Underserved Markets for SaaS Companies with Backstage Capital, Avisare, and Civic Eagle

Scale and solving problems in this sector means that the impact could potentially be, you know, everybody in a society. So I think that's really impressive and inspiring and it's something that, you know, I think about as your investor. And so I wanted to make sure to highlight that for those of everyone that's tuning in and I wanted to also switch gears a little bit. So when we think about impact, it's often marketed as a way to attract team members. I think I've seen so many articles and listicles about like millennials and Gen Z don't just want to go to work, they want to have a career saving the world. So that's a way to segue to what it's been like to recruit and grow your teams as SaaS companies building in this space. So I'd love to hear from both of you what your experience has been like recruiting, what it's been like to be grow your team and any challenges or things that you'd like to highlight here.

Yeah, I can jump into that. I think growing a team that is serving as a SaaS company, a vertical SaaS company that is pretty focused on again, being vertical SaaS, unlike the industry and the customer segments that we're going after, has made it very easy to identify or easier than I suppose it would be to identify talent and passion. And as an early stage startup, that's one of the most important things, right? Identifying talent and then identifying culture and passion for the product and business that you're trying to build. So because we're in that space, in a space that again is niche, is vertical, I think it's made it easier to identify that talent and identify that culture and passion fitness. The other thing too is that we're building a solution that has downstream impact. So it's really important that our company reflect society as a whole. So because of that, we have a very diverse founding team, a very diverse team in general company that we've built where there's representation from all different socioeconomic backgrounds, representation from all different races, representation from all different sexual preferences. So it's been a great opportunity to build a business that reflects to build a company and a business that reflects society in the United States as a whole. And I think one of the, again, one of the things about being vertical SaaS, but then even being vertical SaaS within this space is that you can have that you can find those very focused and passionate people for the company that you're trying to build.

Do you see just a quick follow up there. Do you see that there's any common theme in terms of background for the people that are on your team.

You know what? There really isn't in terms of kind of professional background or academic background. There are folks on our team that come from Google. There are folks on our team that are lifelong civic hackers. There are folks on our team that have a more academic background, that have multiple professional degrees. There are folks on our team that have been lifelong entrepreneurs. So it's pretty broad. I think if there is one commonality, it's that passion for being able to build a company that's venture backable and that can also scale impact, can scale provide financial returns to our investors, but can also again have that social return to society. So if anything, that's really the only thing that unites us all. Otherwise it's a pretty diverse group of people, both in the way that we look, but then also in the backgrounds that we all bring to the table. Which again is important. Right? Like we're building a solution that has really important downstream impact on society. So having that diversity of thought and then also the diversity of talent and the diversity of race and ethnic background and socioeconomic background plays a pretty important role. And it's made us stronger. It's made us be able to grow really fast. It's made us be able to create a solution that works find product market fit earlier. So I think that's reflected on our achievements so far.

Awesome. Sky, what about you?

Yeah, I don't have much more to add. They sum it up very nicely. I mean, I think we've had much more success with mission driven people, with non mission driven people. We are a procurement platform so we have worked with some people who weren't that mission driven because they have some experience in what it is that we're doing. But we've had much more success when you are mission driven and selling to governments is not for everybody.

Right.

So we've had a lot more successful people who get excited about the idea of being government contractors versus not. It's not like you're. It's not like, I guess your typical thought process when you think of a tech startup that's selling to the private sector or selling to consumers. It's government agencies are structured, they can be. But you're selling to governments especially as we get more into the federal government space. So people will get excited about that. We've had more success with and working with it. It can be really fun and actually really rewarding. So that's the only other thing I'll add besides what jamila already very nicely summed up.

Awesome. I think you were reading my mind sky, because the last gear that we were going to switch to to talk about was sales. So just to recap, we've been talking so far about the impact of the companies, what it's been like building your teams and then now just wanted to sell talk about sales for a moment. So I think you just mentioned this like selling to government is notoriously. Sales cycles are notoriously long. It's a tough process. I have been in more than one conversation with another investor who says that they don't like to invest in SaaS companies that have government as a customer specifically for this reason. So I'd love to learn about more about your sales process at avastar. What have you learned along the way? And you know you talked about this already about approaching federal government as a customer versus local government. Is there anything else you would do differently if you could go back in time to earlier days in the company?

