Forget Venture Capital... The US Military Will Invest In Your Business!! (Podcast Transcript)

[00:39] Richard C. Howard: Hey guys, Ricky here, owner of Dodcontract.com, host of the Dodcontract Academy podcast. You just heard from Brian, who owns a company called Vermeer. He's had amazing success with the SBIR program, which is the Small Business Innovative research program. It's an amazing opportunity for small businesses that are either developing technology or looking to modify a product for government use, or just trying to get your foot in the door in government or military sales for the first time. And this is a special episode because not only are we focusing on SBIR, but we are going to bring in a few experts from past episodes that you're going to listen to. So up next, you're going to hear from Luke Robertson, who is an amazing business developer in the defense and government space. He's going to describe what SBIR is, the different phases, how you can go about applying for those and achieving the SBIR contracts with the government. Then we're going to listen to Bryan. So we'll jump right back into him. He's going to talk a little bit about his story and how this has transformed his business and really allowed him to receive funding multiple times over for developing his technology and his business. And then we're going to talk to Oliver at the end. Oliver nowhere from street smarts VR. He's also had amazing success with the SBIR program. It's allowed him to do something he calls Bottoms Up Selling. And if you want to learn more about any of these folks, they're all in previous podcast episodes that you can listen to. As always, please subscribe to the podcast and leave a recommendation if you find any of this is helpful. And you can head over to Dodcontract.com if you're looking for additional help with SBIR or any of your government contracting needs. All right, well onto the episode.

[02:15] Luke Robertson: Well, a Small Business Innovation Research Program is established in statute, and fundamentally what it is it's a way for the US government through various sponsoring agencies like the US Air Force or Department of Homeland Security. They all kind of run their own programs within the larger SBIR program. And it's a way for these organizations to be able to take advantage of the innovative talents of smaller companies. Oftentimes, small companies have fantastic ideas, but they simply don't have the capability to be able to bring these ideas to bear. They sometimes aren't quite able to even productize it. And they certainly aren't able to make it through what they describe as like the valley of death. Where you have one good idea, maybe one good product. But then it's a little bit more difficult to then be able to build that thing out at scale and be able to go under contract in a way that you can then become turn your company profitable. And the Small Business Innovation Research Program is designed fundamentally to be able to bridge that gap, to be able to bring these innovative resources into the government. Because it's designed for small businesses to be able to sell products and services. It's designed to move quickly. Small businesses don't have a huge amount of time. They don't have 18 months potentially. They need to turn a profit now. They need to have a customer now. So the program, it's an application process, it's a contract, not a grant, although there are similar programs that are grants as well, where basically the government will put a small business on contract to build out what their product is. And usually what the government is looking for is a kind of a modified commercial product. So if the small business has a product and it's applicable to some commercial customer and it's proven, it's known that this thing is going to work, but it may not exactly fit what the government's needs are. And what the government will do is it will pay that company to modify that product so that it will be fully applicable to the government's needs. Once proven, once demonstrated success within this program, then the government arranges, and this is really is the main strength of this program is it will then arrange a simplified contracting on-boarding process to be able to move from the prototyping stage to fullon production sales. And I've seen a variety of companies, both the company that I worked for, I guess full time you could say, and also the companies that I've worked with as a consultant, being able to land these contracts and then be able to productize their idea and then be able to actually fully sell it.

[05:17] Richard C. Howard: Sure, yeah, those are great. There's some great wisdom there and some great tips. I also do know that the government has sponsored some solutions that weren't already being sold commercially. They were a little bit past the idea stage, but I do know a couple of companies where they've won SBIRs and then that funding they were using to help develop that solution. But it still would have a commercial and government in that case. Perspectives. Let's talk a little bit about the phases of the Sipper program. So this is something that I discuss a lot with clients. So phase one, and we've kind of joked about this, right? So you have a great idea or a solution maybe like you said, it's already a product that you're selling commercially and you think that it would be a great thing for maybe the Department of Defense and whether say, we find an open topic or a topic that it could fit under. Sometimes these topics are very specific, sometimes they're very broad based on the future was one in the past, which, I mean, you can drive a truck through that thing. But let's say you find a topic and you submit your SBIR and what happens then? So what are the three phases? I know there's a phase one, there's a phase two, and then it can go on from there. What do you view the phase one, Silver, as?

