Navigating the promising relationship between the tech industry and government agencies
Last week, COO and co-founder of Strider Technologies Eric Levesque had the opportunity to be a panelist at the inaugural National Security Innovation Base Summit. The National Security Innovation Base is a project from the Ronald Reagan Institute dedicated to assessing the health of the national security-innovation ecosystem. The program recently created a report card to measure the health, effectiveness, and resilience of this ecosystem and to provide recommendations for improvement. The report card’s findings and recommendations were discussed at the summit. You can learn more about the program here.
Eric was joined by two other panelists, Jake Loosararian, CEO and co-founder of Gecko Robotics, and Joe Laurienti, CEO and founder of Ursa Major. The panelists spoke on the growing interest between the U.S. government and non-traditional defense contractors, like startups, to tackle some of the most pressing national security challenges of our day. During the hour-long panel, they discussed the benefits, challenges and areas for improvement when working with government entities.
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This post will highlight the key takeaways discussed during the panel.
Benefits and challenges of government contracts for startups
The panel discussed the benefits and challenges that come from working with the public sector. They noted that government contracts provide startups with the prospect to work with large entities, such as the Department of Defense, which allows for flexible, scalable growth and invaluable access to expertise and resources that can help bolster a new company.
On the other hand, collaborating with the government comes with certain challenges. These include lengthy government procurement processes, limited communication, and an inclination towards working with industry veterans over new startups. It was also noted that although government contracts can be profitable, recruiting outside talent can be tricky due to the possible negative perception of collaborating with government organizations. Additionally, some startups may have to raise millions of dollars before receiving considerable contracts from the government, leaving them vulnerable to financial challenges.
Debt mechanisms for financing
One of the potential mechanisms that can bridge the financing gap for startups is debt, which could be guaranteed by the federal government. This is much like what the Department of Energy has implemented and similar to the objectives of the Department of Defense Office of Strategic Capital. Debt provides the opportunity to pay back the taxpayer for that bridge. Although it’s exciting to have finance options with these different mechanisms, it’s not easy to lend to startups that aren’t yet profitable.
Requirements of companies working in the government contracting space
While requirements for things like information security are understandable, many of the requirements are antithetical to a startup that’s supposed to move fast with trial and error. For more rapid adoption, the U.S. government should consider more contract vehicles—like CSO vehicles—that give startups avenues to work with government agencies with more manageable procurement and compliance hurdles.
Difficult dynamics of working with a prime contractor or FFRDC
Startups engaging with the government contract space are often required to work with a prime contractor or federally funded research and development center (FFRDC). This dynamic can cause unwanted friction in the business relationship, with the result often being a lack of transparency into the demands and inability to communicate with the end-customer. In some cases, startups are also asked to provide their data, technology, or IP to these entities, which can become difficult to navigate. One solution is to work with the direct-use customers, but startups continue to face barriers when it comes to classified work.
Lessons from the commercial sector
The government sector faces challenges when it comes to building effective systems. In the government sector, the siloed approach to technology and lack of coordination between different agencies and departments has made it difficult for startups to gain traction and build scalable solutions. Adoption may be slower in large government organizations but focusing on customer discovery and engaging with end-users—regardless of whether it’s in the public or private sector—can gain successful traction.
The National Security Innovation Base Summit has taken a critical step toward creating a better national-security innovation ecosystem. We’re entering a new world of geopolitical change, and it will require the cooperation of both the private and public sector to maintain a strong defense posture. Strider’s mission is to protect the ideals and innovations of the free world, and we’ll continue to provide that protection wherever necessary. Learn more about Strider’s products and offerings.