114. Derek Hoyt, Co-Founder of GovSignals

[SPEAKER_03]: government contracting is an element of risk management and so humans are going to trust themselves implicitly and so for us we realized for us to be successful we have to still let the human operator see and understand what's happening. [SPEAKER_00]: This is all quiet on the second front. [SPEAKER_00]: Podcasts where boring conversations around defense tech and national security come to die. [SPEAKER_00]: Join me, Tyler Sweat, and my second front homies.

[SPEAKER_00]: As we dismantle the mundane and cut through the bureaucratic bullshit to demystify the world of defense tech. [SPEAKER_00]: But be warned, this is not a typical government podcast. [SPEAKER_00]: You ready to get weird? [SPEAKER_01]: What's up everybody?

[SPEAKER_01]: I'm your host Tyler Sweat. [SPEAKER_01]: Welcome to another episode of All Quiet on the second [SPEAKER_01]: We're excited. [SPEAKER_01]: We're going to dig into the, the maybe painful world of proposals, proposals, procurement, all of that today, Derek, COCO founder, Gulf signals, thanks for swinging by one, and I am, you know, someone who's been in this space and is hammered out, you know, hundreds, maybe thousands of proposals at this point. [SPEAKER_01]: I'm pretty pumped to you guys exist and sort of what you're getting after.

[SPEAKER_01]: A Tyler, I appreciate it. [SPEAKER_01]: Thanks for having all the show. [SPEAKER_01]: Yeah, man. [SPEAKER_01]: So I like to open this up with a little bit of kind of like, you know, like the hot ones, right?

[SPEAKER_01]: Who are you? [SPEAKER_01]: What are you working on? [SPEAKER_01]: You know, what are you guys coming up? [SPEAKER_01]: So for the folks out there and listening, you know, give them the ones that run sort of you and what you guys are up to.

[SPEAKER_03]: Sure, I'm happy to. [SPEAKER_03]: I'm so quick back around on myself. [SPEAKER_03]: I'm basically starting my career in a defense intelligence agency as an Intel officer in the field. [SPEAKER_03]: I absolutely loved it.

[SPEAKER_03]: Did it for almost a decade. [SPEAKER_03]: I'm truly a fascinating time to be in the intelligence community and the operation space during that decade. [SPEAKER_03]: And then after that, I was just wanted to kind of go into the civilian sector, so surprise, surprise, natural transition went to Palantir. [SPEAKER_03]: So it was a very natural transition for me, and absolutely loved that time, great group of folks, that cohort that I was a part of was truly something special.

[SPEAKER_03]: And then after that, I was like, you know, software is cool, but I also want to get my hands dirty with some hardware. [SPEAKER_03]: And so then went to ultra electronics and so they developed missile component systems, so like, like, instrumentation and test kits and stuff like that. [SPEAKER_03]: So really get thinking my teeth and hands metaphorically right into, I know we build, you know, space durable EE components for the new hypersonic missile programs and things that were on the [SPEAKER_03]: And so then after that, I was like, this is really fun, and you'll play this space, and then ironically, Amazon Alexa came knocking again, and they had been courting me for some time, and so Made an interesting play and decided to go over there, and the timing was for to it is because this was like, [SPEAKER_03]: right at the start of the rise of like LLM.

[SPEAKER_03]: So this is like 2022. [SPEAKER_03]: And so like actually there adolescence stuff like that and seeing like and actually being part of and part of the process there building these like foundational models. [SPEAKER_03]: And I'll never forget it. [SPEAKER_03]: It was like we were running like doing like I don't know like long long days and just pushing and pushing and like we find [SPEAKER_03]: And so when they finally got to the point, we could put in a very large PDF into the system, and it was able to process all that context.

[SPEAKER_03]: I was like, oh, time out. [SPEAKER_03]: We can finally now build systems, software systems that can support enterprise grade quality requirements. [SPEAKER_03]: And so I literally quit Alexa the next week. [SPEAKER_03]: And I started Gulf signals with the guys.

[SPEAKER_03]: So for co-founders, great crew, we just knew right off the bat, just from my experience and everything else, like this was it. [SPEAKER_03]: And then we started Gulf signals. [SPEAKER_01]: and then for take a one step further, it's unreal, sort of arc and together, everything for, so traycraft in the field to, to pound tier before it was, you know, the household sort of name, bending metal and really interesting sort of hard physics problems at Ultra into Alexa, which is like a household sort of consumer.

