VC Power Hour- Underserved Markets for SaaS Companies with Backstage Capital

All right, thank you all for joining today. We are here at Saster Annual 2020 at home to talk about underserved markets for SaaS companies. My name is Christy Pitts. I'm a general partner at Backstage Capital. I'm joined here today by two of my portfolio CEOs and founders, sky and Demola. So I'd like to hear actually from both of you if you could each introduce yourselves and talk about your background and what your company does, and then we'll get into it. Sky, go ahead.

Sure.

Thanks, Christy. I'm Skye Kelly. I'm the founder and CEO of Avasar. We are a procurement platform that helps government agencies make the procurement process more modern, faster, easier, and also help more small businesses navigate that procurement process.

Great. Thank you. Sky Damola.

Hey, everybody. My name is Damola Ogindipane. I'm the co founder and CEO of Civic Eagle A. We're a vertical SaaS company. We provide analytics and collaboration tools to lobbyists and other policy professionals within the corporate space.

Awesome. All right, so originally when we were looking at putting this talk together, from my perspective, I was thinking this is like a government tech talk. But then actually in preparation with sky and dimola, what I learned is that we could look at this more as Civic Tech. So there's a huge industry in both in selling to government and then also supporting government agencies and the work that they create through the legislation. So we're going to talk about all of this today, why Civic Tech is a great market to focus on for SaaS companies, what some of the challenges are in selling to that market, what it's like to build a team addressing that market, and then also sky and Demola's experience as founders and why they're building. So we're going to go ahead and get started. I'm going to let sky go ahead and talk about what it's like specifically, specifically to sell into government. So sky, take it away.

Yes. Thank you, Christy. So I get asked the question all the time, why did we decide to sell to government agencies? And oftentimes I ask myself that same question. But one of the biggest reasons, and one of the biggest, I'd say beneficial points is on governments is that governments are super sticky customers. Average LTVs in government are 15 plus years. So if you can break into it, it can be a very lucrative business where your customers just stay with you. However, it is hard to break into. There are network effects. I was told once before, government agencies love to be second, right? No one really loves to be first. So once they find that something is working somewhere else. They do like to replicate that and sort of use those same solutions. So they often do share those solutions. But the sales process can be long. And then depending on your business, it might be more beneficial for you to either focus on local government agencies, meaning city, county, states, or federal. And we're going to talk about federal as well, because when I started we focused on local government agencies. We're now focusing more on the federal space. I had some thoughts around how hard it would be to sell to the federal government and sort of steered clear of it in the early days. But actually federal turns out to be a really great target for what we do.

I just wanted to make a quick comment that similar to government venture, LPs are super sticky customers and they also operate from kind of a sort of FOMO in a way where, you know, there's a phrase when you're raising as a venture investor that if you're investing on behalf of a pension fund, you don't get fired for taking the risk. But if you see that others are investing, then everything comes together. So there's some similarities between the two industries.

Perfect. So federal government spending is actually quite large, especially in the R and D space, which can be a great way for you to get funding to test out some new theories, new ideas, new applications. The annual number ranges, but this is as of 2018 on the left hand side. 2019, the chart. So 135 billion per year. It was split between basic research, which as you can see on the chart on the right hand side, the federal government is the largest funder of basic research. Then there's applied research and then there is more of the development. So again, depending on your focus area for your business, it can be quite lucrative and quite beneficial for you to get funding for the federal government for basic research programs. And they have really made a focus on making that process easier for small businesses and innovative businesses. So there are a lot of different federal government departments, but the Department of Defense really spends the most in R and D funding. You can see with that chart, they spend a little bit over half of all funding. And they really have made a very concentrated effort. It's a mission imperative for them to work with more small startup and innovative companies. They're trying to be very active in this space. Those of you who might be familiar with SBIR or CBER grants, I initially thought that that was going to be a really hard process, but it turned out to be relatively painless and very quick. They're on expedited Timelines now. So and a question that we get asked often as well, what does the DoD purchase or what do they fund in terms of research? If we're not creating war fighter technology, will they fund us? We are a phase one contract awardee for the Department of Defense and we're procurement platform. So it just gives you an example of the breadth of what they're looking at in terms of research.

