One Customer Does Not a Business Make

“One swallow does not a summer make.” ~ Aristotle

By: Meagan Murphy Crawford

The saying “One swallow does not a summer make,” is traditionally credited to Aristotle but is likely a much older proverb. The main idea is that a single event does not guarantee an outcome. In the space industry, we often see companies utilizing government grants, partnerships, or indications of interest to prove that a market exists or that a company will be profitable. This is a logical fallacy. One customer does not a business make.

The US Government (USG) is, by a large margin, the single largest customer for launch, spacecraft, services from space, and innovative new space technologies. Some analysts estimate that the USG is responsible for more than 20% of the direct revenue of the worldwide space economy. In reality, they could be responsible for up to 40% – 50% as revenue flows down from primes to subcontractors, and the USG also provides significant non-dilutive funding (grants) for early-stage companies. 

The upside is that, simply put, when markets go down, government spending goes up. So, this government revenue provides a valuable hedge for those investing in the industry, and grant funding provides a multiplier effect for investor capital. But… as far as customers go, the USG is the worst.

Controversial Opinion: The US Government is an Awful Customer

The US Government is not a normal customer. They don’t do business the way most companies do business. Their priorities, preferences, and purchase decisions can be convoluted at the best of times and downright impossible to figure out at the worst of times. Purchasing and grant funding decisions seemingly have no logic, and budgets are driven by the fickleness of the US Congress and its four-year election cycle. And to make matters worse, typical military posts last only two years. So, as soon as you’ve built a relationship with a program manager or purchasing agent, they’re off to some new exotic destination, and you have to start all over with their successor, who will likely have different ideas and priorities. 

In a recent SBIR (Small Business Innovative Research) grant cycle, we had over a dozen of our portfolio companies apply for grants from the Air Force or Space Force, where these companies already had good relationships and a history of past performance. For some reason (which still remains murky), all of these valuable submissions received a response that they were “Selected but not Funded.” We were all collectively scratching our heads – What does that even mean? It turns out that priorities shift, management changes, and budgets are never finalized. Relying on the USG for early-stage funding could easily bankrupt your company before it even gets started. 

Once you get through the complicated world of SBIR funding, there is a new world of nebulous grant opportunities (called things like Tactical Financing, Strategic Financing, and Other Transaction Authority). The ultimate goal for a start-up is to get a “Program of Record,” which can include an order for Indefinite Delivery, Indefinite Quantity (IDIQ). But throughout this convoluted process, the government will negotiate prices down, add costly requirements for accounting, delivery, and oversight, and eventually, the company that was once so excited about landing a big customer is burdened with bloated overhead and diminishing margins.  

To be clear, this doesn’t mean you shouldn’t work with the USG. In fact, most, if not all, of our current portfolio companies have contracts with the USG. And it’s a great way to supplement R&D in the early stages of a product development life cycle. This funding is critical for most space companies… but it shouldn’t be your ONLY source of funding. As your company grows, long-term government contracts can provide a solid base of consistent revenue… but this shouldn’t be your ONLY source of revenue.

Resiliency: Government Speak for Diversification

The USG frequently uses “resiliency” to describe sourcing critical infrastructure from multiple sources to ensure that a company failure, supply chain disruption, or other unforeseen event won’t seriously impact the supply of important equipment. Startups need to take a similar approach. They must be resilient in both their funding sources (multiple grant providers and investors) and their customer sets (within the government and in the commercial market). 

We are lucky in the US to have multiple avenues for space companies to receive early-stage grant funding. We have a civil space agency (NASA) and multiple Department of Defense grantors (Space Force, Air Force, Space Development Agency, Defense Innovation Unit, DARPA, etc.). There’s also the National Science Foundation and many other tangentially involved agencies (we have one SpaceFund portfolio company working on a grant proposal to the Department of Agriculture, for example). So, even if you’re targeting the US government as a customer, there is no reason to put all your eggs in one basket. Be resilient in your government contracting, and then build your commercial business. 

What Do Hockey Sticks Have to Do with Entrepreneurship?

Even if you get the big government sale, your revenue will still be ‘bumpy.’ Government payment timelines don’t necessarily fit nicely within a fast-moving startup environment and often don’t align with the realities of supplier payments, payroll, and launch payments. It’s best to think of your government customer as a baseline, a (mostly) reliable source of revenue that can help cover your operating expenses, not a source of surging growth. 

To surge growth, you’ll need commercial customers. While commercial customers may come with their own unique set of trials and tribulations, they generally make decisions more quickly, commit to payment schedules tailored to your business model, and provide growth opportunities through repeat purchases. And there are also a LOT more commercial customers than government customers. Right now (March 2025), SpaceFund is tracking over 10,000 non-government space organizations (including for-profit, non-profit, and research institutions). And if you’re not selling to space companies, your target market may have many more thousands, or even millions, of potential customers. These will be the customers that will get you through the growth inflection point and into surging growth.  

One Customer Does Not a Business Make

While the USG is an extremely valuable partner, an early-stage non-dilutive funding source, and provides a great opportunity for a baseline customer, this cannot be your only business development strategy if you want to be a VC-able company. Companies that take venture capital funding need to reach hockey-stick levels of growth, and this is unlikely to happen without a broad and diverse customer base that builds on US Government relationships. 

Another mistake entrepreneurs commonly make is assuming USG traction translates into commercial traction. Sometimes, it does, and sometimes, it doesn’t. It is vital that you talk to your customers early and often to ensure that you’re creating a product or solution that they want to buy. If you tailor your product development strategy to a single customer—the USG—you may completely miss the sweet spot for the commercial markets. 

Listen to the ancient wisdom and don’t rely on a single market signal (one swallow) to plan your future.

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