[SPEAKER_01]: And then you're like, hey, all right, cool. [SPEAKER_01]: I'm going back full circle and coming back into sort of the fed space. [SPEAKER_01]: So, you know, what was the premise around sort of gov scene as originally? [SPEAKER_01]: That's a great question.

[SPEAKER_03]: I mean, in an essence, like, [SPEAKER_03]: the founding team in our own ways. [SPEAKER_03]: We all live to breathe the pain of government procurement, like from finding an opportunity to even bid on or even to work the ground into shape requirements to lobbying to all of that, to all the way to then actually putting your hands on keyboard and writing a compliant proposal. [SPEAKER_03]: To then even post-award management, like congratulations, you won the contract, but now you got to execute.

[SPEAKER_03]: So like, that's not easy either. [SPEAKER_03]: And so because we've that whole spectrum, we've had that tactical hands-on experience, our thesis that Gov signals was like, let's build the platform that actually can go end to end. [SPEAKER_03]: Everybody claims end to end, but not many people actually understand what it means to go end to end in government contracting where we do. [SPEAKER_03]: And so we're [SPEAKER_03]: is build the software stack that actually it can be used at an enterprise grade to go and and for government contracting.

[SPEAKER_01]: Yeah, and it's, you know, maybe four to it is on a private feature and a bug, right? [SPEAKER_01]: I guess it's one of the more interesting times right now to be to be served in government contracting. [SPEAKER_01]: I think, you know, I'd be really interested. [SPEAKER_01]: I'm going to ask this the right way to just to hear you take not just like the state of procurement because I think procurement is like a little bit of a bookie man to a lot of people like everyone's throw shit at procurement.

[SPEAKER_01]: I get it. [SPEAKER_01]: but you've got an administration that's now sort of like overtly trying to drive outside change, create like real operational leverage and camevilly portfolios. [SPEAKER_01]: But I juxtaposed that with and I don't have the actual data so I'm going to wing this and say a material amount of people [SPEAKER_01]: we're open for business, we want to buy, we're going to do levers, and then the people who are legally certified to do the transactions all vanish.

[SPEAKER_01]: Given sort of all of those changes, like what's your vantage point? [SPEAKER_01]: As you guys are sort of insisting is these like inner of computers across that community. [SPEAKER_03]: Yeah, that's a great question. [SPEAKER_03]: So having, I've personally had [SPEAKER_03]: It's a challenge right now for them.

[SPEAKER_03]: So the requirements to deliver value to the community is real and at speed. [SPEAKER_03]: But the resources, the human labor to push this forward is just no longer there. [SPEAKER_03]: It kind of taking a step back like what is procurement. [SPEAKER_03]: Really at the end of the day, it's currently humans taking unstructured data.

[SPEAKER_03]: making it structured, and then making a decision, like, and that's it, and it's in the to workflow. [SPEAKER_03]: Like, that is procurement. [SPEAKER_03]: And so when you removed all the humans that were the critical decision gatekeepers and the folks that were translating unstructured data to structured data, you've lost a major component of this flywheel. [SPEAKER_03]: And so what we've been hearing, which is for us exciting, especially from a gov signal's perspective, is we want technology to be that new bridge.

[SPEAKER_03]: And so like for us, it's like this sweet spot as like the right time, the right product, and for us, so we're seeing on our end, break growth and also high interest from like the government themselves. [SPEAKER_03]: It's like, hey, we need help to deliver value here because our contracting shops are gutted. [SPEAKER_03]: There might be now three or four folks that used to have like 10, and yet the amount of dollars that are being pushed through or growing, you know, well, like $750 million last year and just contracts and so, and it's not going to get smaller from what we're seeing, but the bottleneck though, the constraint is real.

[SPEAKER_01]: when you sort of look at the two sort of, sort of grossly oversimplified and then take this where you will, you're this, I think I said interlocutor before, but between these really interesting, I think rapidly evolving, relatively speaking, at least constituencies where, you know, we talked a little bit about, [SPEAKER_01]: procurement and then, you know, the executive and sort of the admin on, on driving sort of outsize the impact velocity time to mission all of that.

