Building & selling a product into government is tricky — Phaedra Ellis-Lamkins shares critical advice for getting it right

 I thought an interesting place to start just might be really broadly, um, for you to share maybe some of your, thinking and what you figured out as it relates to building and selling products into government. Um, I'm excited to get to explore this with you, cause I just think there's not, much that's been explained or open sourced around this topic and you've had this really interesting winding path to figure it out at promise.

And so maybe we could just sort of start really broadly kind of what comes to mind when you think about some of the things that you figured out when it comes to early product building and selling into government.

 Yeah. Um, one, I think selling into government is hard. And I think it is especially hard if you don't have respect for the process. And there are two things that I think have been really interesting for us to learn. One is some government is really large, like the federal government and has long-term procurement and is much more difficult.

does tend to be a bit easier to get into. Um, we were lucky as a company, but not obviously as humans during COVID that there was a real crisis of need for support. And so what that meant is that we were able to move much more quickly than if it hadn't been a non COVID time.

So basically during COVID, there was kind of emergency procurement that happened. And, and so that's been really interesting for us as kind of a growth opportunity is to recognize where are there kind of unusual moments that exist that allow you to grow. And then I think what we've learned is that there's different types of procurement, right?

There are sole source, which means you're the only people that do a product. And that sometimes is the highest bar, but in terms of timeline. And, um, then we learned about things like cooperative agreements, which we just had no idea before. So for example, and we did this in partnership with example for the city of Buffalo, which is the water utility where it's a cooperative agreement contract, which means other jurisdictions can use the exact same contract because it's been publicly bid.

And so there's also kind of a lot of specialties and learnings about how to make the system work much more quickly.

When you think about, how, your customers, in this case, local governments think about buying software or solving their problems. What, what have you figured out there are sort of, would you say there's kind of a consistent psychology way of making decisions or a way of seeing the world that you found across these different, um, local municipalities.

and one thing that's been interesting for us, that's pretty consistent is it's scary for someone to be the first. And so a lot of folks are waiting for something to be tried and tested. Every government official. We meet talks about the fear of two things, one a startup, for example, that people used. I don't know if you remember for voting right where you set up this new startup, the voting is often like you're on the front cover of every national news.

And so there's that fear in general about startups. And then the second fear is kind of the, there was a large networking contract in California where people are going to jail for kind of handling procurement poorly. And so what we have found is that there's that common fear, which means then you do have to address the fear of like, how are we making sure that the procurement is done in a way that is, um, as quick as possible, but also meet the standards where people feel comfortable.

And, and so we have seen that consistently. The other thing that we've seen consistently is a real challenge with it in some places. And, um, it's because, you know, a lot of the systems that government uses tend to be very predictable. It tends to be Oracle or, you know, large systems that don't have a lot of changes.

And so figuring out how to make our software as easy to use and as, um, uh, making it not complicated at all has been really, really important because we found people want innovation, but they want innovation without risk, which is the opposite. Sometimes we think about it in the private sector, which is the greatest risk has the greatest rewards.

And so we spend a lot of time thinking about how to de-risk our software, because we find consistently that most folks in government, you know, worry about risk much more than actually the private sector does.

 So maybe to pull on that thread a little bit, that sort of insight is interesting to sort of de-risk or de-risk on their behalf or simplify things? What, what does that actually look like for you? What are some examples of how you've leveraged that insight in building promise?

 Yeah. And so, uh, one, it would be just example of like doing a cooperative agreement, right? Realizing that how do we make it so that you don't have to even think about the language? You don't have to think about, you know, the terms because you're following someone else. So if there is a risk, it's the person that you're following.

Right. Which makes it shared. So now it's no longer just individual risk. And the more people that go into that contract, the, the, the less, the risk is so. One thing we've learned is just how do we create conditions that make it as little risk as possible? Um, the thing we did wrong, which we really learned through mostly error, which I could say it was trial and error is, you know, like we, we, when we were doing integrations, we looked at models and we're like, oh, we're going to do these.

Like, we're going to make this, whatever you want it, we're going to work with your systems. We're going to, you know, which are both costs are very expensive and become centers of cost. And actually then assume that the other, your partner in government, in this case are able to handle that level of customization.

And so we thought, you know, what, what actually seemed really compelling, right? If that's what I want, right. As a company, when, when I, my favorite part of startups is like, I'm going to get the best service they're going to do whatever we want. We're going to give them product fees. And what we realized is most of our clients didn't want that they wanted standard.

