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With small business federal spending goals on the rise, it seems like a good time for small and disadvantaged companies to make a shot at federal business. An incubator called Hutch based in Baltimore, Maryland, seeks to develop minority- and women-owned technical services companies. For more, Hutch founder Delali Dzirasa spoke to The Federal Drive with Tom Temin.

Interview transcript:

Tom Temin: Mr. Dzirasa, good to have you on.

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Delali Dzirasa: Hey, thank you so much for having me, Tom.

Tom Temin: Tell us what you mean by “incubator,” that is to say, are you simply investing in companies or from what I’ve seen of your materials it looks like you also help them establish themselves operationally.

Delali Dzirasa: Yeah, that’s correct. So Hutch, it’s a two-year incubator. And so it’s a full-fledge, consider it like a master’s program. I mean, they’ve got free work, classwork, homework, as they’re moving through the process – you’re exactly right. It’s more about how do we provide them kind of educational foundation of how to do business within this market in general, as well as coaching. And so we’ve pretty much unpacked our playbook at Fearless in how we do business. And so for example, today, we have a Hutch session today and they’re doing a business development deep dive. But our chief growth officer is teaching them about how we do BD, how this is done in the market. When they get to brand and marketing, our chief marketing officer goes in and is teaching them and so they’re getting capability, they’re getting templates, and it really helps to accelerate the growth in the market. And so we have that in addition to kind of precision-based coaching as they need things. You got a number of partners that come in and give them support as they need it.

Tom Temin: And you mentioned Fearless, that’s a company that you started that is a services contractor to the federal government, correct?

Delali Dzirasa: That’s correct, that’s correct.

Tom Temin: And this whole area of data management, and IT, is that pretty much the domain you’re operating in?

Delali Dzirasa: Yeah, so Fearless is a digital services company. And the best way I can describe a digital services company, it’s a sub market of the traditional kind of government IT market space. And so traditionally, you’ve got, the Beltway bandits, people that have been doing this for day in and day out. And you got this small sub market that really says, how do we get companies that kind of look and feel like these West Coast tech companies to want to do business with government? So folks that have a very strong acumen around human-centered design, around how you build and scale applications as you would in the commercial space, how do you track them to do business within our government? So it’s a growing space, we’ve learned a lot, quite a lot over the years. And so Hutch is really our ability to now impart that knowledge and help people do it better, faster, more efficient than we are.

Tom Temin: And is Hutch in the capital supply business or simply the human capital supply business?

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Delali Dzirasa: Human capital business. And so for them, what we really talk about is return on time. Right? So you have founders that are new in the market, right, and they may be someone that’s exiting or transitioning out of government. It may be someone that’s been in another company and thinking about jumping out. How do we get them the tools and the resources in order to be successful within within this marketplace? And so for us, it’s very much so a time investment that we put in them over the course of two years.

Tom Temin: What about the raw material: people, women, minorities, that besides wanting to do business with the federal government, they have to have the basic technical chops in digital services, which is a lot of technologies and specific types of technical steps? Where are they getting their education and knowledge such that they’re prepared at a baseline to be able to go after federal contract?

Delali Dzirasa: That’s right. So the expectation of Hutch when you come in is that you’ve got the technical acumen in your particular domain, and our companies span the gamut. We’ve got about 20 in our portfolio today. And we’ve got cybersecurity companies, we’ve got data analytics companies and data science companies. We’ve got design companies, we’ve got engineering, and DevOps and cloud-based firms that are in the portfolio as well. But all of them have that expertise, right? We’re expecting they come in with an expertise in their space. What they may not have is some of the business fundamentals. What they may not have as well is the ability to navigate, understand how to navigate government. So we can add those on to people that are already very talented technical professionals, very smart individuals. They just aren’t sure which way to run. So we can give them the path and where to go. And once they get that we find they’re really off to the races.

Tom Temin: And when you say there are 20 companies kind of in your ecosystem, what does that mean? Do you have a position in them, or are they independent companies, and they’re just clients of Hutch?

Delali Dzirasa: That’s right, they’re independent. And so each year we do an intake, and we bring them in a cohort. We always have two classes running concurrent, one in their second year and one in their first year. We don’t take a position in these companies. We train them, we coach them, we mentor them, we do business with plenty of these companies as they’re popping out. But that’s really the value add, right, that we now, they have a paying customer, right? For many of them, we may be the first customer, but we teach them if we’re their only customer you’re gonna fail, right? So how do you go out there and you position yourself in the market? I’d say one of the biggest value adds that we’ve seen in the program is not just the information they get. We know we’ve done a good job if we get that cohort to become an actual cohort, right, and connected to one another. Our first class graduated in 2019. They still meet to get programs over, they still meet together every single week. And they’re talking and supporting each other. And so there’s such a high percentage of companies that fail within the first years and so to have that network got folks that you can like travel with and to work within, and support is huge. And so each cohort that comes in their network is exponentially bigger, right? They’re teaming together, they’re partnering together, and really transforming the way we’re thinking about how we do business.

Tom Temin: We’re speaking with Delali Dzirasa. He’s founder and president of Hutch, which grew out of his other company called Fearless. And what evidence do you have that they’re actually getting federal contracts, once they graduate?