[06:33] Luke Robertson: Let me answer that here in just one quick second. But I guess I think maybe I'll try to add a little bit of clarity to what you mean by the topics and the submission.

[06:40] Richard C. Howard: That's a great point.

[06:41] Luke Robertson: So basically the SBIR program, like I said, they're run by different agencies to discuss the Air Force cyber program, kind of it in specifics. What the Air Force will do is it will release topics that some Air Force organization or user has stated that we need something and there is some. We don't know what exactly we need, but we know that there is technology that's out there within a certain field, like you said, like maybe base security, some kind of smart camera thing. And then what the government will do, the Air Force will do is they will release a topic saying if you have a product that fits somewhere in this topic, we can fund it under this particular funding line. And then oftentimes they have what's called an open topic, which is government doesn't know what innovative technology is necessarily out there. They certainly don't know what great ideas are in some individuals mind. And so they will say, hey, write a proposal and send it in and if we like it, we'll put this on the contract.

[07:51] Richard C. Howard: Just to stop and ask you a quick question there because for companies that have maybe been writing proposals and a little bit more familiar with the government process, some proposals can be extremely difficult to put together. What would you rate the Silver proposal? I know they're all a little bit different, but you can give us some of your perspective on that.

[08:08] Luke Robertson: Generally on the easy side, the Zipper program is designed in many ways, it kind of runs as like the venture capital arm of these different government organizations. And so there's an understood risk to the government when it comes to funding these proposals. And so what the government fundamentally wants to know when it comes to doing a cyber application is they want to know about the proposing company. They want to know that this company has like some skills. So they're going to be looking for BIOS of the people who are involved and then they're going to want to know what the technology is in generalities and so that they can judge is there a technical merit to this? Does this have some value? Is there some application that this company has identified. But we're generally looking at a few pages of narrative right up like a PowerPoint presentation and then a small, but I guess you could say significant but graspable amount of administrative documents like various cost volumes and cover sheets kind of stuff. But in relation to a typical government response to a proposal, which may be a substantial lift, especially for a small company to put together a proposal, a super proposal is generally much more simple. And I think this leads us directly back to your question about these phases, right, the phase one, phase two, phase three. So I'll finally get around to answering that now the way that the government once again I'll discuss an Air Force so I can have a little bit more in the specifics. Although other agencies run in this way as well. They fund technologies based on a couple of different phases. And phase one is something of more like market research. The government will fund a company up to $50,000 to basically propose what their idea is and propose what they think the application to a certain government agency's mission may be. And this is a very simple application. We're talking like a five page white paper, a 15 slide PowerPoint deck that describes the technology, describes the company, describe.

[10:29] Richard C. Howard: The application and what's the deliverable usually. So hey, we put that together, we're basically saying, hey, we have an idea or a product, the government fits within your topic and then the government comes back and says, yeah, that's great, we're going to award you a phase one, what's typically the deliverable because you're not actually modifying the product usually with a phase one, is that right?

[10:49] Luke Robertson: Yeah, that's right. Phase one, fundamentally they're putting a company on contract to give them the legitimacy to be able to interface with those government organizations. So you're on a contract to deliver a technology, let's say like you mentioned, cyber security product. Now what you can do is that you can contact those government agencies and say, hey, this is what we think you need. Is this really kind of what you need or how would it be modified. And then the deliverable is a report. So fundamentally what it is. Is the government is paying a company to do the market research and not just paying them to do the market research. But is then facilitating them to be able to do that market research.

[11:29] Richard C. Howard: Right.

[11:29] Luke Robertson: To make sure that you're not as a company just some Joe blow who has no connection to the government whatsoever. Cold calling agencies within the military saying I don't know who I'm talking to. But maybe you're the guy and you need to ask if this is something of value.