[SPEAKER_01]: I think for probably the first time in my adult life like defenses cool and it's palatable and like there are why see companies with like different defenses this is where [SPEAKER_01]: I remember if fundraising a decade ago in defense, for other people, like, what do you mean national security? [SPEAKER_01]: And like, there are, and people you could go call. [SPEAKER_01]: What's, what's happened, like, you know, on the other side is you look at the market and sort of the demand to come in.

[SPEAKER_01]: Is it, it feels like our really great time to be laying a track you're laying. [SPEAKER_01]: How are you seeing that demand and excitement? [SPEAKER_01]: And the understanding, too, right? [SPEAKER_01]: And some people, the downside of a bunch of new entrants, [SPEAKER_01]: is there's there's an educational sort of gap and I don't mean that in like a pejorative way, just folks got to kind of live the pain to understand the pain sometimes.

[SPEAKER_03]: No, it's a really good point. [SPEAKER_03]: So I think Asix teensy did a really good job with the American dynamism movement. [SPEAKER_03]: And I think it really started to lay a picture that other people just didn't have in a concrete memo and end-frame work. [SPEAKER_03]: And so like, I even attended a couple of years back like the early like defense venture program and things like that.

[SPEAKER_03]: And so it's really interesting opportunities from VC money and getting into this space. [SPEAKER_03]: However, even just talking with DCs in general, they still struggle to understand this market. [SPEAKER_03]: Because it's not a traditional market that they're used to playing. [SPEAKER_03]: And so I think as we continue to see different cycles, like companies like Palantir have really opened the eyes of like there is the are the possible androids done a good job too, because like when we see them to write deals, right?

[SPEAKER_03]: They're like, [SPEAKER_03]: How can you become a five billion dollar company? [SPEAKER_03]: Like it's no longer a billion dollar company. [SPEAKER_03]: It's how do you get the five? [SPEAKER_01]: So the one thing we're going to have like one of the best performing S&P's be a defense tech.

[SPEAKER_01]: Yeah, exactly. [SPEAKER_01]: Yep. [SPEAKER_01]: Just one of the big old cards. [SPEAKER_01]: That's [SPEAKER_01]: He told me to stop him, but keep doing it, guys.

[SPEAKER_01]: He's a great, for the community, yeah. [SPEAKER_03]: Yes, exactly. [SPEAKER_03]: And it just demonstrates that there is a market here. [SPEAKER_03]: And so for my end, so new entrances are great.

[SPEAKER_03]: There's obviously some education components understanding how these type of this culture works. [SPEAKER_03]: I mean, government contracting, both federal and sled markets are very unique subcultures. [SPEAKER_03]: they have their own vernacular, their own tempo, their own just personality, I guess you would say. [SPEAKER_01]: When you, when you think about, you know, those new entrants or just, you know, the new new companies sort of come to you, what are some of the things, and you can see, you know, either cooperally or is like a founder that you wish they knew, like, you know, if you were able to [SPEAKER_01]: a cabal of like VCs or a cohort of new co-operators coming in like what are two or three things you're like our guests go get smart on A or B it'll bite out a bunch of variability in the future.

[SPEAKER_03]: It's a great question. [SPEAKER_03]: What I have found is that the companies that are most successful with systems like Gov signals, so our highest success clients are the ones that come in with a pre or slash early understanding of the procurement process. [SPEAKER_03]: If you come in and you have an established process, it could be very inefficient, and that's okay, but you at least understand the components that are necessary to get a compliant proposal or the requirements necessary to actually build a capture campaign.

[SPEAKER_03]: These are very unique sets of processes. [SPEAKER_03]: And if you come with a process, we just take that process, wrap it with our system, and then we accelerate it substantially. [SPEAKER_03]: what we find is when folks are too new to the game and they don't understand the space, they come to the platform like ours and they don't know how to wield it. [SPEAKER_03]: It's like jumping into a Ferrari without any training and you're just like, you just crash.

[SPEAKER_03]: Yeah. [SPEAKER_03]: So, and that's where, yeah, it's so far as it's like, [SPEAKER_03]: We are accelerating the folks that have that process, which is why enterprises and larger bin market companies are very excited about our system and like how we approach the automation of a lot of these workflows. [SPEAKER_01]: Yeah. [SPEAKER_01]: It's a taken that, right?