Sky, can you actually, while we're still on this slide, can you talk a little bit about your experience getting the SBIR grant?

Yes.

So when.

It was actually one of our investors who suggested it to us and I took a look at it and it was a very straightforward process with hard timelines. So a proposal solicitation came out, you had to do things like write a 15 page paper, but they give you a specific structure of what they want in each section. So it's very clear, sorry, a 5 to 10 page white paper to 15 page slide deck. And they tell you on each slide what they want. So we all have this information about our businesses anyway. There's no guesswork in it. And you just use 30 days to be able to submit that solicitation. And then it was about six to eight weeks before you found out if you won that phase one contract award. I went in having zero expectations that we would actually win this award, but we did. And it really gave us license to go out and to get additional contracts with the federal government.

So once you won the award, is it similar to a nonprofit grant where the funding is earmarked for specific activities? Do you have license to spend the funding within your company as you wish? How does that work?

Yes. So there's a phase one and there's a phase two. And so for each phase, you outline in your proposal how you want to spend the money. And so for the phase one, it was mostly about trying to get a phase two contract. It was really a business development grant so that you can talk to different agencies within the Department of Defense to see if you can find a customer to sign up via MoU signer for a phase two. And as part of your phase two proposal, you agree with the customer, but you really outline how you are going to spend money and what is going to be the end result, what is going to be the technology that comes out of that, what is the use case for the department. And so you are really presenting what it is and how you want to spend money.

Awesome. Okay. I love money. All right, Demola, I want to hear from you. Can you talk about the political Technology industry, please.

Yeah, definitely. So while sky pointed out how big the federal government funding R and D industry is, over $130 billion a year. Another component to that is the political technology industry or the civic tech industry. Civic technology has been something that people have been talking a lot about over the last probably four or five years. There's been a lot of civic tech tools that have come out, but nobody really has a concrete definition of what civic tech is and then kind of what political technology is. So with political technology, the way to look at it, and I'll talk about the opportunities that exist in a mom, but the way to look at it are really in three categories. Campaigns, governance, and then lobbying and advocacy. Those lobbying and advocacy are a bit Synonymous and those three sectors make up a $47 billion industry domestically here in the United States. So again, campaigns, and that's federal, state, local campaigns. Governance, that is selling tools that can help government better interact with their residents, with their citizens. And then lobbying, which is helping lobbyists, policy professionals, advocacy groups interact with legislative and regulatory information to try to shape the government and the legislative environment in a way that may be better for that organization or for that group of people. Now, the space that we work in at Civic Eagle is lobbying. Before I get into that, let me kind of shift your view to the right. That map that you see there, and that's the entire political tech landscape, right? The companies that are kind of making up this $47 billion a year market, that are serving this market. And you'd be surprised, it's pretty big map, right? There's a lot of different organizations that are doing this work that are making a lot of money, that are helping kind of shape and change the world, shape and change the country. At the very least with technology and with more specifically sas, the campaign text messages that many of you are receiving right now are powered by Companies that are SaaS, companies that are in the campaign space, and there's dozens of them. So when you see that text message, that peer to peer text message that's coming through from whatever presidential campaign that is being powered by scaling, fast growing venture backed SaaS company, when you get that email message from your city or from your state about something that's going on that's coming from a SaaS company that is servicing that government entity. So it's a really big dynamic space with a lot of different players and still a lot of opportunity to really get involved and be able to do things that are interesting within the political technology industry. Now, when it comes to lobbying Kind of that third component, lobbying and advocacy. Oftentimes lobbying gets somewhat of a bad rap and deservedly so. Like, we all, for many of us, we've probably seen, you know, House of Cards. If you remember Remy in that show, he was kind of like that. D.C. excuse me, K Street, you know, federal lobbyist that was kind of doing a lot of things behind the scenes and to try to like, kind of pull the, pull the strings. And that's, you know, federal lobbyists kind of get a better app. But there are state lobbyists, state advocacy groups, and also locally, and they need technology to help them do the work that they're doing. And that's where, you know, we come in and there are, you know, several players that are really trying to innovate this space and make lobbying and advocacy something that is better, right? That can be executed better, and that takes in consideration the communities and the organizations that they serve. So, you know, for us at Civic Eagle, we work with a lot of different corporations, with many different nonprofits that do advocacy work for communities, with law firms and other lobbying groups and other policy professionals. But there's still space within that category as well to try to really bring innovation. And in general, what these three things have in common is, is wrapping your arms around the understanding that government information can be serviced, right? You can take that information, that public sector information, you can really build businesses around them similar to anything around data. Government information is simply data. So being able to understand that data package it, figure out ways to create solutions for different stakeholders with that data, is an opportunity that we saw at Civic Eagle and that all the companies that you see in that map have also seen as an opportunity as well to be able to service that industry or service this space. And one of the really cool and important things that kind of come along with that is the fact that we believe that we're also doing social good, right? Like, we're actually making organizations that do great advocacy work on behalf of communities more powerful, that we're helping shape government and shape the messaging that comes, that comes from that in a way that better reflects the United States, better reflects the communities that make up the United States. And that's something that really fulfilling as well. So political technology isn't something that folks pay a lot of attention to, but that is really, really, really instrumental in the way that our country continues to progress. Because these again, campaigns, governance, lobbying, advocacy groups, they are at the forefront of government interaction. And being able to be a technology provider that powers that industry is really important. So that's My slide for this conversation. Happy to either take some questions from Q and A or pass it off to you, Christy.