[11:45] Richard C. Howard: An extremely difficult not to catch up, an extremely difficult subject for a lot of businesses trying to sell to the government. Because what you end up realizing is it's a relationship game, right? So once companies get past the point where they figure out, hey, just responding to RFPs isn't going to cut it, there's something else that's missing. And then it's usually the business development piece, right? So some combination of knowing who you're selling to and then really establishing relationships, talking to those agencies. And we've often joked that the silver phase one, you're almost getting paid to do business development. So that huge BD lift that is difficult for small businesses. You're getting paid to do that with a phase one. It's an amazing opportunity.

[12:32] Luke Robertson: It is absolutely an amazing opportunity. It's a program that has demonstrated success. So literally thousands of small businesses have gone through. This program is not new, although it's become much more formalized and the application processes have gotten more streamlined and simpler in recent years. The program has been around for a long time and thousands and thousands of small businesses have used this vehicle for its intended purpose. And they are able to bring their products to the market in the US government in a way that they would never have been able to bridge that gap before.

[13:09] Richard C. Howard: So that's phase one, timeline wise. So from the moment you put the application in, what kind of timeline are you looking at? Assuming that you're going to win, right? So assuming you're going to win, what does the timeline look like for being on contract with the government?

[13:23] Luke Robertson: About four months, three to four months. So every four months the government will open up an application round and so a company will build their application, the proposal, if you will, and then submit it through the website according to the standard, the rules and format as required. And then the government will review that and the other thousands of proposals that go in. And there's actually a pretty high selection rate. And the selection rate depends entirely upon the round who gets selected and what's being selected depends based upon what the government needs at that moment and specific funding amount. But then what they'll generally do is reach out back to that company within three to four months. There's been a lot of movement within the programs to try to shorten that. They would like to get that down to two months or less and then straight to a contract. The government will have the contracting officer reach out to that company, write the contract according to the proposal that the company put in. And it's an extraordinarily painless process once again, especially in comparison to other contracting alternatives. Sure.

[14:43] Richard C. Howard: So now let's talk about, I think, what the real point of this is, right? For any company. And this is what I tell my clients, I'm sure you tell yours is the point of SBIR isn't to win a phase one. The point of SBIR is really to win. That phase two, at least initially, right? Because that's where the money is going to come to help you develop your product or solution. Right. So once we have phase one right now, not only are we getting paid to do business development, but as you point out, just as importantly, if not more importantly, they are helping you facilitate some of your business development. What is that for? What do we need to get now in order to get to phase two?

[15:20] Luke Robertson: Yeah, absolutely. And if I could, I guess even expand upon that, I'd say the point of the separate program really is to get to phase three, which is the production level contract. In many ways. In order to get to phase three, you would go through a phase two, although not necessarily, you can go straight from phase one to phase three. So to add a little bit of clarity, phase one is that business development, that market research, that analysis of the marketplace. Phase two is once that analysis is complete and then there's been a gap that has been identified and there's a specific government user organization that needs something, and that thing is not available on the open market, then phase two, the government will pay up to $750,000. And there are times in which you can go up beyond that, but generally 750.

[16:17] Richard C. Howard: It could be managed by the agency that sponsors it, correct?

[16:21] Luke Robertson: It could be. It doesn't necessarily have to be. It helps, in fact, if you have matching funds, the probability of selection for the program is, I don't want to say close to 100%, but it certainly helps. You don't need matching funds. So the agency that wants your product okay, so you go through phase one, and in the phase one, you identify a particular organization, some major, some kernel, some GS employee who is representing this organization, who is able to say, yes, this is what you've proposed. Like what your technology has value to our mission.

[17:01] Richard C. Howard: Then that's one of the major accomplishments you need in a phase one. Right. Just finding someone to say, and I've sponsored these on my organization has on the Air Force side and the acquisition side, which is really usually signing a memo of some sort saying, hey, this is something that we would have benefit from. It doesn't mean that they have to fund it, but it does mean that they're saying, they're signing a mail saying, hey, we think that there's benefit here and there's a need. Right?