They wanted consistent, they wanted stable. Now we have, you know, incredible repayment rates and, and other things that, that make it worth it. Um, we also had to learn how to subcontract, right? It's much easier for government if you already, um, if they already have a contract with someone for us, just to, you know, go under that contract instead of creating a whole new contract with you.

And so thinking about national partners that we are working with has been really critical. So, just trying to make it as easy as possible, both on the application and, um, in terms of how you get it. And, you know, the thing that I, you know, we observed as like most places care deeply, deeply about customer service.

And what we realized is in government, sometimes it's more about stability and predictability. Um, than it is ju you know, about the way that I might normally think, like I am obsessed about the customer experience. I want every person to feel touched, heard, seen. And, you know, when you want to write beautiful reviews about our experience, that isn't necessarily the bar.

And so I thought about it, even if you ever look at like a website by a government tech company, and I'd say like, oh gosh, why is this? And I realized, like, we didn't have to add everything we didn't need to when we needed it to when it really specific things for growth. And, um, and then we could think about which things we could overall change the conditions, but we weren't going to congeal the conditions of which government works at every level, every piece of beautiful software changing the way that they work, changing the way that they there's no longer punitive for people.

Like all of those things could not happen at one time.

 can you give the example of, one of these partnerships that leverages this idea of, subcontractors?

Yeah. So one is just before the approval of a large, one of the largest, largest 10 cities in the country. And, and so that is working with an large partner and, um, uh, a large public company. And, um, we are working under that large public company who handles this is in transportation and it's going to allow, um, payment plans for, uh, parking in a large city.

 And so the city says, Hey, which is public. You know, city says, Hey, we want to do this project. And in this case, it happened at a city council meeting. And then, um, the government agency says, you know, we would love to do this, but we can't offer it right away. We would love if you could work with the large contractor, this contract's worth, uh, hundreds of millions of dollars a year for the large.

And, um, the large contractor in us, it took a year just for a sense, because these large contracts sometimes are even more difficult than government. And, um, it took a year, so we just got a finalized agreement with them. And now the scope of work is before the large city. And then what's great about it is we do that.

And then we think about partnership, not just in that city, but then you're able to think about partnership in multiple jurisdictions. Um, another example might be that one was really guided by the city, wanting it to happen. Another example might be, um, a company that's a private company that we're working with right now, um, where we're looking at, um, 60 jurisdictions.

So for us, it's an incredible opportunity. They do payments, um, and, um, you know, it's an ability for them to be able to offer an additional service to their clients and it's an ability for us to grow. And so I think the partnerships for us will be an incredible part of growth for our future.

 So I want to come back to some of the things we were just talking about, but I first want to zoom out and something we didn't sort of kick off talking about is how have you approached figuring out who to target, what at what the right level is, what state and or local municipality who inside of those government organizations has the power to, to sort of potentially adopt your software?

Like what what's been the overarching strategy in, in terms of the who to go after.

 um, one, I appreciate we're doing this because the number one question I get from other entrepreneurs is how do we do this? And I'm going to send the link to this

 right. I was like, I'm going to be like, every question you just asked me. Um, so for us, you know, we had to make a decision about time.

Like, do you, do you want, did we want to grow very quickly? Or did we want to have large contracts? And because of COVID, there was a clear crisis in this case because people were, you know, access to Y. Access to food, access to housing we're being limited. And so we wanted to make sure make it as easy as possible.

So for us, local governments made more sense. The crisis was there. The impact was there and we knew that people were moving more quickly. Um, and so we decided, um, local contracts made the most sense because we thought we could grow more rapidly instead of, um, state and federal. And we thought if we started with the local contracts, we proved who we were, that then we would more easily be able to move to state and federal government.

So that's where for us, it was decided. The second thing I think that we did that worked well, which we did wrong before. Again, really through error is at first we tried to sell as like new entrepreneurs and we didn't have people from government that people recognized. and so we actually hired someone who'd been the number two at a large public water utility.

And she is the best sales person, because she knows who to find. She believes in our product. So she doesn't think of herself as a salesperson. She believes in what we're doing. And for example, once user groups, we're having a user group, cause she's like, oh, I want everyone to grow and be able to communicate.

And so for us, it was not just where we thought made them a sense, but where we could move most quickly. And then who I think, figuring out the who from a sales strategy. And so for us, well-respected leaders works really well. We try to hire kind of people who had done traditional sales to government before, and it just didn't work well.