Great, thanks Demola. I have one follow up question for you from the slide, so let's play this through for a moment. So I was thinking about the example you gave from House of Cards and Remy and effectively, the way I understand lobbying as a layperson or as a citizen is that once a lobbyist is successful in either in getting legislation passed, then organizations have to respond to that new legislation, right?

Yeah. So the way to really look at it is when legislation is first drafted, whether at the federal or state level, it's not immediately just like written and then, you know, go and then go through the legislative process. There are a lot of people that are involved in the shaping and the amendments that go into that piece of legislation. There are a lot of different stakeholders, there's community stakeholders, excuse me, like us, that can go in and have a conversation. All this information again is public. There are lobbyists that are representing different organizations that go in and share their opinion on maybe things that can be changed in that legislation to make it adhere to their organization or to their industry. And there are also advocacy groups that do the exact same thing that look at a piece of legislation that has been drafted or sponsored and proposed again at the federal or state level and want their opinion to be heard on it as well. And they're representing maybe a community or some sort of interest organization, advocacy organization. So it's really a lot of stakeholders that are coming in and trying to make sure that their voice is heard in the shaping of that legislation. And then, yeah, oftentimes once that bill is act, once that legislation or that bill is actually passed and signed into law by that, you know, by the legislative body. And then that, that, that governor at the state level or the president at the federal level, people may try to, you know, change that. Right. They maybe not like what that, that law that that new law has proposed or what it's doing. And that starts the legislative process all over again. You have to actually go through the legislative process to change laws. That's really the point of legislation is to actually like change the law that's on the books by creating a new law or by changing that law. So that, that's kind of the way that it works. And again, like our solution, our product helps the organizations and the lobbyists and the policy professionals that do this work, do it more collaboratively, have an analytics tool that helps them be able to manage the work that they're doing. And know what's going on at the federal, state and local levels.

Great, thank you.

Add one more thing, just an alternative use case for lobbyists, because we actually use lobbyists as well, and it's not for legislation, it's just for navigating government. So when we started, we were trying to work with the city of la and it is very complex and political. And it was actually a government employee at the city of LA who suggested that we work with lobbyists in order to be able to navigate and, and find the right customers. Right. The right decision makers at an organization as big and as complex as that. So, and just a different use case, you know, while they don't help us push legislation, they help us figure out who the decision makers are, who cares about what we do and what we offer, and who would be the best customers for us for some of the largest organizations.