[17:30] Luke Robertson: Yeah. Obviously, one way to prove that need is if the organization puts their own money behind the request. But once again, it's not required. But what is certainly important is to have someone who has sufficient authority within the organization to be able to speak for that organization to say, yes, we need this thing. Right. You can always go find somebody who's willing to say, well, that sounds interesting to me, but if they're not in a position to then affect any sort of acquisition, then it's still helpful and it's wonderful, but it's not necessarily yeah.

[18:03] Richard C. Howard: Because we're really looking at we're not talking about if we were talking about security again, we'll just kind of stick with that. We're not necessarily talking about the user of that security application. If it's an airmen or a captain in a flight squadron that happens to be using the tool, that's not probably going to fly. Right. What we're really looking for is someone in an acquisitions agency, like a program manager, maybe a contracting officer, that will probably be the PM, possibly a requirements person. So it could be someone not in the acquisitions, meaning the acquisitions being the field of putting companies on contract for the government and managing those programs. That's what we call acquisitions, at least in the department of Defense. But it could be a colonel that's in charge of requirements for the flying unit. We talked about earlier, right, that's up there on staff. He could potentially be one of the.

[18:52] Luke Robertson: Signers on this, right? I fear that I actually haven't been terribly clear, like as I discussed this about what do we even mean by why are we talking about like a memo and anything to back up just to touch? Phase one is that market research. Phase two is the adaption of commercial technology to an air force's need or an RND to develop a brilliant idea into a prototype. And in order to get a phase two funding, there needs to be a phase one. There is only the push. It's basically you as the company saying, hey, I think this is a value. Let me articulate what the value is. Phase two requires a push and a poll. So phase two requires that government organization or user or somebody within it to say we need this. And then that organization will then sign a memorandum of understanding, not with the contractor, not with the company that wants to build it, but with the air force support program saying, this technology will benefit my organization's mission. And whoever signs that memo needs to be somebody who has some level of authority, program manager, program managers, folks on staff, absolutely great. Doesn't necessarily have to be. So the way that the air force breaks it down is there is a customer and an end user. And usually an end user would be like maybe a squadron commander, perhaps somebody who is down in that unit level, not necessarily like the tech sergeant, but it could be. It could be. And then the customer would be in.

[20:46] Richard C. Howard: Fact, everything I just said. Okay, so I thought it had to be someone a little bit higher up in the food chain. But you're saying even an end user like that text argent might be able to sign off on something like this.

[20:57] Luke Robertson: The higher the rank and the more the authority that somebody has, the more likely the more weight that signature carries. Although for a phase two, there are no specific restrictions to who can sign. It just goes to show to just.

[21:11] Richard C. Howard: How much detail is involved in this because these are constantly changing the SBIR program and the requirements. And so I learned something new every day as we move through this. So that's interesting.

[21:22] Luke Robertson: What you just described in terms of who needs to be signing is kind of there's a phase two B, a supplemental funding program in which as a phase two RND program moves along nicely, then the government will pile on and say, hey, we're going to double down on this. This is really working out well. And that one requires the specific GS 15 or six above to sign off. But just a phase two MOU, usually the end user will be like maybe a squadron commander, and then the customer will be somebody who is closer to a position that they can scale the solution across the organization so that's when you're looking at somebody at staff or PEO, once again not required. So it is still possible to have in fact, I recently saw a successful phase two with two squadron commanders, a communications squadron commander and a maintenance squadron commander, and both at the same base. Neither one has the authority to expand the solution across the entire Air Force. But the Air Force saw the value of the technology and said, hey, we see that this is something that's worth funding. And then they did.

[22:35] Richard C. Howard: That's amazing, too, because one of the biggest challenges for a lot of businesses is figuring out who to talk to because a lot of times they'll be talking to somebody in the army or the Air Force or one of the other government agencies that maybe could use their solution but has no authority to make a purchase, right? And so they're like, hey, I just talked to this army colonel, and this is a real example. They brought a solution. This army colonel who he was running an operational unit. He was not never going to authorize a $20 million purchase for the army. Right. Just wasn't his job. It wasn't his responsibility. The army knows about this, and I'm just waiting for the sale to come in like, well, you're going to be waiting a long time because that army colonel said it's a good idea.

[23:19] Luke Robertson: And it is.

