Government contracting startup Sweetspot, which uses AI to help companies navigate the US procurement process, raised $2.2 million in its initial seed funding round, the company told Semafor exclusively.
The round, led by 1984 Ventures, marks a milestone for the five-person startup that came out of Y Combinator in 2023. It hopes to make the sometimes byzantine, $759 billion world of government contracts accessible to anyone.
It’s also an example of the new generation of AI-enabled startups that can get by with fewer employees and less funding. One of Sweetspot’s five employees is an intern.
The company launched about a year ago with a search engine that scours federal contract databases. It’s since expanded to mine state and local contracts, and has added software that helps companies apply for and track their progress in the federal procurement process.
The service costs $720 a year for the search feature and $3,600 a year for the full suite of software. The company’s customers include AI startup Groq, defense tech company Vannevar Labs, security firm Strider Labs and Flexport, according to Sweetspot co-founder Sachin Subramanian.
Sachin posted, “Streamlining government procurement is a tough problem to tackle, and we’re glad to be working with some of the best investors to execute our vision.”
He says the idea is to essentially create a “TurboTax” for government contracts, making it easy for everyone from general contractors to web developers to find and fulfill government contracts.
“Our alpha is we’ve made all this hidden and previously untapped data more easily accessible and democratized,” he said in an interview.
Sweetspot is in a race with another Y Combinator startup, GovDash, which was founded in 2022 and is more heavily funded.
One characteristic that many AI startups have is that the technology’s universal accessibility makes it difficult to create competitive “moats” that stave off rivals.
“I don’t believe there are durable moats in software for the most part,” said Aaron Michel, who led the investment round at 1984 Ventures. “For the most part, the real moat in software is phenomenal execution.”