And, but having someone who had seen the problem understood the problem and believed our product was the best solution was the way for us to sell. So we, we chose local governments for growth. We realized if we hired folks who knew people, we could move much more quickly. And now once the product's in the market, it's, it's much easier and we're beginning to hire kind of traditional salespeople, but that's how we got into the market.

And we're just now going into state and federal.

 And so you started by hiring one or two people full time that sort of had a set of relationships.

 Yeah, we, we hired both. We tried an enterprise person. Who'd been, who'd done enterprise sales to government, and we tried someone who had been in government and never done sales before. And the never done sales before is the number one sales person in our company by tenfold.

 that's, that's such an interesting insight. And then that person called started by calling on the people that they knew from career. And that sort of basically the sorting of which local municipality to go after.

 Yeah. and I think it's, you're really using that person's credibility. So figuring out who is credible, and I think people do this a lot in military sales. That's what we learned is you hired the general who used to be in government. Right? I just, we hadn't seen that model. And, but, but once we did it, I was like, oh, of course, this makes sense.

And this is why people have boards that come out of, you know, come out of government that then sit on their boards. And, um, and so for us, yeah. But, but I thought, oh, we're, you know, those folks won't know how to sell as well. I think over time, our model is really going to be that person with an account exact right. you have an AAE with the person who has deep relationships. That's probably the right model for us. Um, but you definitely need the person with relationships. Otherwise, your, you know, you're just, you're starting from scratch, right? It's not just the product you're trying to make them trust you. It's, it's a lot more difficult.

 and do you think you could start out having that person be an advisor or part-time or to get going? You need a, you need to recruit one of these people to be in the seat. Full-time.

 I think it wouldn't have worked for us as an advisor, but it doesn't mean it might not work for someone else. I think because our contracts are not large contracts, so you need to get volume and also it still takes. So even as I think about our revenue, like we've booked a lot of revenue, we booked in the tens of millions, but we haven't made in the tens of millions because it takes a long to get a contract. And then from getting the contract to actually then executing the contract. And so in advisor just means less firepower. And, um, so I think they're, they're helpful, but probably it wouldn't have been the right model for us.

Um, but certainly would understand why it might work for someone else.

So what is a great first meeting look like? When you're first sort of reaching out, you get a meeting, maybe this individual sort of driving it, and maybe in the early days you were there, what is the architecture of that meeting look like? And maybe how has that evolved as you've been building promise?

 Yeah, I think what's changed is we used to think of good meeting was where someone said, oh my gosh, this is the best I want to use it. And now we know that not is not necessarily the best meeting, unless the person who's executing it is the right person. And so oftentimes we would meet, we would think, oh, we want to meet the head of something.

And then you meet the head of, and they're like, this is great. And then you meet with their team and they're, and they're just like one more idea that we're just going to outlive you longer than the person who told you to do it. And, um, so now we're much more thoughtful about who we need as really the people who are for us.

We think of them as levels. We want levels of commitment. And so we're really looking for people who are committed and the closer to the execution that the person is, the better off it is for us. And so a good first meeting. Now we know as let's say customer service or a CFO or someone who's going to use our software, we want that person to fall in love with us.

And so a good meeting looks like the person who's going to have to manage it, actually falling in love with the product and then seeing the value and making their work better because it, what we've discovered is it isn't in government, just like something is good. It has to be something good that also saves time and saves energy.

And I think in traditional SAS software, one would assume like when someone buys the software, you're doing that because you know, those things, I think what's different in government is sometimes software. Hasn't been great for government and people don't build beautiful and easy to use software.

And so there is not the same assumption that software will make their world better. And so we have to figure out how to demonstrate, not just the overall value, but specifically. So when we think about this in a place like the county of Marin, we do payments for. And, um, what we've discovered is they're the, like, which seems so insane to me, but the people who work with them before they have, software that you make payments for courts, but they don't even recognize the person.

So like you go in to make a payment. So if you say, Hey bro, I'm here, I'm making a payment. You can just put how much, so you could be paying the wrong department, you could be paying the wrong amount. And, and so just by being able to, for us say, Hey, we're going to start recognizing people so that we're going to make sure how much the person knows, whether it's the right person.

Like that's a transformative difference for the accounting department there because they were doing individual interactions with every email. And so you have these smart, capable, the woman who runs the financial services is so smart and amazing and, and we were able to make the system better.

