I was looking for an idea for a startup, and began digging into the world of SMBs with the thought that it is extremely varied and there may be a problem in need of a tech solution. The idea I ultimately focused on was SMBs vying for government contracts in the US. This is a massive market ($40B just in GSA) and also one that is very hard to navigate, with over 100,000 relevant governmental bodies (federal, state, city, county, school districts etc). And while there is a lot of publicly-available data on how to sell to the government, the RFP system is extremely complex. Also, there is a lot of regulation around procurement, especially at the federal level. Today much of the work is done by companies with the help of advisors, and the idea was to scale up by creating a platform that could help SMBs identify and bid for opportunities.

Validation

To build a picture of government procurement overall I started with Google, going down many rabbit holes (lots of governmental bodies, acronyms) in a relatively unstructured process. I wound up with hundreds of links and started building a picture of how broad “government” is in the U.S. 

There are many experts, youtubers, and influencers in this realm. They create a lot of content to draw customers, and I learned a lot from that. Also, I spoke directly to a few experts (turns out they are eager to talk and all you really need to do is reach out to them. I found them/reached out via Google, LinkedIn, Youtube). They were able to validate the problems that they are helping SMBs with. 

Reached out to companies selling to the government, such as Via (through my connections/network). This validated that the procurement process is, in fact, quite difficult. 

Why the idea didn’t progress 

We didn’t dive into the contracts themselves – where there were a lot of things hiding – early enough. I knew I had a gap, but I didn’t go that deep because it was a massive amount of work (downloading and analyzing databases with Federal and State contracts where the info exists). 

Before moving to fundraising, we decided to do it. We downloaded a federal database over three days, and started querying. How are the contracts built, who wins them etc. With each question we asked we saw the TAM dropping. A lot of contracts are federal only, work with big SMBs, or do a lot of small contracts vs. one bigger one.  

We saw who won the RFPs, Googled the businesses, and realized it was hard to find ‘easy’ opportunities. If you look at gardening/landscaping in Texas, for example, you find that there is a 100-person company that does landscaping for federal entities in the State, so it’s a mega contract with lots of smaller contracts under it. My understanding: To answer federal RFPs, you need to have a business that is focused on it (vs. an SMB that also does commercial work). That changed the competitive landscape. 

Also, we had two ideas for the  business model. The stronger one was that we would act as a proxy for the companies. The other was that we would take commission. But then we heard a podcast (of one of the advisors) and understood that the proxy model would be very difficult to do. 

Insights

1. In retrospect, I would have spoken to more people via intros. I worked with the assumption that I can validate the need via public info. Had I spoken to small businesses themselves, I might have gotten early indications about the issues I learned later.  

2. Most of the businesses I spoke to are businesses that work with government and not commercial as well.

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