Yeah, that would be the primary thing. I would have gone after federal much, much sooner. Yes. I'm not going to sugarcoat it. The sales process for governments can be long but really if you think about it for enterprise customers, they're almost just as long and just as crazy to navigate. And you don't have a the structure changes a lot more in terms of the hierarchy and who's in what position in the private sector versus in the public sector. People tend stay in their roles for a lot longer and their organization charts that are typically public. You can find your way to get to the appropriate people at government agencies because they are government employees. So that process makes it a little bit easier. We learned a lot in this process. We learned about thresholds, budgets and budget authority and keeping your sales price under budget authorities to expedite the sales process. Selling to departments as opposed to trying to sell a solution agency wide, going after smaller agencies versus larger agencies. Depending on your solution and your price points. There are tricks of the trade that you can use and it just really is dependent on what your tolerance is, what your funding level is. If you can get a big sales team to sell at a higher price point, that's great. You want to start off at a lower price point. It does make it a little bit easier to scale, but it does make it harder then to grow your price point as you continue building your business because they become psychologically accustomed to paying a smaller amount for your products and services. So there's really different ways to go about this and approach it. And for the again, for the Federal government. It is, I think in my opinion, given where we're at right now, for us it is an easier process than selling to local governments because they do have bigger budgets, they do have a bigger need for it, and they are actively working to make the process easier, as I mentioned.

Awesome. Thank you. Sky Damola, you mentioned that about half of your clients are for profit and half are nonprofit. When you look at the for profit side of your client base, how do you help those customers adopt ONVU? Are you using similar SaaS? Like, are you using typical SaaS methodology? Is there anything that you would consider kind of a hack that you've put together?

Yeah, typical SaaS methodology, you know, typical four to six month sales cycle with vertical SaaS. So we don't have to go through the entire enterprise. We're selling it to a specific department. We try to do a land and expand strategy. Once we're in there and upsell them, we do it a little bit different. One of the things we don't do, we don't price per seat, we price per consumption of data based off consumption of legislative data. So a little bit different there. But some SaaS companies do that. So you can, you know, for us, because on the corporate side it is like really, truly, you know, vertical SaaS, enterprise vertical SaaS, you know, we can, we follow general, you know, best practices and principles that work with a little bit of, you know, sprinkles on top. Because of the type of people that we're, we're, we're selling to. The other thing too with, you know, sky mentioned how, you know, folks in governments, you know, operate a certain type of way. Well, you know, this space is very transient. So somebody that's working in government one day is, you know, two weeks later a lobbyist at a corporation the next day and that mentality, right, that thought process falls with them and the next day they're working. You know, somebody that comes out of public policy school is working at, you know, a nonprofit that does great advocacy work for, for women and then the next day is, you know, back working as a corporate lobbyist for, you know, big oil and gas company. Right? Like it's very, this, this industry is very transient. And those folks that work in this industry, we have to be very aware of like what their buying methodology and psychology is. So even though we have some like very standard vertical SaaS, corporate selling principles, there is a little bit of nuance there because a lot of these folks do come from government, you know, are moving and kind of have different, different ways of doing things that aren't, that aren't traditional. And that's something that we've learned over time, selling into this space.

Great. All right, so we're going to go to the thank you slide for everybody that's tuning in and I'm just going to do a quick recap of our conversation to date. So we walked through process selling a government and also in the political space we talked about impact of the companies, what it's like building a team and also on sales process. So now I'm going to stop sharing my screen and we're going to go to audience Q and A. So bear with me for one moment. All right, great. So I think on. Okay, sorry, I'm just gonna have some background noise coming through, but if there's any chat questions similar sky if you're go ahead and take them and I will be off of mute in just a moment.

Okay, so first question for me looks like how are you able to balance MWDBE 8 certifications with receiving venture capital? Yes. So for certifications as a minority and women owned business, there are thresholds that you have to meet and mostly it's 51% ownership for minority status or women owned status. Now if you do have investors that are minorities or women, they can also count towards that. So it doesn't just have to be the founder, but there are organizations like nmsdc, National Supplier Minority Development Council who recognizes this issue and the fact that we are venture capital backed and there are more African American owned businesses that are venture capital backed, et cetera. So they actually have a special program where you have to just have 30% minority owned status in order to qualify for that certification. So again, that really depends on your investor and it's much easier to get at the early stage. But investors don't like it if your contracts or the majority of your contracts are just 8A contracts. Because then as you continue to grow the business, if you get more venture capital, then you lose that 51% status. So while it can be beneficial in the early days, I'd say just have a strategy about expanding outside of that or to a certain point, especially with SaaS, and you don't have to. The eight status can get you in the door, but it doesn't have to be what is dependent upon that for a contract, which is a way that you can balance both. So we always talk about how we're minority and women owned business, but our contracts aren't reliant upon that. Okay, do startups, particularly black female founders, need to register a small business or something in particular to go after CIBER grants. No, you do not have to register as a small business in order to go after sbir SBIR grants. They will ask that you check a box basically and verify that you are a small business and meet the standards. And in each CIBR application or open topic contract they will stipulate what those standards are. It's usually 500 employees or less or there can be a revenue threshold depending on the type of organization that you're in. So you don't have to have that status in order to go after super grants.