Delali Dzirasa: We track their revenue. They submit those, they submit that data to us. They submit their headcount. And so on average, a couple years out of Hutch, I mean, they’ve grown 6 to 8x, all of them across the board. And so it’s been a huge value add. We look at them compared to folks that aren’t in the program. So we talk about this return on time. We see it, it is very evident. We’re seeing their deals, we’re seeing their communication, we’re seeing them partnering, and they’re priming things and supporting each other. We’re seeing them support us on deals. We’re seeing us back them on deals. And so we see the activity day in and day out.

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Tom Temin: And what about the idea of whether they should choose between subcontracting? Because there’s no end of Lockheeds and the Booz Allen’s and the Deloittes needing small business and technically-minded subcontractors versus going for that prime contract yourself.

Delali Dzirasa: It’s both. It’s not an either/or, it’s both. Ultimately, what we teach a lot of in fact, with the session today is on business development is – and we call it “authentic BD” here – it is about how do we add value. This isn’t about give me a contract, give me a deal, give me some money, right? It’s what is your problem? How do we add value to that, right? In some scenarios, that the customer may get the most value if you’re out front and you can build a team that supports that. In other areas, it may not be the case. And so you need to understand each deal is a little bit different. But they learn both. For many people that are just starting, if they’re brand new to business, and they span the gamut, right? We have some that it’s their first year business, some that have been in business for let’s say, four or five years. The longest has been, I think, in business for 10 years doing commercial and they went into government. And so they’re coming from different places. If they’re new in business, what we suggest is subbing. Because they need the iterations of okay, can I get my invoice out on time? Can I do all the back office processes, like do I know how to recruit someone, can I turn on their benefits, right? Those things, get those reps in now, you have to learn and understand how that side of the business works. And then now add another layer and like learn how to prime and learn how to manage other contractors and other vendors, as you’re building a team. But it’s the muscle memory. So it really depends on where they are, and what we recommend at each stage.

Tom Temin: And as part of the training on which vehicles to choose? The CIO-SPs, the Alliant Small Business and GSA schedules and so on, because that’s often a great amplifier of the ability to get a contract is to be in the right vehicles.

Delali Dzirasa: That’s correct. It is part of it. We have them look at it starting off, pick a focus, right. And it’s really easy to wake up and become this body shop. At Fearless we talk about this idea of being this Purple Cow that is remarkable and it’s different, it doesn’t look like all the millions of brown cows you’ve seen before. And how do you do that? And a lot of that is adding real value. It’s really hard to add value. You’re starting off, you’re less than 10 people, and all of a sudden you’re a subject matter expert on every single agency and every single domain. It just doesn’t work that way. And so we really have them hone in and focus. Is there a particular domain? Is it health care, is it Defense, is it so-and-so, and then going to what is the agency that you really think you can go in very, very deeply, and provide a lot of technical understanding, and domain expertise, and then add value over time. Once you’ve done that, you get to add the second. Once you’ve done that, you get to add the third. And so there’s an extreme sense of focus that we ask them to bring as they think about building a brand – not a firm – a brand, which is much bigger, and will outlast them.

Tom Temin: And when you look at the area of cybersecurity, a lot of the military agencies and I think to some extent certain civilian agencies have done outreach to historically Black colleges and universities, minority-dominant universities to try to get them to develop talent in these technical areas. Are you seeing that actually pay off as people come up through these institutions ready to do this type of work, and now need that training for direct federal contracting?

Delali Dzirasa: I think so but it’s not nearly enough. And when we talk about the federal government, billions of dollars on IT spend, and every company that I know of this market has openings that they can’t fill. And so this market is in a desperate need for talent. And if we’re going to be serious about competing as a country, right, we look at the time, as we look at the Indias, we look at the Russias, right, all these other places, they’re trying to fuel their entire populations. And we tend to overlook so many segments of our population that aren’t in the workforce, don’t have the correct skill sets. And so ultimately, if we don’t do this and make a serious investment, we hurt all of us, right? All of us are, we’ve got part of the table stakes here.

Tom Temin: And you’re located in Baltimore, which is a city that is both a great city and a city with terrible issues of poverty and crime and so forth. How does that inform your work?

Delali Dzirasa: I’m inspired, right, I think Baltimore is an interesting tale of, people often call it The Tale of Two Cities. And you’ve got a space that has, as you mentioned issues with poverty. People often think of “The Wire” when they think of Baltimore. It is also a place that is the home of some of the best hospitals in the world that are within this environment. We’re such, we’ve got a such an interesting location, especially when we think about federal in general. We’re pretty much in between Fort Meade which houses DISA Cyber Command, NSA, as well as Aberdeen Proving Grounds. We’re right in the middle of that. We’ve got, again, this amazing health care apparatus that’s here, as well as the commercial and financial sectors that are here and so there is a melting pot, a blending of different industries that happens here in the area that’s got very low cost living in a way that you just don’t see. What I often tell people is Baltimore has challenges, yes, but where else would you go to want to do your best work? If you care about impact, if you care about making a difference, if you care about helping to transform this planet for the better, why not come to Baltimore? Baltimore is the place where you can do this impactful work in a way that it will scale and provide meaning? Our mission at Fearless is to build software with a soul. And our vision is to create a world where good software powers things that matter. And so we talk about education, and health care and social justice and all these things. They deserve the same tech that is powering cars that drive themselves. And so with that in mind, this is the place where you do that work, right. This is the place where you come where you want to make that impact and they will receive it here and be be appreciative.

Tom Temin: Delali Dzirasa is founder and president of Hutch, thanks so much for joining me.

Delali Dzirasa: Thank you, I appreciate it.

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