[SPEAKER_01]: The automation of the workflow, you know, it's accelerating productizing but sort of democratizing access so you can take procurement teams that you [SPEAKER_01]: four or two or one, and still arming them. [SPEAKER_01]: You know, we spent a bunch of time talking about sort of the the ISP, the ISP, the new Cows, all that, on the other side of the fence, right? [SPEAKER_01]: How are you seeing receptiveness from the broader, you know, D.O.

W. [SPEAKER_01]: or U.S.G.

[SPEAKER_01]: sort of for humor to you? [SPEAKER_01]: So I think often get sort of this bad name of, oh, they're industrially [SPEAKER_01]: I found them to be the thirst for technology and automation and innovation. [SPEAKER_01]: Are you seeing that too and what are some things you're excited about there? [SPEAKER_03]: Oh, 100%, and for us, it's a very exciting segment for dove signals, so we have a great contract with the Defense Innovation Unit to actually help them modernize their entire project management workflows and all that running the CSO process and things like that, which is absolutely essential, right, for, and this requirement is fits perfectly with what we're seeing in the government side, we didn't have an incumbent system.

[SPEAKER_03]: It was spreadsheets, and it was PDFs. [SPEAKER_03]: So again, unstructured type of data, and then Congress gave them more funding and mandated, okay, get this out the door, but the constraint was never solved. [SPEAKER_03]: And so we came in and we're like, hey, this is why we're working with them to maximize that constraint. [SPEAKER_03]: Let the dollars flow through to the best companies, running your process, but in an accelerated manner, with full auditability.

[SPEAKER_03]: And so we're seeing great excitement interaction over there, coupled with then also continued conversations with other Department of War components that are like, he's contracting shops that did get cuts or that are still doing the land of PDF and Excel. [SPEAKER_03]: And it's like, hey, do you want to automate that? [SPEAKER_03]: And like, we can help you actually the risk, right? [SPEAKER_03]: So at the end of the day, government contracting [SPEAKER_03]: And so humans are going to trust themselves implicitly.

[SPEAKER_03]: And so for us, we realized for us to be successful, supporting both government agencies and contractors, we cannot abstract away the risk management approach. [SPEAKER_03]: We have to still let the human operator see and understand what's happening. [SPEAKER_03]: We just accelerate the stuff that comes around [SPEAKER_01]: I mean, that's super cool. [SPEAKER_01]: As you think about expansion into D.

O.W. [SPEAKER_01]: more D.O.

W. [SPEAKER_01]: and C.S. [SPEAKER_01]: And I mean, even beyond, like, into some of the Fed Cives and the sled, like, we talked about what, you know, to hold up the crystal ball, right?

[SPEAKER_01]: Like, what's it looking like in a few years? [SPEAKER_01]: Like, where would you think about sort of your, [SPEAKER_01]: your North Star that way. [SPEAKER_01]: What's that look like for you guys not not not not that's for any proprietary secret strategy sure sure sure sure. [SPEAKER_03]: Well I can tell you exactly what our core thinking is and it it was actually it was was talking with some generals with the army and this was a couple years back and I was like I said it almost in a state of just and but then it turned pretty serious and I was like [SPEAKER_03]: five minutes for a government agency to identify a requirement and issue a solicitation.

[SPEAKER_03]: And the community to respond and be awarded in five minutes. [SPEAKER_03]: Like, why can't we do this? [SPEAKER_03]: And at first, it was like, oh, a process, policy, and all this stuff. [SPEAKER_03]: And I was like, as we started to dig into this, we're like, hey, wait a minute.

[SPEAKER_03]: This, it can be solved with technology. [SPEAKER_03]: And now with the advent of these high quality foundational models with a solid harness, why can't we do this? [SPEAKER_03]: And so this is completely changed this paradigm. [SPEAKER_03]: And this is why we're full steam.

[SPEAKER_03]: It's like we can do this. [SPEAKER_03]: We've established already, just to give you a tactical antidote, what used to take contractors like a month to go end and with, [SPEAKER_03]: with us. [SPEAKER_03]: And we're continuing to collapse these windows, either from running capture projects to running full proposals, whatever it might be, or even doing the project management component and organization, we're continuing to collapse this time on target. [SPEAKER_03]: And so, perhaps it's getting a very exciting.