Christine, want me to yeah, I'm going to jump in real quick because I saw in the participant group there's somebody that raised their hand and a question that had come through from this person says we are thinking about trying a freemium play, which I have not seen much of in government yet. Any experience around that as a CP tactic in this space. So I'd love to hear from both of you and I also have an opinion about this.

Sure, I will go. We looked at freemium in the beginning and I know companies that do do the freemium model with government to varying levels of success. I will talk about my viewpoint on why we didn't do premium, but that is not to say that premium doesn't work for governments. What we found for our sector is that governments value what they pay for and that it is harder to get them to take you more seriously if they're not paying for it than it is if you are a budget. If you are a line item on their budget and continuously working with them, they have a point person, they're invested into it. And so trying to get them to do something for free, it doesn't speed up the process because ultimately you still need that decision maker. And if you're trying to go after the end user who's more junior doesn't have the decision making authority to use it for a certain amount of time or get a certain level of access to it and then have to go after that end user. Longer term it can be just as long. Now it can. Ultimately I think it works best and I've seen it work best in those red hot markets that we're talking about where there's a very specific new need that is widespread across the country that you have a brand new solution for in departments like Transportation for example, because they often have a lot of authority to just be able to select whatever solutions work best for them. So it absolutely can work. It's just for us it wasn't the tactic that we took. Cool.

Demola, do you have any thoughts on that?

No, nothing to add. I think sky hit on it perfectly well. It's not something I would do as well. We actually do have some government clients. That's not the space we typically sell to, but we have a few. It is not something I would do for all of the reasons sky articulated.

Awesome, thanks. Yeah, so I'm gonna hit on that too. I am not contrarian in this particular moment. I don't think a freemium play. I would not recommend a freemium play. And as an investor at Backstage, we invest across all sectors, consumer and B2B. And effectively the sooner that you can have revenue in place, the more optionality you have as a founder. And that's just like general business model advice specifically. Also, I think the psychological impact of trying to raise prices or go from free to a paid model, it's tough because as sky mentioned, not like in the government sector specifically, having budget allocated towards your product is critical to your long term success. But even in the private sector, having the moving from free to paid is friction that you're adding into your adoption process. And then finally, the other piece that I would say here is, as somebody that used to be in procurement, in a corporate environment, oftentimes freemium has very little trust when it comes to it and security. And so this is another barrier to adoption from the very beginning. So while freemium may seem like it would help people to adopt and then land and expand, or help your customer to adopt and then land and expand, in fact, being free to begin with can actually cause a greater level of scrutiny and resistance to adopting the product. So that's just my two cents from what I've seen. And then speaking of landing and expanding, we have a question that says can you talk about the importance of selling under the threshold to get started, landing and expanding and shortening the sales cycle. Demola, you mentioned landing and expanding. Can you talk about that?

Yeah, I think Shelley was asking it specifically about government. And I do have a thought on. I'll just quickly share. I know we don't have much time. I'll quickly share what we do from a corporate perspective. And also, I mean, you could also make this work, obviously selling the government, but like instead of freemium, it's better to go in, sell and then expand. Like try to get it under that budget and then figure out how you can grow your. Grow that customer out. And I think what Shelley's referring to is that there's a threshold in government in Terms of when they actually, like, have to trigger an rfp. If you're going in and just trying to sell a product directly to a government agency or entity, I know a lot about that, but sky knows a lot more. So with the little time we have left, I'll pass that to you.