And so I think we could have sold the software, like, oh, we have Venmo cash. Or we could sell it as now. Every person is not going to get an email. The counting department, every time someone makes a payment and hand have to do that. And the person who is a citizen is going to be able to make the payment and not pay the wrong amount, pay the wrong department.

And so there's just some things I think we've learned as a team that are much more compelling for folks, which is it makes my life better.

 So on that point, let's say, I want to come back to this idea of levels of commitment, but in, the person in Marin, um, w what does that translate into a first meeting? You sit down, maybe in this case it was on zoom or whatever else, how do you run that meeting? Like, what is, are you doing needs finding, are you immediately selling the time-savings and ease of use value prop?

 Yeah. Well, one we're pretty lucky that there was a case study done on our work that documents a 93% repayment rate with people were already. And so I think having, having an outside source of that people trust saying, Hey, this works means that we don't have to convince people that it works. And so, so that's been helpful.

And I think also because other governments sell best to other governments, way much better than I think we as an individual ever would do. And so for us, it's really kind of allowing that process. And then we think through, um, we're less likely to just say, you know, like I used to run revenue team and for a private sector that does, uh, home care and needs, you know, like we, I would tell the team, listen, like?

What are their issues? We, we don't do the sales discovery in the same way here because sometimes people don't know what the issues are. Right. So many of our meetings when we meet with someone, they don't know what their repayment rate is. They're not sure they think they have a payment plan, but they don't know.

And they don't know how broken. So we always try to get that information ahead of time. But usually what we are trying to do is just get that person to commit, to going to get the information. So our first sales meeting is usually the discovery of what the problem is. Not in a way of, as though the person can articulate it, but helping coach that person through how do they find out what the issues are?

Because most people, you know, we do installment plans for folks, and most people have a payment plan, but what happens is because most software doesn't include payment plans. It means that the team runs it manually. So if I'm not the person who's executing, I don't know that. So I'm just like, oh, we have payment plans.

So we have to say, oh great. How many people on them? What's the repayment rate. And 90% of the time someone says to us, you know what? I don't know, let me get back. Um, now it has started to shift a bit as there's been success, right? Because then people are going, wait, you're in Louisville where we had a cute study, done.

People go wait you've bought millions of dollars. And I would say we did pricing wrong in the beginning. Right. We charged way too little for what the return was. Um, but we do much more kind of, I would say education before we do discovery. And in a way I would highly tell people not to do, if you were doing home care sales,

you mentioned this a little bit in terms of why a given person inside of a government wants to acquire, procure a piece of software. Um, but maybe you could kind of expand on kind of what you've noticed in a little bit more detail, meaning. Is it generally cost savings? Is it TA cost and or time savings?

 Is it potential to increase revenue? Is it potential to create a better citizen experience? Is it some mix of that? Is it similar across municipality? Like what sort of comes to mind for you in that area?

 Yeah, it's not consistent. That's what we've learned. And it isn't like, you know, in my other jobs I could say, okay, I got it. Here are the three reasons. And then let's prepare responses and here's what we see. Um, it's really different. And so for some people, it is a values judgment. I think that people should be able to have their water bills paid.

if you're poor, you shouldn't have to pay interest and we should get you a. Cost savings as quickly as possible on every program you qualify for it. We should do, and we should make the experience as good as possible. So some people find us and I think this is a lot of the initial folks values-based okay, this is the way we should handle it.

 We shouldn't charge people who are struggling, um, high interest rates and we shouldn't, we shouldn't have a punitive system. And I think the, the reality is COVID made people believe there were a deserving poor, which, which is counter intuitive for me. And somewhat, I felt a violent reaction to, but I think that it made people say like, oh, this isn't someone's fault.

And so people were much more generous in the, their assumptions of programs in a way I've not experienced. And so, so we saw a lot of growth where people are like, oh, um, you know, Louisville, the one that did the case study, 40% of people were behind, I think, in water bills. And so that's a large amount of people, right?

It's a system. Can't handle it in some way. And so, um, that really is the values places. Then we have some complete opposite, which is a large city, um, where we met with, you know, someone who ran parking and he said, I wish we could boot people the day they miss a payment. And so you have extremes, right? And then we have probably most folks fall in the middle, which is they want to do a better experience.

