Government agencies almost always buy software through channel partners. A “channel partner” is an umbrella term for organizations authorized to work with the federal government. It includes managed service providers (MSPs), systems integrators (SIs), resellers, etc. Open core companies tend to have channel partners/MSPs reaching out more than is usual for an early-stage startup because of high open source software usage in the government. Sometimes it makes sense to focus here, but often it does not.
If you don't have any customers, you should focus on opportunities that are most likely to be your first customers. Federal agencies often don’t make good first customers because of the complex federal procurement process that requires security clearances, certifications, and working with channel partners. Deals can take years to close. This is very risky for startups that need to maintain cash flow. Don’t underestimate how challenging it is.
If you have government agencies using the open source project, and they're proactively reaching out for specific enterprise features (like auditing, support, SSO, etc.), it may make sense to explore these opportunities. In most cases, inbound outreach comes from a channel partner, not the agency itself.
Some open core companies are uniquely positioned to sell to government agencies because their open source version is the only self-hosted provider available making it the only option for government users. Being the only self-hosted provider isn’t a signal to pursue outbound federal sales if there’s no inbound interest. To get the certifications and clearances needed to engage with federal customers you still need a sponsor (could be a customer or partner). If an agency is willing to sponsor you because they need your software that badly, they will likely have a channel partner contact you. Federal customers are great in the long term due to large contract sizes with expansion opportunities and great retention, but being prepared to sell to them and navigating the process is hard.
We do not recommend that Pre-Seed companies pursue outbound federal sales, unqualified (i.e. no existing usage) opportunities, or engage in white-labeling deals.
Engaging with channel partners
Channel partners or MSPs may reach out because they are working with a specific customer with a current need, or because they see some potential future opportunity. A good guideline is if a channel partner contacts you about specific customers, it’s probably an opportunity worth exploring. If they contact you promising broad distribution or a speculative prospect, it’s best to pass for now.
If a channel partner or MSP contacts you, assess each potential deal on a case-by-case basis. Quickly qualify or disqualify the opportunity by finding out if there are existing active open source users and their feature requests. Act according to usage and interest:
Engage
If you have not sold to the government in the past but are being pulled in that direction because there is existing active open source usage and inbound interest, this is a signal to start selling to them. Closing a highly engaged, highly motivated government customer can still take over a year —always maintain a strong non-federal sales pipeline. Don’t pursue a government customer at the expense of more immediate revenue opportunities.
ReadSelling to the Federal Government next.
Don’t engage
When there is no existing usage, a channel partner may try to sell you on the promise of gaining access to government customers with large deal sizes. This can be tempting but it’s often more a distraction than a worthwhile sales opportunity. We strongly recommend against engaging in white-labeling deals.