Thank you. I do know quite a bit about this topic. So there's the perception of what government agencies have to do, and then there's reality. And those two things don't always mirror, especially when it comes to it. So a big way, a big factor that government agencies get around having to trigger the RFP process is by having these IT Master Services umbrella agreements. Now you, as a SaaS company, you can become essentially a SKU under an IT Services Master umbrella agreement. So there is a provider, and there are a lot of these providers that they, they have the contract, the government agency has the contract with the IT provider. And then if you are a SKU on there, you can just be purchased by any agency because it's not direct with you, it's direct with their master services provider. Not everyone knows this. And this is why I mentioned again, even within government agencies who have this and they have these master services agreements for this particular reason, they don't always know that. So they'll often trigger an RFP just as a default reflex because they feel like that's what they have to do when it and specifically SaaS works differently. So needless to say, one, educate your customer because oftentimes they won't know that about their own organization. And we've had to help get them to the right people to tell them within their organization that this is an option. But two, staying under their budget thresholds, which can vary wildly from 150,000 at larger agencies to 25,000 at smaller agencies to even I've seen like some that are 5,000, but that's more at state agencies, which doesn't really make a ton of sense. So know what your budget, what your agency's or department's budget threshold is, because it can vary by department as well. And that can again, get you in the door. One thing that I didn't mention is it's much faster and much easier to get pilots to work with these government agencies. But you can charge for pilots, they can be paid pilots. We have charged for every pilot that we had. And so with pilots, they actually don't need to trigger the RFP process either. And that gets you in the door where you can get hung up. And we've had this problem happen a Couple of times is you have to be super clear and agree with the person up front what happens. Post the pilot. Right. So are you going to trigger an RFP process? Can you just get three bids? If it's under the budget threshold process, then can we just get a contract directly? So just make sure you know that up front. But again, just making sure that you are getting paid for everything you do with government agencies. But the budget threshold is a decent way. Now another thing to think about if you're thinking about that sort of land and expand by staying under the budget threshold, is that all of this, your pricing with government agencies, especially if you've responded to an rfp, becomes public domain. So other agencies will know what you've charged an agency. And so there could be consistency issues if you're trying to go after bigger agencies versus smaller agencies. If you have that per user model, then it can make sense. But just keep that in mind as well.

Fabulous. All right, we just have a few minutes left and there's a question that just came in and I'd love to hear from both of you on this. It says, how long did it take to create your mvp? And who was the original team?

Yeah, for us it took about a year, I'd say like 8 months to get to MVP. Happy to have Backstage as our very first investor helping us get to that point. But yeah, it took about eight months, nine months. And the team that did it, it was three of us essentially. So the founding team kind of putting an MVP together before being able to then bring on somebody. It was very lucky for us. We have a technical person as part of our founding team. So we were able to be able to get that MVP done. And one of our founding team members is also a designer. So like that obviously is different than if you're a solo founder and you need to bring on somebody onto your team and hire them and pay them and that type of thing. Our team was able to kind of make those short term sacrifices go without getting paid, but generally bootstrapping. So yeah, like I'd say eight months, nine months. And then immediately, once you have something that is sellable, start charging. Like that was our thing, like get something that could get something that somebody will pay for, even if it's just a little bit of money, solve some sort of problem that we can charge for. And we were able to do that basically within eight months.

Awesome. Sky.

Yeah, so it depends on your definition of mvp. So our true, true MVP was a slide deck. So we hadn't built anything and we Started pitching off of this slide deck, and we got our first customer, sort of pilot agreement with that slide deck. So it really didn't cost us very much at all. But we. I'll tell them this amongst friends, we didn't pitch that we didn't have the solution available. It was just some people in government. Our technology can be technology adverse. So no one was asking to see the demo. They just wanted to see the slide deck. So that's what we showed them, and then we built it afterwards. Now, because we kind of knew that governments take a long time, once we got someone to agree to do a pilot, that's when we started building, and we were able to build it in time for the pilot to be live by the time the pilot started. So that is how we did it. Yeah. Hustle in. That's amazing.

All right. Thank you. I love it. All right, thank you both so much. Last thoughts, final thoughts on this space for anybody that could be watching or watching the replay.

Yeah, I would say just if you want to sell to governments, start as early as possible, start getting people excited, start understanding the budget thresholds, understanding who will be your. Who will make the decisions, and really honing in on what it is that they want. Not even what's good for them, because sometimes that two things don't coincide, but what it is that they want. So the earlier that you can start, the better.

Yeah. And I'll say it's definitely a complex space to get into. You got to do your research, you got to study it. You got to know what kind of what all the ins and outs are, which is good for me because that means less competition. So, you know, fine with that. But I think bad for democracy, bad for the country, if you don't have more people trying to push the envelope and innovate in the space, make things better. So definitely encourage folks, you know, if it's something, if you're a technologist, if you're looking at solving problems in the space, but maybe that's why you join. When you're watching this, the recording of it, just learn about it. You really got to do your research, understand it, and you'll be better off for it just like any other industry.

Awesome. Thank you, Tamila. All right, that's it. I'll just recap real quickly. So we're talking about a huge industry here, addressable market, billions, both in the civic tech space, utilizing political information and then also selling directly to government. We're talking about huge impact. So when you address this market and you build a product you're not just building a SaaS company. You're affecting society. And, yeah, venture backable opportunities. So I'm really thrilled that Backstage can be an investor in both of you and both of your companies. And thank you to Saster for giving us this opportunity to share more about building in the civic tech space this morning.