[SPEAKER_01]: Yeah, I mean that. [SPEAKER_01]: You think about the value of just taking, which is we use total cost of ownership all the time, but taking effectively like the total cost of ownership of a B&P machine, right? [SPEAKER_01]: So what big contacts are not going to call and you're bidding for bulls dollars. [SPEAKER_01]: And hey, we're going to get you, I don't know, a 10% increase in P-lin at $20 on the dollar of last year's B&P.

[SPEAKER_01]: Dude, that's like the real level left for right there. [SPEAKER_01]: That's pretty awesome. [SPEAKER_03]: 100%. [SPEAKER_03]: Yeah.

[SPEAKER_03]: Well, I mean, I hear it every day. [SPEAKER_03]: Like when I talk with like heads of BD departments, right? [SPEAKER_03]: Like, or even like heads of engineering, like they're my favorite to talk with. [SPEAKER_03]: They're like, I just spent 200,000 in direct labor on my BMP charge line because I had to take engineers off of doing direct billable labor and then apply them to an internal [SPEAKER_03]: And they're just frustrated.

[SPEAKER_03]: They're like, that's 200K internals hitting my, I, you know, my indirect labor rates, which is pushing that up higher. [SPEAKER_03]: And it's this vicious cycle. [SPEAKER_03]: So when we come in, we're like, hey, you don't need to keep going that route. [SPEAKER_03]: Here's Gov signals.

[SPEAKER_03]: Here's how we approach the space. [SPEAKER_03]: It's like having like an army of Deloitte analysts that are just there, the agents, and guess what? [SPEAKER_03]: It's a fixed cost, right? [SPEAKER_03]: We understand the world is paying.

[SPEAKER_03]: So [SPEAKER_03]: I don't know. [SPEAKER_03]: I love it. [SPEAKER_03]: It's truly a passion of mine. [SPEAKER_03]: It's like seeing that excitement, the light bulb goes off when people get hands-on keyboards.

[SPEAKER_03]: It's a fun experience for folks. [SPEAKER_01]: How have you seen you talk about your time at Ultra and love the Ultra Team? [SPEAKER_01]: You're great. [SPEAKER_01]: I think it's some of the larger companies that have these giant sort of B and P engines [SPEAKER_01]: Are you seeing resistance, receptiveness, like what's that relationship look like?

[SPEAKER_03]: Yeah, because it depends on the role and the individual. [SPEAKER_03]: So my favorite to date is when we go to the capture lead that's done this for 20 years, and he has an established network, and he's like, it's my favorite. [SPEAKER_03]: It's, I don't need technology. [SPEAKER_03]: I have my network established.

[SPEAKER_03]: I just, [SPEAKER_03]: and I was like, okay, that's great, you know, that's also you have that experience in network. [SPEAKER_03]: I was like, give us just one week with the system and just let's see what happens. [SPEAKER_03]: What net new opportunities that you can even realize because your network is you are a finite creature and your network is naturally bounded. [SPEAKER_03]: Just give it a week and let's see what happens.

[SPEAKER_03]: And then we have it run for a week, you know, it's because we're able to bring in IDIQs and GSA and things like that. [SPEAKER_03]: And so we have in OTAs and consortium feeds, like we're bringing all this data in. [SPEAKER_03]: And then we have our agent scan through on their strategy. [SPEAKER_03]: And then before we know it, they're like, oh, I didn't know this opportunity was coming around the corner.

[SPEAKER_03]: because we bring in forecast data too. [SPEAKER_03]: I would like to see, so take the strength of your network and understanding, combine with this suite of agents that can scan through all this data at a scale that a human just never could, you get some really exciting combinations. [SPEAKER_03]: So that's just a quick example and just like a capture lead. [SPEAKER_01]: Yeah, I think that's one of the points that [SPEAKER_01]: But folks sometimes take for a, they look at this all like a zero sum.

[SPEAKER_01]: Like, hey, if I'm going to use something like gum signals, I got to go Mark my old bid my whole capture to me, like, we'll be second. [SPEAKER_01]: Like, what if we could take, let's say their capacities, you know, 10 tier one proposal a year and I can make that 25 tier one proposals a year. [SPEAKER_01]: That sounds way cooler than, you know, the, hey, I got to go get rid of this and then I'm just going to use a system for it and I think that's where you hit that, you know, it's an overused term, but like the, you know, the one plus one kind of equals three and you, you can get a ton of growth, you know, organizationally, personally, like it's, it's a really, really cool spot.