Awesome. Thank you. All right, so we're going to jump into takeaways. So Sky, I'll go to you first.

Great. So, yes, as I mentioned, government customers, very sticky. But if you're going after the strategy, it's harder to try to displace incumbent solutions because government agencies are such sticky customers, they tend to stick with their internal solutions or incumbent solutions for a long time. So it's much better to go after brand new spaces or a different twist on the spaces or the problems that they need to solve. Local governments can be easy to reach in a small number, but much harder to scale effectively without a large sales team. Now, if you do have a large sales team, it makes it much easier or I've seen some solutions that are just truly in red hot markets, truly tackling a big need in a new space that can scale much faster. And then lastly, federal government agencies, they are actively seeking startups and they're trying to reduce their processes to make it easier to work with them because it is imperative for them to bring on new innovation with the Department of defense, the DoD, as I mentioned, being the primary use case or the primary ones pushing that. But within the dod, there's the Air Force, there's the army, there's the Navy, there's the military, there's a lot of acronyms, Ensign and nga, National Geospatial Organizations and all of that. So I would suggest that don't do what we did, which is just shy away from it early on because we just thought it was really hard. Depending on your solution, it can be really effective for you. Thank you.

Yeah, so three takeaways for me and it's really around building A business with public data. And the first one is public sector data is valuable to the private sector. So whether it's municipal information and data, whether it's information about legislation like what we do, there's a lot of opportunity in creating products and solutions for the private sector by utilizing public sector information and data. Second is government inefficiencies equals an opportunity. So a lot of the stickiness that sky alluded to when it comes to the public sector and to government, when you're selling to government and building products for government can sometimes lead to them being inefficient in the long term. Right over 10, 15, 20 years span and then being able to understand that that is another opportunity either to again sell to government or to create products by looking that as an arbitrage opportunity for the private sector. And then third is that political tech is a great way to impact democracy. For a lot of folks that are probably joining this call, you're interested in how can you have a social impact as well in creating political technology solutions, finding opportunities, not just limiting to what I call citizen engagement tech or resident tech, which is like direct to somebody, individual to engage. I think that's a very limited scope. There are tons of other ways for you to be able to have an impact on democracy by looking at what the bigger picture is around again governance, around campaigns, around legislation, and then creating products that can help improve democracy.

Awesome. All right, so we're going to hit on this last point in just a moment, but I want to transition into the next part of our conversation today. So we're going to go into Q and A. I have questions for both of you, and then we're going to open up to questions from people who are on the live stream. So on this last point that you made, Demola, about political tech being a way to impact democracy, can you talk more about your background? What is it that led you to launch Civic Eagle and what do you feel the impact of, of your product on society will be once you are at scale?

Yeah. So, you know, I am an immigrant from Nigeria, moved to the US When I was six. You know, grew up really having a more global perspective and a perspective on how to kind of maximize the opportunities that democracy gives us and that capitalism also gives us, and trying to figure out a way to, you know, create technology and create solutions that have a net positive impact on democracy. So that's kind of always in my viewpoint, just from growing up and having that more like kind of global perspective around like what different countries do from a governance perspective. And, you know, for me, you know, starting Civic Eagle kind of originated from, you know, feeling of wanting to, you know, be in the. Be a part of the solution in the moment. On the heels of Michael Brown being killed in Ferguson, Missouri, and feeling like, you know, what are the ways that I can actually, like, make an impact and make the country and the world a little bit better? And for me, it was, you know, this. It was starting Civic Eagle, really figuring things out around that space and trying to, again, lead the country a little bit better. And again, you know, one of the most fulfilling things around building a solution in the political technology space is the fact that you can see tangible, actual impact on the organizations and the customers that you're serving. About half of our customers are for profit, and the other half are nonprofit. And I'm most fulfilled by helping the nonprofit organizations that are doing really great social impact and advocacy work be better able to be better equipped and able to navigate the political lobbying and advocacy space by utilizing our technology.

