Opinion
From red tape to revenue: The growth of business-to-government partnerships
"Although the B2G trend began with major corporations, today, it’s trickling down to the startup level. Companies of all sizes are realizing that government partnerships can offer scale, longevity, and a clear path to global expansion," writes Chemi Peres, Managing Partner and Co-Founder at Pitango.
For decades, businesses have viewed business-to-government (B2G) opportunities with some reluctance. The public sector was often seen as slow-moving, highly regulated at times, with long sales cycles, and encumbered by unique goals and metrics that made it unattractive for companies accustomed to the speed and scale of B2B or B2C operations. And government tenders, though promising large budgets and high stickiness through long-term contracts, were complex and hard to navigate, especially for early-stage companies.
But that is changing.
The world beyond business
The story of B2G is beyond business; it touches on influence, diplomacy, and a new kind of power. Private companies, often starting in B2B or B2C, are finding substantial opportunities and long-term contracts in the B2G space, offering innovative solutions in exchange for large-scale projects and stability.
This evolution is also transforming traditional notions of power, with businesses sometimes wielding significant influence and contributing to diplomatic and economic ties between nations. We are seeing companies acting as ambassadors, business decisions impacting policy, and innovations changing the way governments operate.
Although the B2G trend began with major corporations, today, it’s trickling down to the startup level. Companies of all sizes are realizing that government partnerships can offer scale, longevity, and a clear path to global expansion.
The fall of barriers to entry in B2G
While most statistics focus on B2B and B2C, there is a growing body of qualitative evidence and case studies indicating that B2G is a robust and fast-growing market. There are several key forces, to name a few, driving this development:
- Ease of doing business: The integration of innovative technology into public procurement systems has made doing business with governments progressively easier and less complicated than in the past.
- Digital transformation: Governments around the world are under pressure to become more efficient, cost-effective, transparent, and convenient. They are therefore investing heavily in private sector digital technologies and expertise to streamline services and improve performance (e.g., Estonia’s e-Residency, Singapore’s Smart Nation, and the UK’s integration of AI in healthcare), opening the door for startups and enterprises to become key partners in national modernization strategies.
- Global challenges with private-sector solutions: Governments are called upon to tackle large-scale global challenges such as climate change, international conflict and food security, while also addressing domestic issues of cybersecurity, infrastructure resilience, water management and agriculture modernization. As a result, they are increasingly turning to private sector innovation for solutions. This has driven the prominent development of dual-use technologies, especially in the defense-tech and cyber security arenas.
- Impact and sustainability: From national to municipal levels, governments are aligning with global initiatives like the UN’s 17 Sustainable Development Goals. This includes enforcing environmental, social, and governance standards and investing in sustainable technologies. Private-sector collaboration is essential to achieving these goals, leading to a significant uptick in public-private partnerships (PPPs) across critical areas (e.g. Morocco’s Noor Solar Complex and Georgia’s blockchain-based land registries). These partnerships often reflect a shift from mere procurement to co-innovation aimed at achieving scalable, socially beneficial outcomes.
- Strategic interests in tech and infrastructure: National interest in compute power, AI infrastructure and quantum computing is growing, with a technological “arms race” quietly underway among many countries. Australia, for example, recently invested over $600 million in Silicon Valley-based PsiQuantum to build the first utility-scale quantum computer near Brisbane. Governments are competing to attract hyper-scalers, data centers and tech giants by offering incentives like cheap energy, favorable tax regimes, and regulatory flexibility. Partnering with such global enterprises can expand domestic job opportunities, increase investments, drive local economies, and tremendously affect a country’s GDP.
Private sector diplomacy and geopolitical business
As businesses grow larger and more global, national priorities become increasingly dependent, to some extent, on private-sector innovation. As a result, the traditional power dynamics between states and corporations are rapidly evolving, with diplomacy and commerce more connected than ever. The warm stance Prime Minister Narendra Modi of India has adopted toward Israel, for example, is driven partly by his experience seeing the effects of Israeli drip irrigation tech during his time as Gujarat’s chief minister. Innovation can breed goodwill, reshaping international relations from the ground up.
The world’s largest businesses are taking part in geopolitical events. Elon Musk’s Starlink support for Ukraine and Tesla’s complex partnership with China indicate how private enterprises can affect global diplomacy. A similar overlap is evident when business leaders can implement government-scale strategies, such as US President Donald Trump’s application of corporate principles to governance and Musk’s somewhat short-lived vision for efficient public systems (e.g. through DOGE).
We are entering an era in which a nation’s “innovation power” may become as critical as its hard or soft power on the global stage. Beyond cultural exports or military might, private sector innovation can deliver food security, energy independence, cyber defense, and scalable resilience – outcomes once solely within the domain of government agencies.
A two-way street
Governments are now pursuing startups and enterprises with vigor, recognizing the productivity, efficiency, and scalability these partnerships can bring. In turn, businesses are learning that governments offer not only scale and large contracts, but also stability and long-term relationships.
This isn’t limited to big corporations. More startups are incorporating B2G into their business models. As the complexities of dealing with government agencies are more manageable today, companies of all sizes can see government partnerships as gateways to impactful, sustainable growth.
Furthermore, many business leaders in the B2G space come from government or military backgrounds, reinforcing the flow of expertise between sectors. The result is a more integrated innovation ecosystem.
Israel’s B2G advantage
Israel has long anchored its diplomacy in the export of innovation in the fields of defense, water tech, food-tech and agriculture, and more. In addition to creating a thriving tech ecosystem, we have provided favorable tax regimes for global investors and incentives for foreign enterprises to set up shop in Israel. But we can do more.
Strategically, Israel should enhance its investment in dual-use capabilities, create frameworks to attract quantum and infrastructure investments, and allocate greater resources to academic excellence and R&D to reinforce its competitive edge. Furthermore, integration into emerging regional alliances, especially in the Middle East, offers growth opportunities that could secure both prosperity and security.
To seize these opportunities, Israel must make deliberate policy efforts to support Israeli companies in penetrating foreign B2G markets, especially in sectors where we have a comparative advantage.
Chemi Peres is the Managing Partner & Co-Founder at Pitango.
