Creating a Category in the Public Sector: Why It's Harder, and What Actually Works

Category creation in the private sector is well-trodden ground. Find a problem the market doesn't yet have a name for, give it one, build the solution, evangelize the buyer. It’s oftentimes even preferable to build a new category than compete against legacy players.

In the public sector, this is not the case. The buyer is a public servant accountable to elected officials, an inspector general, a procurement officer, and the press. The decision cycle is measured in budget years, not quarters. The reference customer for a new category often doesn't exist yet, because the category itself is new. And there's a structural barrier that private-sector category creators never have to fight: a procurement system designed to reward vendors who specialize in procurement, not vendors who solve the problem.

If you're trying to build a category in the public sector, you have to plan for that reality from day one. The companies who do it well treat the long timeline as a feature of the strategy, not a tax on it.

‍Consider DLP Labs, which is currently building underwriting infrastructure for commercial EV batteries. Batteries represent 40 to 60% of an electric vehicle's value, a $25,000 to $175,000 component that historically has been a black box. Commercial auto policies exclude battery degradation. OEM warranties cover mechanical failure, not the slow decline that determines whether a fleet operator gets stuck holding a six-figure brick.

‍DLP Labs is creating the data and risk-pricing layer that makes carrier-backed Battery Service Contracts possible, and the prime market for that category is public fleets, where EV mandates in New York, California, and more than twenty other states make adoption non-optional. We'll come back to how they're doing it.

Public sector buying is structurally different

Three things make public sector category creation harder.

First, the buyer is risk-averse for good reason. Public servants don't get promoted for adopting an unproven solution. They get scrutinized. The career incentive is to buy from a name that already shows up on a state contract, not to champion a category nobody else has tried.

Second, the buying group is large and varied. A single procurement may involve a department head, a CIO, a CFO, a procurement officer, an attorney, a council, and an outside consultant. Each has a different definition of risk. A new category has to make sense to all of them, in their language, with their evaluation criteria.

Third, the proof points you need don't exist yet. Public sector buyers ask for references in their state, in their size of jurisdiction, in their specific use case. If you're creating a category, you can't produce those references on demand. You have to build the first one and then wait for it to mature into a story that the next buyer will accept.

These are surmountable. What's harder to surmount is the procurement system itself.

The procurement trap

The procurement system is a category creator's biggest structural opponent. Public sector procurement favors vendors who are good at procurement. Decades of layered compliance mandates have produced a class of incumbents whose core competency is winning the RFP. Their software may be aging. Their solutions may be incremental. But they know how run the plays.

When you arrive with a new category, you are not just asking the buyer to consider a new solution. You are asking them to evaluate something the procurement system was not designed to review. You may not have the required certifications. You may not be able to leverage a contract vehicle. Your past performance won't match the templated requirements. The buyer who wants you may not be able to buy you, because the system in place doesn't know how to rank you.

This is not a marketing problem. It is a structural problem. And it is the reason that almost every successful public sector category creator looks, in retrospect, like they spent the first three years doing two jobs at once: educating buyers about the category, and educating procurement systems about how to acquire it.

What actually works

Five things matter more in public sector category creation than they do in the private sector. DLP Labs is a useful illustration of how they fit together in practice.

1) Find the buyers who can act before procurement. Every new category in the public sector got its first wins from buyers who had budget authority outside the standard procurement track. Innovation funds. Pilot programs. Discretionary spending. Foundation-funded experiments. State innovation grants. The first ten customers of any new public sector category almost never came in through a competitive RFP. They came in through a side door, with an executive sponsor who was willing to take the career risk. Map those side doors before you map the front door.

‍DLP Labs' first signal came from a town hall in a rural school district that was publicly grappling with problems on its new electric school buses. Founder Ryan Kuhel reached out to the superintendent, got routed to the head of transportation, and is now kicking off a program with the district. The pilot is small on its own. It is also exactly the kind of zero-to-one reference that unlocks larger agencies later. "Unlike a lobbyist or consultancy, NationGraph surfaced a real opportunity on day one," Kuhel says. The lesson generalizes: side doors aren't found at conferences. They're found in the public record, in council minutes, in the moments where a buyer is publicly stating a problem your category can solve.