[23:20] Richard C. Howard: But you got to picture it as thousands of offices within the army and none of them talk to each other, and only a few of them have that authority to purchase. Right? So what's interesting about this is what you're saying, hey, with this program, we can actually find a user that thinks this is a good idea and they could sponsor it. It just makes it a little bit easier to go in and have a solution authorized by the government to start working on. Let's pivot and just talk a little bit about I don't want to spend too much time on it, but phase two, right, so phase one, we've won. We found either a user or an acquirer to sponsor the program. We submit the application, which is a little bit more in depth for the phase two. And then what happens then?

[24:07] Luke Robertson: So phase two usually have about a year, 18 months. It depends on the, the specific organization like period of performance, generally around a year to year and a half. So phase two are pretty significant contracts. They also get funded in the same timeline as the phase one. So a few months after the submission goes in, an Air Force Contracting Officer reaches out and says, congratulations, you've been selected. Let's go ahead and put this thing under contract.

[24:41] Richard C. Howard: Hey.

[24:41] Richard C. Howard: So back with Ricky here. And Luke is extremely knowledgeable about this process, of course. And if you want to learn a little bit more about SBIR, about how to sell to the government, you want to head over to Dodcontract.com. We have some amazing opportunities there for you to work with us and to learn at a pace that makes sense for you, how to actually sell products and services to the government and how to win SBIR contracts. There are not a lot of resources out there that lay it out for you step by step from people that have actually done it right. So head over there if you want to learn more. Now if you're thinking to yourself, hey, I've never sold to the military. I don't have any relationships, I've never done anything with the government at all, then Brian is really a good case study for you. He is who we are. Bryan Stream, he's the one we listened to at the very beginning of the podcast. Now he's going to give you a couple of minutes on just some of the things that he learned working with the military. He had no prior government experience. He had never actually talked to a military officer before applying for the civil program and going out and winning one after the other after the other. He did an amazing job networking and doing some of that work. So listen to Brian. He can talk a lot about what the process looks like and make sure to check out his episode. So here is a Brian, people in.

[26:01] Speaker A: Uniform who are trying to help you, who are vouching for you, they don't want to look like an idiot to you. A lot of times they feel this was like a Michael. A lot of times the Majors who are kind of like the Vouchers or the Colonels who are kind of like, we want this, Brian. We're going to do this with you. They feel blessed. They're like, wow, I'm so fortunate that you're giving me the opportunity, the Colonel, the opportunity to go get this million dollars from these other people, which is like, crazy to me, but that's like, sometimes, like, the dynamic, they feel so honored. And because we won a couple of them now, people feel like, I'm like a wizard expert. So they feel like once you get a little credibility, you get more credibility, kind of like build off of that. So we got we got five Phase Two SBIRs, we got an OTA, we got a prime on an IDIQ. And, like, this was kind of part of my I have another very simple rule to sales, which is you can't sell you can't sell **** to people if they don't know you exist. If they know you exist. If they exist, you have a 1% chance, and that's way bigger than 0% if they don't know you exist. So I just kind of let it be known. I reached out to everyone I had. Setting up phone calls, having hour long meetings with a person that may or may not go anywhere is risky, but I feel relationships with people. I got relationships with some people that I met Cold, that I went to their retirement party in Kentucky. Guys, transitioning out of SOCOM. I really worked. The right word is hustled. I hustled really hard.

[27:49] Richard C. Howard: Hey, guys, back with Ricky again. And that was really interesting, listening to Brian and how he won. He ended with hey, he really hustled. I mean, like, he went to someone's retirement party in Kentucky that he met and networked through. He used LinkedIn. He used a lot of different methods to find the right people to sponsor his SBIR packages. It's certainly something we can help you with. But now I want to transition over to Oliver Notewear, who we talked a little bit about at the beginning. And again, he has a full podcast episode here in the Vault. You know, Oliver won multiple SBIRS, and he also used them because once you're a Phase Two graduate, you can use them to help win direct purchasing from the government or sole source purchasing. And you also use this bottoms up approach where he was selling to units. This is very unusual, but SBIR can open up a lot of doors for you, right? You just got to make sure that you are using it the right way. So without further ado, let's listen to Oliver.

