyers is critical, and good sales engineers (SEs) are just as valuable as talented account managers.
But the Government market is also unique in many ways. Here are five well-tested imperatives to bake into any Government strategy.
Target Hub-and-Spoke adoption…including SLED
Prioritize the right lighthouse customers for your company
Be wary of in-house programs
(Wait to) build a separate team
Scale investment at the right time
1. Target Hub-and-Spoke adoption
Within many Government agencies, a significant portion of IT purchasing is centralized via the CIO organization (the “Hub”). While broad, enterprise-wide adoption routes through these CIO organizations, earlier use depends on offices or centers (agency components) that control distinct IT budgets (“Spokes”).
One of the challenges with the Hub-and-Spoke sales strategy is that it is often the agency CIO or CTO that has the budget to travel frequently (e.g., to Silicon Valley and elsewhere). They also have an overt role of “innovation scout.” However, do not be seduced by the relative abundance of opportunities to meet with representatives of an agency CIO: in the early days, prioritize one meeting with a Spoke over 10 with a CIO, since CIO cycles will rarely lead to aggressive and early use.
Spokes often fund technology pilots and nimble, impactful adoption as well as early product-level feedback. Once successful, adoption transitions to larger groups and buying is centralized. This motion is depicted below:
Key tactic: Here’s a great litmus test question for a Federal Sales candidate: “Tell me about the specific sales opportunities that we should pursue outside of CIO organizations.” Again, the goal is to ensure focus on the far more productive Spokes.
Further, consider how the smaller and more fragmented state-and-local + education (SLED) sector can itself be an attractive Spoke. In our experience, the higher sales velocity and a much larger number of SLED customers can be an important accelerant for a successful Public Sector strategy. Heads up that it also typically demands a GTM team separate from federal efforts.
2. Prioritize the right lighthouse customers for your company
We’ve all been exposed to the idea of lighthouse customers: buyers who buoy a product’s legitimacy solely by using it. In the Government market, this holds true in spades, largely because of the relative concentration of technical expertise in a small number of agencies.
Therefore, it is critical to determine which agency is truly considered a lighthouse for your product. For instance, the U.S. National Geospatial-Intelligence Agency may be the first to adopt geospatial mapping technologies or new sources of commercial imagery, and its adoption of these technologies or sources will impart credibility.
While lighthouse agencies rarely represent the largest potential revenue opportunities, initially landing the right expert users often creates much larger, follow-on opportunities down the road. Here is a generic framework:
Key tactic: Be sure to take a step back to identify the high-value lighthouse customers for your product and use that key account list to guide how you and your team spend time. Don’t just follow the path of pre-existing account relationships.
3. Be wary of in-house programs
Paradoxically, the technically advanced organizations are also the ones most likely to have home-grown solutions to the challenges your product is designed to address. Existing programs are often the hardest to dislodge, especially when they rely on people more than technology.
Falling into the logic trap that massive bureaucracies should trend towards the kind of rational self-optimization that we see in businesses is a common mistake. In other words, just because it’s clear that a large government organization is not optimizing its resource allocation by not buying compelling, commercially available products—don’t automatically think it represents a prime sales opportunity.
Key tactic: Do not try to take on in-house products or services: find the pain points and early customers that have yet to solve technical challenges on their own. Fold in this consideration when working with your federal team to gauge pipeline formation efforts.
4. (Wait to) build separate Public Sector teams
It’s tempting to ask commercial sales leads to also cover Government opportunities, especially in the early stages of growth. That is almost invariably a bad idea for a few key reasons:
Sales leads who don’t have USG experience won’t know how to prioritize the spoke and lighthouse customers we described earlier.
Even worse, those sales leads will not understand when to push for a contract (and when not to). The government contracting process is complex and guided by strict procurement regulations, and a sales call to action looks different with a government customer than a commercial one.
Most importantly, wearing two hats like this is a distraction to ramping revenue in commercial markets, which in most cases is the top priority.
For early-stage engagement, the best approach is to rely on one of your technical founders or execs, and then focus any additional headcount growth on a very small group of sales engineers.
Just as a startup CEO should work on the first five or six commercial customers personally, direct exposure to these focused conversations will deliver detailed, product-level feedback. Feedback that will either drive specific work or inform the strategic decision of whether and how to engage with the USG at all.
Key tactic: As growth takes your company beyond the effort to test product-market fit with Government customers, pay particular attention to hiring an elite group of sales engineers specifically familiar with Government systems. SEs will play a critical role in ensuring customer satisfaction and identifying incremental sales opportunities. Further, most early adopters within the USG actively resist sales lead engagement—more strongly than what we see in commercial sectors.
5. Scale investment at the right time
After establishing that there are strong use cases for your product within the Government, it is tempting to use that signal to argue for higher investment: headcount, a dedicated office, maybe even tailored additions to your board, and lots of advisers. Resist this temptation—it is almost always the right idea to wait longer for the government than your experience with commercial markets would dictate. As with any investment, spending too early can lead to significant drains on cash and unmet expectations with your team, your board, and your investors.
Moreover, premature investment often leads to what we call the “Curse-of-the-first.” Too often, the first head of federal sales will operate for 12+ months, laying the groundwork for valuable contracts but without realizing bookings. After firing this person for nonperformance and bringing in your second federal lead, sales finally start hitting. Many CEOs will incorrectly kick themselves for not removing the first person earlier, not realizing that the new sales lead is merely netting fish that the first lead already had on the hook.
As a company matures, it usually establishes a dedicated, Public Sector team. This team will provide the heart of federal revenue growth but is not the only piece of the puzzle. Channel partnerships through solutions providers and cloud service providers (AWS, etc.) can be useful. Lastly, an important part of an at-scale operation may include a talented legislative affairs lead or service provider relationships.
Key tactic: Keep it objective: evaluate three key signals when deciding when to scale your Government team
Active users – these often come many months after the initial purchase order. Don’t rely on rumor or innuendo; demand specific data to validate use
Direct agency contracts – especially if your product has been baked into future year budgets
Expansion to multiple agencies and/or migration from spoke to hub
Once these signals provide inarguable proof of realized traction, recruit, and staff your dedicated team of AEs and SEs.
And—even after perfectly executing your early Government engagement strategy, always expect heartache and frustration, and manage stakeholder expectations accordingly!
