Re-imagining the small-business mentor-protege model

I have written a number of times over the past few years about the emerging ecosystem of non-traditional government IT contractors, who have a strong sense of social purpose and who genuinely keep customer interests front of mind. One of those is Chris Cairns, a former Presidential Innovation Fellow and 18F-er who in 2017 founded a new company called Skylight. Cairns' firm has now grown to 40 employees (it has prime contracts with the Air Force and HHS, and is a sub at the VA and SBA).

Cairns, from the perch of his tiny company, has taken a bold step to re-imagine the venerable mentor-protégé program that grew up to give small businesses more contracting opportunities by acting as "proteges" to large firms that offered them subcontracts on the large firm’s prime contracts along with some kinds of business advice and help.

Cairns’ effort was inspired by the death of George Floyd. "The George Floyd incident was a critical awakening for me personally," he said. "Sadly, it took that event for me to realize that I’ve been a passive anti-racist all my life. And if I don’t become an accomplice in the fight for equality and justice, I’m part of the systematic problem at work in this country."

"I gave a lot of thought to this, and realized that we [at Skylight] possess really unique assets that we can leverage to advance the cause," he continued. "Specifically, we have unique institutional knowledge of how government contracting works, we have access to relationships and other resources, and we're in a position to help young businesses thrive."

Cairns came up with an idea he calls Guidelight (he got the name from a friend at the Defense Digital Service). Skylight would choose one company founded by a minority entrepreneur with five or fewer employees and pledge to help them add 10 employees in a year.

Note how this is very different from the traditional mentor-protégé program. In that program, large firms do provide subcontracting opportunities and business skills advice. But they also get something very tangible in return, which is credit for these subcontracting dollars against the often-significant subcontracting opportunities they are required to make available when they win a prime contract. Skylight is a small company, which doesn’t have a small business subcontracting plan and thus no requirement to hire small-business subs. Any subcontracting opportunities they make available from their prime contract dollars come out of their hide. Furthermore, in traditional mentor-protégé efforts, the subcontracting opportunities are chosen from the mentor’s existing prime contracts. As a very small firm, Skylight doesn’t have many prime contracts to provide subcontracting opportunities, so it will have to locate some itself from its network.

The second difference is what kind of work the company being sponsored does during its relationship with Skylight. Skylight is giving the company significant roles on their contracts, such as the project manager. This means the sponsored firm is doing the actual work on a prime contract Skylight won and getting most of the revenues from that work. The sponsored company pays Skylight only its G&A, and Skylight gets some revenue from the discounted subcontractor rate that Skylight pays them. These are not dreg subcontracting bones the large business throws the small business’ way.

The innovation in Skylight’s approach doesn’t stop there. Skylight will be looking for opportunities to a sponsored company to bid itself for work as a prime rather than a sub and be awarded prime work on its own. Additionally, Cairns said, "the leadership of the company will serve as Executive(s) in Residence at Skylight. Basically what this means is that they’ll be deeply embedded in the company, including Board, Leadership, and company-wide meetings. They’ll have unfettered access to everything about Skylight -- Employee Policy Handbook, Accounting Standards, etc." (This knowledge sharing is also part of the operating model of the Digital Services Coalition, the professional association for non-traditional contractors where Skylight is a member.)

Compared to a traditional mentor-protégé relationship, the leadership of the company being sponsored is "very deeply embedded with ours," he said. "We’re providing deep institutional support and building a deep institutional relationship. This goes beyond the standard mentor-protégé arrangement where the mentor provides advice and coaching."

There’s even more. This is still for the future, but Cairns would like to establish a "diversity equity fund" where interested firms agree to contribute a portion of their profits to buy equity in the firm being supported.

Cairns hopes he can expand this idea to include other companies as sponsors.

The first company Cairns is helping is called Polydelta, a firm founded by a Goldman Sachs and 18F veteran named Jay Finch. Finch has worked with helping startups his whole career. His first job was at Goldman Sachs, where he worked with telecom startups. He then left to set up a startup of his own to help new businesses do crowdfunding for themselves. Then he switched to the public sector, working in the Obama administration on a program to encourage crowdfunding by new businesses, and from there to Treasury and 18F to do the same thing. At 18F he switched to managing new client acquisition

Finch wanted to be able to continue interfacing with the public sector after any change in administration, so he got a mid-career degree from the Kennedy School and then founded Polydelta. Currently the company’s one client is the Department of the Interior, where he is a sub to another small company called Forum One, a 100-person firm also founded by Kennedy School grads. Currently Polydelta’s only employee is Finch, so Cairns has pledged to help build the business to support nine more in the next year.

"Perhaps this isn’t as lofty." Cairns said to me, "as colonizing Mars to save humanity, but if we have enough collective actors trying to drive social change, then perhaps, to paraphrase the title of a Barack Obama blog post, we can ‘Make this Moment the Turning Point for Real Change.’"

If you want to understand how non-traditional contractors are different, just look here. Speaking for myself, I stand in great respect, even awe, to the innovativeness and public spirit Cairns is showing.

Note: This post was corrected on Oct. 5 to properly identify Polydelta's Jay Finch.