[28:50] Oliver Notewear: Phase One was basically Afwerk saying, great, you have this commercially available solution. Here's a little bit of money. Go do customer discovery in the Air Force. And so I think we went to six or seven different bases, and it was sort of classic business development. You talk to a bunch of people, and out of ten people you talk to, maybe one's interested, and they become your champion, and then they connect you with other people who are interested, and you just pull the thread and see where it goes. And after going to a handful of bases, we met some folks who said, hey, look, we know this isn't ready for prime-time yet, but we like the direction it's heading. We like your mentality. We see the future. We're on board. And that led to us applying for and then receiving a Phase Two contract.

[29:32] Richard C. Howard: Got you. So the phase one, usually we. Don't have to get into what you guys were paid, but typically a phase one, like you said, it's a small amount of money. It's usually under a couple of hundred grand where you might have a white paper or something or some type of report that's due. But like you said, typically you're going out and you're kind of looking for a customer, right? Looking for, hey, if there's somebody in the government where this fits their need, and usually app works or whatever organization is going to have an idea that it does or fits within like a mission that they're focused on trying to provide solutions for, then the phase two, that's usually a much larger contract, but you need a government sponsor and that's what you guys found. So everything's a little bit more difficult with the phase two. How did you find that phase two? How did that go for you guys?

[30:19] Oliver Notewear: It went well, all things considered. In the application part or process of the phase two, we said, hey, here's what our existing technology is, here's what we think the warfighter needs based on our conversations with those tactical units, and here's what our proposal is to adapt from commercial to DOD needs that got approved. And then we spent about twelve months working with the schoolhouse down in San Antonio to ensure that we could adapt some of our solutions to their needs. It was a fascinating process. It was just as new to us as it was to a lot of our defense stakeholders because they were, like I said, captains and senior enlisted. This was brand new territory for them and they were really excited, which was great for us. They leaned in. In fact, we had an Airmen come hang out with us at our office in New York for a couple of weeks and the unit let them go.

[31:08] Oliver Notewear: TDY specifically to help us make this transition. It was phenomenal.

[31:13] Richard C. Howard: Yeah, no, that's awesome. And you're right, it's something we focused on a lot in the DOD contract academy where one of your goals, really, if you're trying to sell the government in the State Department of Defense, is making it easy to make a purchase.

[31:29] Richard C. Howard: These were great interviews with both Oliver and Brian and Luke, and you can check all of them out on prior episodes of this podcast. One thing that they all have in common is they are both extremely, all three of them are extremely hard workers and with Brian and Oliver they have amazing solutions. So really just understanding SBIR and actually both of them, it was brand new to both of them when they went after it. And one of them, Brian, never even talked to anyone in the military or the government before. It was his first time doing that. So if you have never sold anything to the government, if you've never thought about it, I guess the point is that you can absolutely do that. It does take work, and you have to understand the process, but you can absolutely win. You can hit Dodcontract.com if you want to learn a little bit more, if you want to go through our training, our coaching program, where we help our students and our clients go through not just SBIR, but selling products and solutions to the government, because the government buys in a lot of different ways. And I would say, whether you want to do that or not, less than 1% of all small businesses ever try to sell to the government or to the US. Military. So there is a customer base here. It's an untapped resource, and they're required to buy from small businesses. So I would check out at least if the government is buying your product or solution. You can go to Dodcontract.com and get some free training on that. You can find out. It literally takes two minutes. You can see if they're buying what you sell, and you can listen to our podcast. It's a free resource to help you kind of navigate the way of selling to the government or selling to the US. Military. We have a lot of free training in here with subject matter experts and small business owners that have done it themselves. So hopefully we've inspired you to at least take a look at it, and hopefully we can help you in some small way start winning those contracts, because it really can be transformative for your business and your wife. So this is Ricky Howard. I'm out. Thank you for listening.

If you enjoyed this episode, you can also check out Teachers Selling to the US Military where we dive deep into the world of government contracts for teachers, coaches and instructors.