Investors and Government Contracting

June 29, 2020

by a searcher from Thomas A. Edison State College in Cincinnati, OH, USA

I am looking at a company that I believe has tremendous upside potential as a government contractor. The strategy would be receiving my SBA 8(a) certification and leverage my relationships to partner with larger government contractors in the industry. Given that strategy, there are rules around investors and the amount of equity I can offer.

I'm wondering if any investors have experience with these types of opportunities. Did you invest? Why or why not? What would have made the deal more attractive to you if you chose not to invest?

Reply by a searcher
from Stevens Institute of Technology in New York Metropolitan Area, USA

Micah - I'm not an expert in government contracting but I have worked for multiple construction companies in the government construction space. Set-aside certifications generally require the majority owner (more than 51% shareholder) to oversee daily operations and maintain ownership and control. In the construction space, more than bringing in outside investors, the issue is leverage and how the surety (bonding) company will provide you with a bond program. Your investors have to understand that the bonding company is the first lien holder over the bank and other investors.

Reply by an investor
from University of Pennsylvania in Washington, DC, USA

Belated response but if still looking happen to help. redacted or DM. I'm a serial GovTech entrepreneur with multiple exits in space - happy to chat more. I generally like gov't as a market for search but like all things there are a lot of nuances (depends a lot on sub-market, type of contracting, nature of contracts, etc).

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