Technology of national interest can appear in many ways, for example in data analysis and cybersecurity, as well as satellites and weapons. Many startups offering dual-use applications increasingly view the government as an attractive customer due to its broad range of use cases and the amount of federal funds available.

And while there are several grant programs (like those offered through the Inflation Reduction Act) that provide non-dilutive financing to startups, Rebecca Gevalt, managing partner at Capital Dcode who worked at the CIA, says she advises companies to pursue contracts instead.

“The real key is, how do you find a replicable way to get government revenue so that it can become a core part of your business?” Gevalt said on stage this week at TechCrunch disrupts 2024.

Gevalt spoke alongside Topher Haddad, founder and CEO of satellite imaging startup AlbedoAnd Kai Kloepferfounder and CEO of a biometric weapons startup Biological fireon the rise of national interest startups and how startups can go about getting their foot in the government’s door.

DOD is ‘full of money’

The goal of startups working with government should be to obtain repeatable revenue, not just grants or other non-dilutive funding. An easy target for startups with a national interest use case? The Department of Defense (DOD), which Gevalt says is “full of money.”

The D.O.D. budget request for 2025 was nearly $850 billion, with $143.2 billion for research, development, test and evaluation, and then another $167.5 billion earmarked for procurement. The agency actively seeks to work with startups developing AI, autonomous systems, quantum computing and space technologies.

There are a number of entry points for startups, such as the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs through DARPA. And while startups can get their foot in the door through these programs, Gevalt recommends startups have a partner to guide them from the design and prototyping phases through commercial contracts.

“There are strategies to move from that first step, from R&D dollars for development to more programmatic revenue, and that’s where our consulting firm helps companies, but there are a number in Washington that help businesses do that,” she said.

And Gevalt is right. A Defense Innovation Council Report 2023 found that only 16 percent of DOD SBIR-funded companies were awarded commercialization contracts over the past 10 years.

But it’s not just defense

“I think a lot of times people can fall into the trap of thinking that if I want to sell to the government, then it has to be related to defense technology, and I have to be involved in drones, missiles, things like That. And that’s fundamentally not the case,” Gevalt said.

She says Dcode has a strong focus on investing in startups that process and analyze data, as well as those that offer cybersecurity solutions.

“Under the law, the government can’t delete any of its data, so it’s going to be an ever-increasing problem to manage it and extract information from it,” Gevalt said. “And then, from a cybersecurity perspective, they get hacked quite frequently, so we try to give them access to the best tools. »

Put your blinders on politics

As the US elections approach, should startups make contingency plans for various presidential candidates? Albedo’s Gevalt and Haddad say it’s not really necessary.

“Across government, you’re going to have people interested in data, tools, cybersecurity and the latest in AI,” Gevalt said. “Where the flow of dollars changes, the size of government could change. But I fundamentally believe that whether government grows or shrinks, it will have to modernize its systems starting in the year 2000.”

Haddad noted that Albedo is in “wait and see” mode, as he expects certain effects. But not enough to have a plan A and a plan B for different candidates.

“In general, space is a big priority, and I don’t think that’s going to change,” Haddad said. “Maybe it will change business development a little bit in terms of how we focus on different agencies or departments.”

Gevalt said the best way to not be affected by changes in administration is to seek relationships with non-political appointees.

“When you’re putting together your federal go-to-market motion, you generally don’t want to talk to politicians,” she said. “You want to talk to the people who are doing the work day in and day out, whoever is in administration, because they are the ones who are going to buy your products.”

Made in the USA

Gevalt said that for the government, it is better to contract with startups based and producing products in the United States – but even more so for software than hardware.

“If there are certain people on your team who are doing certain work in certain countries, then it becomes very difficult to make sales to the government, at least to the DOD and some agencies in the intelligence community,” he said. she declared.

Both Albedo and Biofire are based in the United States and have manufacturing facilities in Colorado. Kloepfer emphasized that construction in the United States was important to Biofire because of the nature of its business.

“We are very heavily regulated by the Department of Commerce when it comes to export controls. …(T)he United States is enthusiastic about keeping its weapons technology in the United States,” he said, noting that Biofire would likely need special approval to contract with foreign manufacturers .

He added that investors also like to see local manufacturing because it makes quality control and scaling easier.

“For the early stage we’re at, the question is how quickly can we iterate? How fast can we improve? » said Kloepfer. “And doing that in our current headquarters…is much easier than going to some sort of foreign supplier, if that’s even possible.”

Finding Product-Market Fit in Government

Gevalt says his company often sees start-ups hire a salesperson or lobbyist when trying to secure contracts with the federal government. Instead, she advises startups to first determine which agencies need their technology using data available on sites like Bloomberg Government (BGov), Government tribeAnd GovWin IQ.

“When the government says they want to buy something, they have to make it public, unless it’s a classified item,” she said. “So… you can sift through this data. And if you know who your competitor is and you know they sell to the government, you can…see what contracts have they won? In what positions did they win them? Do they work with partners like Deloitte or Booz Allen?

This is also true for AI startups looking to work with government.

The key mindset is to be strategic and tactical, says Gevalt, emphasizing that startups should review the government’s general strategic documents regarding AI and then tactically seek out offices that are actively leveraging AI technologies.

“A lot of people have been in government for a very long time and so know conceptually what AI is, but a lot of the data architecture they have is not going to actually facilitate the use of an AI product. anyway, regardless of what data sets they’re working on,” Gevalt said. “So… strategically you can see the Biden administration currently wants to leverage AI in this way. do the agencies actually do it? … How do they buy it through a partner?