[SPEAKER_01]: The last two questions, and then one is, you know, we talked a lot about like all of the cool stuff happened, and it's you're like, what, what's happened that you didn't expect, right? [SPEAKER_01]: Like, what caught you off guard in a year of sort of crazy things like, what caught y'all guard? [SPEAKER_01]: If anything. [SPEAKER_03]: And that's a fair question.

[SPEAKER_03]: I think it was most interesting this year. [SPEAKER_03]: was the actual impact of this shutdown. [SPEAKER_03]: I've been part of multiple shutdowns, right? [SPEAKER_03]: This is almost turning into like the normal battle rhythm.

[SPEAKER_03]: But because of where we're positioned now, the impact to the SMD market was real. [SPEAKER_03]: So we, so I've been having some serious conversations with folks in higher SMB, you know, their businesses are done. [SPEAKER_03]: And this was a, this was a very eye opening in regards to, they had high concentration risk on federal contracting opportunities, they had didn't have diversified revenue streams, they're, they're done, they're out impacting real, people's lives and, yes, so the, the impact of the S&V market, I actually was more surprised the end and for me that was, I was not expecting it.

[SPEAKER_01]: Yeah, that's fair. [SPEAKER_01]: It definitely was, I think, the closest to bone I've ever seen, something like this cut to a pretty material subset of the community. [SPEAKER_01]: It was pretty traumatic for sure. [SPEAKER_01]: I don't even think, like, somebody's not think I caught up in the...

[SPEAKER_01]: Hey, this will be done in the second week of August, like a lot of actually. [SPEAKER_01]: It's still not done like it got picked to the back. [SPEAKER_01]: You had all of these different like DRP's you had, you know, the shutdown questions on budget things frozen, reprimandization, hey, so and so needs to sign to release this nickel or that nickel and I mean, man, like six months when you're you're early in the game six months delay on caches are real thing. [SPEAKER_01]: Yeah, that's a great answer.

[SPEAKER_01]: All right, last question, this is the easy one and a lay up and you can take this in any direction you want to. [SPEAKER_01]: Derek, it's the crown. [SPEAKER_01]: Derek's King for a day. [SPEAKER_01]: What is one thing you change and why?

[SPEAKER_03]: The great question. [SPEAKER_03]: There's like so many things, right? [SPEAKER_03]: And this world that I would love to just like if I could be King for a day. [SPEAKER_03]: I think.

[SPEAKER_03]: My first response and my first gut emotional response and from my experience, I would love if I could change the culture of government. [SPEAKER_03]: Government is a risk and verse culture. [SPEAKER_03]: And if I could just wave a magic wand and say, no, we're gonna actually change the culture to a board-leaning risk-medigated risk-accepting culture. [SPEAKER_03]: I think we could see substantial changes to America, to our infrastructure, to our big and dream and push in ways that we just, I feel we've lost.

[SPEAKER_03]: And so, if we could change that culture back to that pioneering, adventurous spirit of the American war in governments, and I think that would be a phenomenal, a nominal change for us. [SPEAKER_01]: Yep, dude, I love that. [SPEAKER_01]: I do think it. [SPEAKER_01]: you do something like that it brings us back to the point of genesis for all of us, right?

[SPEAKER_01]: The willingness to push all the chips into the middle and and see what shakes. [SPEAKER_01]: I mean, that's what we're born from. [SPEAKER_01]: So I appreciate that. [SPEAKER_01]: That rocks.

[SPEAKER_01]: Eight days there are times like, thanks so much for what you guys you do and thanks for coming by. [SPEAKER_01]: I'm so excited to watch you guys continue to just buy down complexity and pain and help to [SPEAKER_01]: really think about how do we increase that velocity, how do we get concepts, capability faster? [SPEAKER_01]: We pulled onto your one time and money out of the system and that's what you guys are doing. [SPEAKER_01]: So keep it in a brother.

[SPEAKER_03]: I'm percent tired. [SPEAKER_03]: Appreciate your time. [SPEAKER_03]: This was great. [SPEAKER_03]: And always looking forward to having a chat.

[SPEAKER_03]: Like yeah, thanks tune in everybody. [SPEAKER_03]: Cheers.