Thank you. So when your customers are using the technology, I think I'm just thinking back to some insider information I have about Civic Eagle, being an investor and some of your slide decks. And I think that one thing that I've seen before is how much more efficiently your customers are able to work together and more collaboratively they're able to work when they have your product, which is called Onvue. So what is it like for them before they have the product versus after? And do you see that, like, what their. What do you see their feedback? Yeah, it's 8:23am Pacific time for anybody watching. So hopefully you got the gist of what I was trying to say.

I got the gist, yeah. I mean, the North Star metric that we use for nonprofits is the percentage time saved when it comes to finding, identifying, and analyzing legislation. So our customers see about a 65% reduction on the nonprofit side in the amount of time that it takes for them to identify legislation that is important to that organization or to their policy area, and then the amount of time it then takes for them to analyze it and kind of figure out what their best strategy is. And on the high end, we've seen folks save 80% in terms of reduction in time doing that work. And that matters a lot. Right. Like, nonprofits are not. They're not necessarily flush with cash. Advocacy groups are not flush with cast. So being able to save them that time, being able to help them, you know, more like allocate that time to directly to the actual lobbying work and meeting with Lawmakers meeting with their community members makes a pretty big difference.

Great, thank you so much. Damola Sky, I have a similar question for you. What's your background? What led you to start Avasar? What's the impact of avastar at scale?

Yes. So I am a serial entrepreneur that is glutton for punishment and Avasar is my second tech company. And I've always been interested in how do you alleviate wealth inequality along racial and gender lines. It's just something that has been pervasive for me throughout my life based on how I've grown up and just seeing the inequalities that exist. And so I was working at Fortune 500 companies at&T, Disney and ESPN and saw just, I saw firsthand the experience of how life changing it can be for small businesses and startups to get really lucrative contracts with these big organizations and how it can propel you to success. But also seeing the discrepancy in who got access to those contracts and the networks that it takes because it was mostly white male founders that I would see come through get these contracts. So really started Avasar with the lens of wanting to level that playing field and democratize that access. And it was not our intention to go into the government space specifically, but we found that there was the need, there was the opportunity and they were willing to work with us in terms of being early stage and pilots and they also had at the local government agency level, but federal as well, requirements to work with small and minority and women owned businesses. So from a mission perspective it was aligned and really just wanted to change that landscape. Procurement is a multi trillion dollar industry. If you look across government and the private sector and so if we can get more of that money going to minority and women owned businesses, it can really make a huge difference.

Great. So can you talk about when. So for a minority owned female owned business or women owned business, when they're looking to get a contract with a government to fulfill an rfp, what is the process like without Avasar?

Yeah, so we tackle a couple of different issues within this process because the, the process is fraught with issues. So at the local level, getting certified as a minority of women owned business gives you a preference, a bid preference, which means essentially a discount on your rate when you are trying to propose a solution and responding to an RFP at the local government agency level. So they will take whatever bid that you give and depending on the municipality and their rates, they will discount it by anywhere from 5 to 10% which makes you more competitive in terms of that bid specifically because they're trying to work with more minority and women owned businesses. So just the certification process in general can be a nightmare. On average, it takes companies around six months to even compile that documentation and be able to effectively submit. And government agencies are seriously backlogged in terms of processing those certifications. I've seen it as bad as a backlog of over 400 days to actually get a certification. It was so bad that the same people who were applying for these certifications were actually applying for their renewal certification before they got certified in the first place. We were able to take that processing time down for from 400 plus days to on average between 10 to 14 days to process these certifications through some crowdsourcing that we do. And then on the small business side, we took that process down from 6 months to 70% of our vendors submit a certification within 7 days and 30% submit within the same day. So that's a significant time savings on both sides. The RFP process in general can be confusing. The discoverability and the access level of it, just not even knowing when there are RFPs or RFIs that are available to you and having to navigate many different solutions and then understand how to submit bids on many different processes. But something that we're also starting to get more into now is really even on the government agency side, and this is at the local level as well as the federal level, a lot of government agency employees don't even know their own rules on procurement. So what can they procure with what vehicle, when and how do they need to just get rebid? Do they need to make it public? Can they use an IT umbrella agency or agreement in order to facilitate that? So in order to solve this problem, we needed to solve it on both sides. And that component of really even helping the government agencies better understand how to procure different items faster is a huge time savings and beneficial really to both sides of the marketplace in the equation. Thank you.

