The allure of the federal market is undeniable: multi-million-dollar contracts, long-term customer relationships, and the chance to contribute to solving some of the nation’s most pressing challenges. But before diving in, startups must confront a critical question: is this market right for you?

Engaging in the federal space, particularly within the defense sector, is not a decision to make lightly. Success requires more than a groundbreaking technology or a compelling pitch deck. It demands a strategic, long-term commitment—one that can take years to materialize. The goal of this article is to guide you through the foundational questions and realities you should consider before committing your time, resources, and energy.

The Time Horizon: Are You Ready for the Long Game?

Entering the federal market is not a sprint; it’s a marathon. On average, startups can expect to spend 18 to 36 months just to secure their first contract. And building meaningful traction? That can take 5+ years. Progress is often nonlinear, with peaks of interest and activity punctuated by long periods of waiting.

Ask yourself:

• Can my business sustain itself without federal revenue for 2-3 years?
• Do I have the patience and resources to navigate a complex, bureaucratic process?

As Rob Miller notes in Startup Statesmanship, “If you don’t have the endurance to weather the government’s procurement cycles, you might want to rethink your strategy.”

The Resource Commitment: Do You Have What It Takes?

The federal market is not a space where you can simply dip your toes. It demands significant investment in time, money, and expertise. Companies often underestimate the level of effort required to achieve compliance, navigate procurement systems, and cultivate relationships within the government.

Consider:

• Do I have the capital to invest in building a federal business development team?
• Am I prepared to hire specialists who understand government business?

Venture-backed startups may have the financial cushion to sustain this effort. But for those without substantial external funding or a partnership with a prime contractor, the road can be considerably more challenging. Part of the challenge is simply being taken seriously enough to win the contract. Even investment in things like media, networking events, sponsorships, and otherwise can be critical - especially if you are trying to compete with a known prime contractor. Their decades of reliability prior, even if they’ve performed poorly, will serve them over your lack of performance history (and will favor them in a source selection environment, too!). 

You can bootstrap into the federal government, but most companies I know that have done this have fought tooth and nail to do so, and they are very very niche, which brings us to the next question…

The Market Focus: Can You Start Small and Specialize?

The federal market is vast, encompassing countless agencies, missions, and opportunities. Trying to tackle too much at once is a recipe for failure. Start with a niche.

“Specialization is your best friend,” says Steve Blank, who has worked extensively with startups engaging in defense. “The more focused your initial entry point, the greater your chance of success.”

Ask:

• What is my product’s specific value proposition for a federal mission?
• Which agency or program has the greatest need for what I offer?

By beginning with a single mission or agency, you can refine your approach, build credibility, and create a blueprint for future expansion.  

Depending on your tech, it’s also often more successful to continue to expand through your existing partnerships. Do you have traction in the Army? Grow within the Army first. It will take exponentially more resources to create that same traction in the Navy, than it will to bring in additional Army clients.  Steady growth, and mindful resource allocation are key to long term success. 

The Realities of Progress: Are You Prepared for the Challenges?

Even with a clear niche and strong resources, progress in the federal market can be uneven and unpredictable. Contracting cycles are lengthy and often depend on external factors, such as budget approvals or shifts in government priorities.

Reflect on:

• Am I comfortable with uncertainty and delays?
• Do I have the resilience to keep going even when progress feels slow?

As Auxo Insights noted in the article Cut Through the Chaos, clarity of purpose can help businesses stay focused and motivated, even during prolonged periods of uncertainty.

The Role of Congress and Lobbying: When Do You Need Government Relations?

Success in the federal market often hinges on understanding the broader legislative environment and the influence of Congress. Federal funding priorities, procurement policies, and mission focus areas are all shaped by congressional decisions. For startups, navigating this landscape can feel daunting, but it’s an essential part of long-term success.

Consider:

• How will shifts in appropriations or policy affect my opportunities?
• Do I need help advocating for my technology or mission alignment?

Hiring a government relations expert or a lobbying firm can be a game-changer for startups, especially when seeking funding for new initiatives or trying to align with emerging legislative priorities. However, this comes with its own set of questions:

• Am I prepared to invest in hiring someone with experience in government relations or federal lobbying?
• Do I have the bandwidth to actively engage in legislative discussions or committee hearings?

Startups should also assess how much they’re willing to advocate for themselves. While some may partner with established firms to gain access to key stakeholders, others might choose to focus on grassroots relationship-building within the agencies themselves. Both paths require careful planning and a clear understanding of your goals.

Pivoting Your Business Model: Are You Open to Change?

One of the most significant challenges startups face in the federal market is the potential disconnect between their product or service and how the government prefers to buy. The government may lean toward service-based models, valuing ongoing support and integration over standalone commodities, or vice versa. This preference can be hard to overcome, and may require a business to pivot its model to align with government needs.

Ask yourself:

• Am I willing to adjust my business model to meet government expectations?
• Can I find a middle ground that satisfies both my goals and the government’s requirements?

For instance, if your product is designed as a commodity, are you prepared to build out the support and service infrastructure that agencies expect? If not, could you partner with another company to fill that gap?

Being flexible and willing to adapt not only increases your chances of success but also demonstrates your commitment to meeting the government’s mission-critical needs. 

Partnerships, particularly with established primes, can help bridge these gaps and position you more favorably in the market.

The Path to Success: Are You Willing to Partner?

Few startups succeed in the federal market without building partnerships. Prime contractors can provide mentorship, resources, and access to critical networks. Partnering with a prime may be critical to your success in the market.  

I have walked through the process of “defining market success” with dozens of companies. A good number of them are best suited as business-to-business ventures. This comes with both benefits and challenges, but I’ve found many teams are unwilling to entertain it. It’s a question worth reflecting on.

Ask yourself:

• Does it make more sense to sell directly to the government or through a prime vendor?
• Do I have relationships with established primes or government stakeholders?
• Am I willing to align my goals with a partner’s to gain a foothold?

Final Thoughts: Is the Federal Market Right for You?

The federal market is not for everyone, and that’s okay. The decision to pursue this space should be informed, intentional, and aligned with your company’s capabilities and long-term goals. While the potential rewards are significant, so are the challenges. 

I would love to see as many new entrants in this space as possible. I believe a rising tide lifts all ships for non-traditional partners in defense and federal, and I believe more diversity in our industrial base is critical to long term national security -- especially in today's geopolitical environment.  But not at the expense of your company's survival. So think hard, it's okay if the answer is "not us", or for many "not yet". And I'm rooting for you either way.  A strong domestic economy is still a check in the "win" column.

Your Fan,