Navigating Startup Pitfalls in the Public-Private Partnership World

Earlier this week, 1776, the collaborative space for start-ups that we call HQ, asked our CEO Dag Gogue for insights regarding the challenges Transit Labs has faced in the world of public-private partnerships for better transportation.

You can check it out here: http://1776dc.com/2013/11/21/navigating-startup-pitfalls-in-the-public-private-partnership-world/

Or read it in full below!

Navigating Startup Pitfalls in the Public-Private Partnership World

By: Dag Gogue, CEO of Transit Labs

Within the DNA of every startup is a desire to solve an existing problem.

Whether addressing issues in health, education, entertainment, or—as in the case of Transit Labs—transportation and sustainability, startups must be able to work effectively with local, state and federal government agencies.

At Transit Labs, our core focus is to make public transportation cheaper, safer, more efficient and more eco-friendly. We are diligently working toward these goals by harnessing the power of technology and big data, placing it into the hands of dedicated transportation officials in order to enable them to:

  • Collect high quality data in order to provide a more accurate picture of transportation operations, cost, service consumption, supply, and demand — and streamline the reporting of this data.
  • Extract powerful analytics and intelligence on key performance metrics such as cost efficiency, quality of service, and safety.
  • Effectively share intelligence within and between public transportation agencies as well as across the transportation industry and surrounding urban and rural communities through peer analysis and benchmarking.

Unfortunately, cultural differences can make public-private partnerships very challenging and difficult to navigate. This is especially the case for startups. Even companies looking to improve and streamline government services face huge obstacles.

Challenges with Government Contracting

Procurement Process

Doing business with government usually centers around a procurement process built on Requests for Proposals. The RFP process is designed to make sure that all interested parties have the same comprehensive materials at their disposal to submit their proposals. This ensures that the government does not play favorites in determining the winners and that costs are minimized.

The RFP timeline that Transit Labs typically deals with is as such: After receiving the proposal, we evaluate it and send questions or attend a pre-proposal conference. Then we draft the proposal, submit it, and wait on government evaluation. If we make the short-list, we engage in further negotiations before finally closing the deal. This process is extremely challenging—not to mention time consuming—for a startup.

After successfully executing a year-long pilot with one particular government agency, turnover within the division brought negotiations for a full contract to a complete stop. The new leadership took over a year to put together a new RFP, which we decided to pursue. After another six months, we were selected and were able to finally sign a full contract. It took another five months to receive any payment for our work.

Although the process was arduous and seemed at times like a futile effort, through dogged perseverance and flexibility we were able to exceed the expectations of our clients and win a second contract.

For many startups, though, the capital costs of the process coupled with the risk of not being selected, are a significant barrier to entry. The RFP process is a financial and strategic commitment; you commit and follow-through on a comprehensive strategy for an extended period of time. This requires significantly more preparation than the typical fast-moving, “pivoting” tech start-up expects.

It is also important to be aware that the best technical and cost-effective proposal does not always win. Additional factors such as the lowest-cost bid, size of the team, firm experience, and previous collaborations can also play a large role in the awarding of government contracts. Unfortunately, these are areas in which start-ups are usually weak.

Lastly, even after successfully navigating through this process and being awarded a contract, a startup must deal with a payment timeline that is exponentially slower in government than in the private sector.

Aversion to Change

The biggest problem for start-ups is government’s risk-averse nature. Government services typically impact large facets of the population and different government functions are inextricably intertwined. Implementing the smallest change in one sector usually requires an extensive analysis in order to assess and address all potential effects. While the common perception of government is that bureaucrats are afraid of change, the truth is closer to the fact that wariness of unintended consequences can paralyze constructive change.

Start-ups are antithetical to such paralysis: The very nature of startups combines change, innovation and risk. As a result, though, startups typically experience a lot of resistance when entering the government arena. It helps a great deal to have the right advocates and ambassadors, or team members with a proven track record of execution with industry, private sector and government experience.

Multiple Stakeholders with Different Perspectives

Transit Labs often deals with entities that combine multiple forms of government under a single umbrella, such as Metropolitan and Regional Planning Organizations (MPO). This makes the landscape within which we operate even more colorful.

Embedded within our mission is the seemingly insurmountable challenge of addressing issues faced by a number of starkly different types of government entities: local, municipal, and county governments, state governments and finally the federal government.  The differences between these various types of government are not only evident in terms of size, budgets and location, but more importantly in terms of priorities, incentives and overall culture.

There is no simple solution to this issue. However, the time-tested business rule of understanding the goals and interests of all your customers can go a long way in helping to develop and maintain a successful relationship.

The combination of these factors creates a challenging environment for start-ups catering to government. However, it is important to focus on optimal execution of one’s strategy, instead of on the daunting nature of the obstacles.  Risk aversion, a costly procurement process and projects with multiple owners and stakeholders are also the main reasons why the government sector is rife with opportunities for innovation.

A Guiding Compass Throughout the Process

Despite all of these complexities, one constant factor that Transit Labs has used as its guiding compass—and which has served us well to date—is the fact that we, along with our government partners share a single customer: the American public at large.

This fact, more than anything else, has enabled us to craft a strategy that allows us to find areas of consensus within which we can operate freely and innovatively alongside our government partners, in order to effectively serve our common customer.

Our experience has helped cement for us the fact that the principles that enables startups to succeed in the private sector—flexibility, perseverance, ability to pivot, cost and time efficiency and passion for one’s work—are even more crucial when operating in the government arena.