What's Stopping Startups From Contracting with the Government?

President Barack Obama's fiscal 2016 budget proposal dedicates $86 billion to IT spending—and a growing movement thinks startups should get a bigger cut of it. 

During a recent conference call, Office of Management and Budget Deputy Chief Information Officer Lisa Schlosser said the White House is "exploring ways to expand opportunities to small and innovative companies." These include a proposal to raise the threshold for contracts eligible for a simplified process from $150,000 to $500,000 and a pilot program with set-asides for small, innovative companies. 

Despite its large tech budget, startup teams don't consider the government an attractive market, according to Meagan Metzger, founder of a new startup "accelerator" dedicated to helping early-stage companies win government contracts. 

The Washington-based program, Dcode, claims it can help businesses go from "no access" with the government to "full access" in six months. For a fee of about $130,000 to $170,000, or in exchange for equity, Dcode42's team plans to guide businesses through the contract procurement process -- getting on General Services Administration schedules, or building a network of contracting officers. Dcode is now accepting applications for its inaugural class of businesses, starting Aug. 1.

Early-stage companies struggle to establish credibility with the government, because "to win a contract vehicle, you must demonstrate past performance working in the government, on a contract vehicle," Metzger said in a statement. 

Metzger isn't alone in her effort to bring emerging technology to the federal government. The GovTech Fund, a San Francisco-based venture firm, only invests in tech companies marketed to the public sector.

To get more startups interested in government contracts, Dcode’s team plans to present at the South by Southwest festival in Austin, which attracts entrepreneurs from across the country. 

Government contracts are "a completely different language" than what many entrepreneurs are used to, especially if they focus primarily on the private sector, Metzger said. "You're going to need new marketing, new business development, a new pricing strategy."

And there's a cultural gap too, she added. "Down to, 'You can't wear your Silicon Valley attire into a government meeting.'" 

(Jack Moore contributed reporting.)

(Image via Hurst Photo/ Shutterstock.com)