So I just want to hit on a couple of takeaways from this last bit of the conversation that we've been having. So for both of you, when your solution is adopted, you're saving your customers significant amounts of time. And that's common with SaaS solutions. You're taking outdated processes, bringing information, analytics and software to the table in order to improve efficiency. But I think what's really important about this conversation specifically is that when you're saving your customers time, that has an impact on society. And so, you know, SCAI for avastar, what that means is that small businesses that are owned by women and minorities have an easier time responding to RFPs and RFIs. They have an easier time getting certified, and local governments and federal government has an easier time contracting with them. And for Civic Eagle, that means that nonprofits and advocacy groups are able to more effectively utilize their time because they better understand the legislation that's affecting them. And so the impact of that on all three of us and people watching, especially if you're in the United States, is that the adoption of SAS tools in the civic tech space can make our lives better as citizens. And so I just wanted to hit on that because oftentimes when solving for different problems in different sectors, it's important to consider what the impact is of your product at scale. And solving problems in this sector means that the impact could potentially be everybody in a society. I think that's really impressive and inspiring and it's something that I think about as your investor. And so I wanted to make sure to highlight that for everyone that's tuning in. And I wanted to also switch gears a little bit, so. 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 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, on 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 the 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, you know, kind of professional background or academic background. There are folks on our team that come from Google. There are folks up on our team that are, you know, lifelong civic hackers. There are folks on our team that have a more academic background. You know, they 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 from 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, 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, 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. We summed it up very nicely. I mean, I think we've had much more success with mission driven people, 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, selling to consumers. Government agencies are structured, they can be rigid. 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 Jim will already very nicely summed up.

Awesome. I think you were reading my mind sky because the last year 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 a government is notoriously. Sales cycles are notoriously long. It's a tough time 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, 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 off to 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, the more enterprise customers, they're almost just as long and just as crazy to navigate and they 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 10 to stay in their roles for a lot longer. And there are 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've learned a lot in this process. We've learned about thresholds, budgets and budget authority and keeping your sales price under average 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 Demola, 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 into a specific department. We try to do a landing, 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 selling to. The other thing too with, you know, sky mentioned how folks in government, 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, 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 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 to this space.

Great. All right, so we're gonna go to the thank you slide for everybody that's tuning in and I'm just gonna 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'll 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 investment 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, you don't have to. The eight status can get you in the door. 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 CIBRA grants? No, you do not have to register as a small business in order to go after CBIR 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 CIBER 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. Christy, 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 sales 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, then 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 and they're invested into it. And so trying to get them to do something for free use, it doesn't speed up the process because ultimately you still need that decision maker. And if you're trying to Go after like 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, you know, 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.

Damola, 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, you know, 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 is. 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. Damola, 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. You know, what we do from a corporate perspective. And also, I mean, you can also make this work, obviously, selling the government, but, like, instead of freemium, it's better to go in, sell, and then, like, expand. Like, try to get it under that budget and then figure out how you can grow your, you know, 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 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 SAS 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 the 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, what your agencies 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? 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, let's say like eight months to get to mvp. Happy to have Backstage as our very first investor helping us get to get to that point. But yeah, it took about eight months, nine months. And the team that did it, it was, you know, three of us essentially. So the founding team kind of putting an MVP together before being able to then like bring on somebody. Like, I mean, it was very lucky for us. We had a technical person is part of our founding team, so we were able to like, you know, 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 out 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, you know, 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 you 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, you know, 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 are 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 the 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. We 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, maybe that's why you join where 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, Timila. 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, you know, 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. All right, take care. Thanks for tuning in.

Thank you.