When Government is the Customer: Things to Keep in Mind

Are Silicon Valley Companies Becoming More Open to Working With the US Department of Defense?

Are Silicon Valley companies becoming more open to developing tech for the US Department of Defense? This is the question that four investors – Trae Stephens of Founders Fund, Bilal Zuberi of Lux Capital, Raj Shah of Shield Capital, and Steve Bowsher of In-Q-Tel – discussed at a startup event for military veterans. According to Shah, the number of companies, founders, and entrepreneurs interested in national security is at an all-time high.

But what should companies consider when selling to the US government? In this blog post, we will explore the issues of mission creep, DoD-ization of products, and intellectual property rights when selling to the US government.

Mission Creep

Mission creep occurs when a startup that begins to work with the government spends the bulk of its time catering to the government owing to new requests, and ignores earlier, commercial customers in the process. Trae Stephens, co-founder of Anduril, a maker of autonomous weapons systems, said that this makes it hard to do both cater to civilian enterprises and the government at an early stage.

DoD-ization of Products

Many programs that enable founders to do early business with the Department of Defense require the DoD-ization of the product for that use case. However, this can take the company away from the commercial businesses needed to make the business truly work.

Intellectual Property Rights

When selling to the US government, how can companies ensure their intellectual property rights? Bilal Zuberi of Lux Capital shared a cautionary tale of a portfolio company that received a $100,000 grant from the National Science Foundation. When the company started to do a Series B raise, there was a clause in the grant that said the government could use the product if needed. It took six months to negotiate with the NSF to get the right back.

These are just some of the Things to Consider when selling to the US government. To learn more, stay tuned for more from this discussion on tech for military applications, AI in military applications, and more.

Categorized as AI

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