They want it to be good, but they want to make sure it makes sense for them. But there is, there is not a common, we haven't hit the commonality yet of this is what everyone agrees.

 got it. And so does that mean that you, you start with a lot of needs finding when you're engaging one of these local governments to figure out kind of, okay. This, they tend to care about this. Shape our value prop around that specific dimension that they care about.

 Less so than if we were doing something else because we have to make the case for our rules. So for example, a lot of people have punitive systems, right? You miss a payment, you have a consequence, you lose your driver's license, you get your water, shut off, you get your electric shut off. And so the most important thing we can do is help people understand why those rules are wrong.

So we can't do, we can't let there be a lot of customization because if we do a lot of like, what's your needs, then someone says, oh, I want to do it this way. And I think at the beginning we thought that was right. Right. You know, like help understand what their problems are. But then we now have to instead convince people of our solutions more than we can just hear their specific problems.

Cause we don't want to modify. And our big problem becomes, you know, if people want to modify, like I want to use your software, but for example, if people don't, um, pay on the day, it's due, I want to cut off their. And for us as an example, we don't want to do that because we know that, you know, almost 80% of people, if you give them two more weeks, we'll make that payment.

So we find term works better than like the monthly assumptions or the payment dates. And so we can't have the same level of, you know, kind of just like, what are your problems? Let me just better understand that me. Here's how the solves, what we just have to do is say, here are the things we can solve for, and for the first time where like, we may not be able to do that.

Because for example, if you're someone who wants to boot people, the day that they get shut off, we know we're going to have problems because we want to give people as much flexibility as possible, because I can show you data that you're going to actually receive more back. But I think the product response, like as we think about.

what works for our product, we can't be in these relationships where it's very punitive.

Cause I think the reason people answer our phone calls respond to our text messages is because it isn't a punitive system.

 So that's really interesting because it, it, to your point, it's kind of the opposite of, of modern enterprise sales, which begins with understanding what are the problems that the customer has and then how the solution maps. And so on this point about educating a customer, is there anything you've figured out about how to do that?

Well, it seems like one approach is bringing a lot of data or case studies that this smart other city did this and look at the success that they had. But I would assume that a lot of the people that you're spending time with have been doing something a certain way for a very, very long time and educating someone, getting someone to change their mind, getting someone to try something new in a local government context seems exceptionally difficult.

And so anything that that's really worked or that you figured out specifically around educating and teaching people about kind of a new way forward.

 Yeah. Data actually has been really helpful for us in a way we never, I've never used Salesforce. I never used data in sales before. At least in that first meeting, because when I was, you know, building a sales team before I would say we had a 90 10 rule and I would say, you should listen, um, 90% of the time, and you should only speak 10% of the time.

It's all about like he letting someone say, here's my problem. And then at the end, you're, oh God, here's how our solution works to your problem. Now it's really different. Now we think about, we want you to understand what our product does and then you need to make a decision. Does it make sense for you?

And I want to discover what your issues are, but like, I know now what we can solve for is repayment, rates, customer experience. I can't solve for, if you really want to boot people, like, you know, like there's just certain things we can't do. And I think it sets us up for failure and it's not a business that I think we can scale. so for example, now we've learned if someone says that they're probably not right for us, they're probably a year out and we want to keep cultivating them, but we need to have even more data where we say the reason we can't do the five things that you've already done, that you, wanted. Is because it doesn't work well.

And so we, we are, are even having that conversation with a current client, right. Where they want to be a bit more punitive. And we just said like it here, now I can say to them, this is what it costs you to do that rule because here are the people on a program here that people are not, you've lost 24%. you know, you've gotten 24% more income from being able to do it our way. And I think maybe for clarity, for us as a software company, what we think is really important is we fundamentally believe people are structurally poor and they are not making the decision to not pay. They are struggling to pay.

And so our obligation is then to create systems that allow people to pay, because we think people don't want to lose her driver's license. They don't want to go lose their water. They don't want to not have power. So if you believe that the system is it's supposed to then figure out how do you create flexibility and how do you recognize repayment?

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Phaedra Ellis-Lamkins is the co-founder and CEO of Promise, a modern government payment solution. She shares her advice for other founders building a product for government — from dealing with long sales cycles, hiring folks with industry expertise, and pivoting with purpose.

Advice for building & selling a product into government

Phaedra Ellis-Lamkins, co-founder and CEO of Promise, shares her advice for other founders building a product for government — from dealing with long sales cycles, hiring folks with industry expertise, and pivoting with purpose.