The Clock
Government agencies and Silicon Valley startups should have a Kirk and Spock like relationship. Each of them is formidable on their own, with their own strengths and weaknesses. Each side stabilizes the other, making the two together greater than the sum of their parts.
Government agencies bring a deep understanding of America’s problems and access to vast resources, while Silicon Valley has created an unparalleled engine for bring the latest technologies to bear to solve customer problems. Sadly, attempts to work together often end in mutual frustration, followed by resignation to accept the status quo.
The misunderstanding isn’t a matter of laziness, arrogance, or incompetence on either side of the table. Startups are used to quick decisions and a rapid “build-measure-learn” environment that not only tolerates but encourages forward-facing failure. These early-stage companies understandably struggle to work with multifaceted, risk-averse bureaucracies. Government agencies face a similar mismatch. They are used to prime contractors ready to bid on any contract. Many are shocked at the idea that a company might say no to lucrative business opportunities, especially after expressing excitement in the project.
The root of governments’ misunderstanding of Silicon Valley stems from their lack of experience with The Clock. From the minute a company takes any kind of funding, whether equity or debt financed, a giant clock begins counting down above their heads. You can’t see it, but ask any founder and they’ll tell you that they know it’s there. This clock is an ever present reminder that someone expects them to create X amount of money in Y amount of time, leading either to a timely loan payback or an investor’s exit. The clock doesn’t stop, it doesn’t pause, and the only way to reset it is to take in another loan or another round of investment.
The clock is the one thing that government agencies miss when they try to do business with a start-up.
Equity financiers buy into a company and debt financiers loan to a company based on where the company expects to be in Y time (the star presented in Figure 1). That includes the path to get there (the solid arrow in Figure 1). Shifts happen, pivots happens, “we totally missed that but now we’re back on track” happens. But each of these digressions take time and money. And through it all the clock keeps ticking.
When engaging with startups, many governments forget that time is money. They might think that a 30 minute phone call, or a quick 90 minute office tour, isn’t a lot, but it is. That clock keeps ticking and that 30 minutes could have been spent talking to other potential customers, interviewing potential new hires, improving their product, or a number of other critical activities.
Government officials are used to a world where their budgets and purchasing power make them an attractive customer, and therefore worth the time on the part of the company. “It just takes us a little longer to pull the trigger” is how they justify visit after visit and phone call after phone call. And they’re right. Their budgets and the length of the contract do make them attractive. But not for startups.
A 3 year sales cycle is useless to company that is fighting to stay alive over the next 12 months. So when it dawns on the startup that this sale won’t be going anywhere anytime soon, the government quickly drops down the priority list. Governments get frustrated because they can’t get back in the room, and startups get frustrated because they wasted huge amounts of time on the wrong customer.
This dynamic characterizes the majority of government-startup relations over the last few decades. But it doesn’t have to be this way.
Both sides have to learn to get past the product pitches — forget about the sexy solutions — and talk about their mutual problems.
Most of the time a government official doesn’t know what products he or she needs. To that person — steeped in bureaucracy and physically removed from Silicon Valley — the state of the art is difficult to gauge. They have a set of requirements, and aren’t sure what a solution would look like. These officials should be talking to startups not just because they want to learn about products, both also to learn about the problem as seen from the other side of table.
For startups, they want to understand what the “delta” (or gap) is between their solution and the widget that will solve the government problem. Until they grasp the problem and context, they can’t start having an informed conversation about collaborating to solve it.
Since the startup has a set solution and the government doesn’t know what solutions would look like, the temptation to talk solutions is huge. But the problem space is the only common ground they share. The startup made a lot of tradeoffs when they built their product. There were dozens of options that they chose not to build because they have almost no resources. And don’t forget about The Clock. The startup’s product was optimized to solve a specific segment of the total market’s problems — their hoped-for “early adopters”.
Startups know that they don’t have a comprehensive problem definition, all they need is an understanding of the problem as it pertains to a specific customer segment. Their understanding of their customer segments’ problems — and thus their product lines — evolve in an iterative process.
By talking about problems instead of solutions, a government official develops clarity around his or her problem. They can quickly learn a lot about the most innovative commercial options, and begin to see a solution pathway. The other side benefits, too. Startups gains valuable insight into the product gaps, allowing them to make better decisions about resource allocation.
Most importantly, a short and fruitful discussion leaves everyone with a positive interaction that feeds the ecosystem of people working in the same problem space. And that healthy ecosystem — startups and government organizations — will bear much fruit in the years to come.
The important thing for governments to remember is to always be mindful of the clock.
