Hardware Business Models
Selling to Consumers and Businesses
Selling to Local Governments
Working with Regulators
Your Extended Team
Urban Us Investment Memos
– Bowery Farming
– One Wheel (Future Motion)
Like hardware startups, there are few things that scare investors as much as business-to-government (B2G) sales. Some investors have had poor experiences, watching their companies struggle to navigate procurement, long sales cycles, and poor transparency in the sales process. Other investors simply don’t have any experience with B2G as a business model and would prefer to stick to business-to-consumer (B2C) and/or business-to-business (B2B) models.
A typical local government request for proposal (RFP) can take 365–730 days! How will your sales strategy cope with this? If you are a software company, it’s possible to price in a way that allows you to bypass the RFP process by tapping into discretionary spending budgets, where sales cycles can be about 90 days. It’s an effective initial growth strategy, but then what?
It surprises founders when we tell them that we have a few teams who have succeeded, as seed stage companies, in winning RFPs with local governments. In most cases, the process has taken well over a year, but being able to close what are usually $1m+ deals can be enough to get another, larger funding round done.
The RFP process differs from enterprise sales in other ways. In some competitive segments of government services there might be analyst publications that provide clear maps of the relative competitive positions in that space. In the B2G space, there is detailed data available about who is selling to local governments, including the name of companies as well as contract values. This is helpful from a competitive perspective, but also offers the potential to discover possible partners. Partnerships are another way to reduce the risk of RFPs and learn more about the process.