2) Build proof at the speed of trust. Public sector buyers don't move on hype. They move on stories from peers in their jurisdiction, their function, their size class. Your job in years one and two is not to scale revenue. It is to build five to ten reference customers whose stories will land with the next hundred. Treat each early customer as a co-founder of the category, not as ARR. DLP Labs' framing is explicit about this: "I see us working with these smaller fleets, then growing into really large contracts." Small wins now, in service of credibility that compounds over years.

3) Help buyers buy you, not just want you. Most category creators underweight procurement strategy. The work isn't glamorous, but it pays back at compounding rates. Get on cooperative purchasing contracts (Sourcewell, OMNIA, GSA) so buyers can sole-source you instead of running a competitive RFP. Get on state master contracts. Pursue the certifications buyers will look for. Build a procurement playbook that your sales team hands to every prospect's procurement officer, mapping your product to the language and structure their system expects. 

DLP Labs' three-track strategy points squarely at this: non-dilutive grant capital to fund R&D and earn credibility, small pilots to build past performance, and eventual placement on cooperative purchasing vehicles so agencies can buy without an RFP.

4) Build the partner ecosystem that already has procurement scaffolding. Architects, system integrators, regional consultants, and prime contractors already have past performance, certifications, and relationships with procurement teams across hundreds of jurisdictions. Partnering with them lets you ride their procurement infrastructure into accounts you couldn't reach alone. 

CRUX Solutions, a small Texas-based low-voltage technology consultancy, gets pulled onto design teams by architect partners, who handle the prime relationship while CRUX delivers the specialty work. 

DLP Labs is doing the analogous move on the underwriting side, validating its actuarial model with Perr & Knight and joining the Palantir Startup 002 cohort for live fleet-health ingestion. Carriers, actuarial partners, and infrastructure platforms are doing the work of giving the category structural credibility before the first big procurement.

‍Plan for the legislative cycle. Categories that change how public agencies operate often need a legislative or regulatory tailwind. New York and California have mandated electric vehicle transitions. More than twenty states carry active ZEV procurement mandates. Public fleets aren't choosing to buy EVs. They're being told to. That is the kind of structural tailwind that turns a new category into an inevitable one. Watch the bills, the budget cycles, and the executive orders. They are the leading indicators of when a category becomes legible to public buyers.

Plan for years, not quarters

The honest version of the timeline: creating a category in the public sector takes five to seven years, not eighteen months. The first two years are identifying and winning the early-adopter side door. It's actually not too dissimilar to establishing a foothold in a new state or with a new agency type, even if you've served government for years -- the best practices are the same.

The next two are building enough reference proof that mainstream procurement can recognize you. The years after that are when the system starts to bend toward the category you've been building, and your incumbents start to feel it.

The procurement system isn't going to right-size itself in time to make your category creation easier. The reformers who built it had real reasons. The policy goals layered on top of it have constituencies. The incumbents who've optimized around it will fight any simplification that erodes their moat.

So plan for the system as it is. Find the buyers who can act inside it. Build the proof that will travel through it. Partner with the players who already navigate it. And take the long view. Kuhel describes it well: "Once you're in, selling to local governments is a really great long-term investment. The funding persists." The public sector rewards the category creator who is still standing in year five, not the one with the loudest launch in year one.

If you're early in this work, the most useful thing you can do today is map your category against three lists. Which of your prospects have discretionary or pilot budget that doesn't require a competitive RFP. Which cooperative purchasing or master contract vehicles you can ride. And which partners in the existing procurement ecosystem could carry you into accounts you can't reach alone. Those three lists are the foundation of public sector category creation. Everything else follows.

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