So, You Want to Sell into Federal?

There is a funny-but-too-true joke in federal software sales — you want to be the third VP of federal sales. The first VP educates the management team and builds the necessary infrastructure, the second VP educates the market and builds sales pipeline, and the third VP closes the deals and gets paid.

This joke seems to hit close to home to many successful VPs of Federal, especially those that have decades of experience. Many have seen this in a growing company they’ve worked at, or they’ve seen it happen with friends.

I haven’t been a VP of federal sales in my career, but I help Insight-backed companies enter and grow in the public sector, and I recruit and work with an outstanding group of VPs of Federal across many Insight-backed companies. Here’s the top five tips I’ve learned from them:

1. Federal is a Team Sport

CEOs and Chief Revenue Officers (CROs) sometimes tell me that they just want to put an account executive focused on the federal market for a year and see how it goes. I tell them that’s often a recipe for frustration — on both sides. Management can get frustrated with little or no revenue, and the account executive doesn’t make any money. The CEO and CRO aren’t sure if the lack of progress is due to 1) poor performance from the account executive, 2) lack of product fit with the market, or 3) bad luck.

The CEO or CRO will tell me that they want to learn from a single account executive in market, but they often don’t put the processes in place to make the account executive successful from a market and customer discovery standpoint.

It depends on the sales motion (solution-selling versus higher-volume transactions), the average sales price, the maturity of the product category, and the urgency of the customer need, but generally an enterprise software company will need 3–5 people to enter the federal market. That team could include, for example, a couple account executives, a sales engineer, a channels and business development person, and an experienced sales leader. In some companies, you might also have internal sales/business development representatives also on the initial team. Usually, federal market entry needs marketing budget, but starter teams often do not have a full-time federal marketing person.

Perhaps just as important, Federal is a team sport inside a company. The CEO, CRO, and VP Sales North America all need to be committed to the territory for the long term. The Chief Product Officer and the VP Engineering need to be supportive of security and other product requirements that come from federal customers, recognizing that some of them will be necessary for the federal team to compete. The Chief Marketing Officer needs to be supportive of helping develop federal sales and marketing collateral, websites, event marketing, and lead generation efforts that are particular to this unique market. The General Counsel, Head of Channels, and Head of Sales Operations all need to be cognizant of the government terms and conditions required to be part of necessary contract vehicles, without which the new Federal team will have very restricted avenues to market. The CFO and the Board of Directors need to recognize that although the federal market is large, serving it will have a longer and more expensive sales cycle, which will impact the corporate metrics around sales effectiveness and efficiency.

In summary: there must be buy-in from the whole team to provide a real chance for success in this market.

2. Recruit experienced people

It’s easy in federal to waste time. It’s too easy to spend too much time with federal system integrators before you have the resources to truly support those conversations. It’s too easy to respond to RFPs and RFQs that are designed for an incumbent, and the federal agency doesn’t really intend to switch vendors. It’s possible to spend too a lot of time talking with federal technical and mission executives who don’t have budget.

That’s why I’m a proponent of hiring experienced VPs of Federal, who have experienced growing a federal practice from scratch. That’s a different experience from the experience of managing a sizable federal practice — also a valuable set of experiences and relationships. In some cases, a VP Federal will have had both experiences, just as some start-up executives also have had big company executive experience.

An experienced VP of Federal will have existing relationships with the complex federal sales ecosystem (distributors, value-added resellers, and federal system integrators). An experienced VP of Federal will have experience hiring and managing federal sales, marketing, channel, and business development employees. They will have a strong network of other federal VPs and are able to back-channel quickly on candidates they are considering hiring.

Yes, an experienced VP of Federal will be expensive, and there are even specialized recruiters that help companies find and recruit them. They are worthwhile investments, because the right VP of Federal is key to a multi-year investment in the territory.

I’ve also seen companies successfully groom an existing sales executive to become the VP of Federal — I’m not saying it can’t be done. No one is born a VP of Federal Sales. The advantage is that approach is that person knows the company executives, culture, and product — usually down cold. They have a track record of success. But the challenge is the learning curve is so steep — and thus it takes a quick learner (and some good timing) to make it work. I’d strongly recommend hiring an experienced VP Federal.

This advice also holds true for the people that report to a VP Federal. Yes, an experienced business development employee who worked at the federal system integrator will be more expensive, but she or he should understand the integrators, how they think, and how a fast-growing software company can best engage with them.

3. Invest in the “full stack”

Building a federal practice is more than just investing in federal account executives. It requires sales, sales engineering, sales operations, business development, channel management, field marketing, product marketing, customer success, product, engineering, legal, and executive management.

Part of the challenge is that the rest of the company — especially outside sales organizations — may be less sympathetic to federal requirements, at least initially. The marketing department might wonder about the specialized vendors in the federal ecosystem and wonder about the ROI of federal-specific marketing investments. The legal department might initially balk at the terms of the federal government or the terms of a distributor that sells to the federal government. The sales operations group might set up processes that don’t work for the federal team. These issues are completely understandable — and solvable, if management views the federal territory as a “full stack” territory.

This friction can be especially acute with product and engineering. For most commercial software organizations, the engineering team has a process for considering new product features, including from sales teams in the field. What they might not realize, however, is that sometimes those coming from the federal team are table stakes for the federal team to compete and win business.

Where does FedRAMP fit into this? FedRAMP is the federal cloud security certification, and one of several certifications that companies seek (others include Common Criteria, agency Approved Product Lists, Certificate of Networthiness, FIPs, etc.) My advice is to let federal customers guide the conversation on FedRAMP — and other federal-specific certifications and requirements, for that matter. It would be prohibitively expensive and take years to get every federal certification before entering the market — so it will be an ongoing conversation with prospective and existing customers about which ones to pursue, and along what timeline.

I’d also highly recommend using an experienced federal distributor (e.g. Carahsoft, Immix, or DLT), as the part of a broader channel strategy. An experienced distributor will hold federal paperwork on behalf of a software vendor, have a network of value-added resellers, have access to a variety of federal contract schedules, and even bring additional marketing and inside sales support.

4. Urgency and Patience

The federal market is a bit of a paradox. For traditional enterprise software companies, it requires a multi-year commitment, often without seeing much revenue in the early years. And yet the customers can be large and less likely to churn. So it requires patience from the executive management team.

And yet, a federal sales team needs to have a pioneering spirit, and be relentless in their qualification of opportunities, so they can appropriately focus their precious time. They need to have the energy and passion that educates the market, the knowledge to build the business and technical case, the savviness to understand (and help advocate for) budget, and the detail-orientation to get through the federal contracting process.

For management, it’s not enough to look at new revenue as a metric of success, or even just sales pipeline. It’s the quality, stage, and long-term potential of the sales pipeline that also matters — all the more reason why I’d recommend hiring an experienced VP of Federal to lead the team.

How patient should a management team be? It depends, in part, on market maturity. There is a faster rate of payback and a lower investment risk to building a federal practice when a company has a strong product (e.g. already in the Gartner Magic Quadrant) in a relatively mature technology category where buyers are already educated on the “what” and the “why.” If your prospective buyer has prioritized your technology category and already has an existing budget for that capability — you’ve compressed your sales process and decreased risk.

Conversely, the less defined a market area, the higher the risk of slow Federal adoption, and the more potential investment required. Educating federal buyers can take 18–24 months or longer, and high-performance sales professionals aren’t interested in sticking around if they aren’t doing well. As a result, too often in nascent market categories, a company will experience federal account executive churn. Even if a company is compensating individual contributors on business development plans, annual sales talent churn is a real risk, at least until the category matures into a prioritized and funded category.

5. The power of focus

The federal market is big. It’s $90B per year of federal IT spend, and it spans hundreds of agencies, with locations around the globe, employing 4 million people, including uniformed military and reserve. The federal market is certainly not a single enterprise, and the cabinet departments aren’t single enterprises either — at least in terms of a sales and marketing motion. The federal civilian, defense, and intelligence communities have different cultures, speak different lingo, and in some cases even have different rules and laws.

And yet, even a small team needs to focus on areas of the government that are most likely to turn into business in the near term, as well as turn into substantial revenue over time. That’s why I’d suggest focusing on agencies in the larger cabinet departments, especially those that have a reputation of being more tech-forward than their sister agencies. It depends on the DNA of the company, but usually it’s easier for commercial software companies to focus initially on federal civilian agencies, and then add a focus on defense and intelligence agencies over time. Put simply: don’t boil the ocean and focus where the need is the most acute.

I’m a big advocate of government taking advantage of modern software, like the companies that Insight invests in. I’m excited about the continued bipartisan IT modernization efforts, which include a push to simplify and streamline the process of how government buys software, and a focus on using Software-as-a-service. But the federal government has a lot of existing rules, processes, and culture about how it researches, tries, and buys software — and software companies need to deal with the existing system, not just a future state we are working towards.

If we are going to build a government with exceptional customer and employee experiences, that delivers on missions to secure and protect the country, and invests in the future, then fast-growing venture-backed companies are an important enabler of that vision. I’m proud to work with the Insight portfolio as they strive to enter and grow in the federal and other government markets — serving government customers, who are in turn serving the American people.