When regulation is a (rare) opportunity


Every time we see something new about the corona virus, it’s always worse than we thought: maybe we won’t develop immunity to it; Maybe six feet of social distance isn’t far enough. Perhaps the spread does not subside in warmer weather.

Every time we see something new about the economy, it’s equally bleak: maybe we can’t safely reopen for months (despite Georgia and South Carolina), maybe unemployment will exceed the levels of the Great Depression, maybe travel will only be in the middle Resumed in 2021. Perhaps most companies that have closed their doors will never return.

But like everything in life, there are usually some good ones in all the bad ones. And for companies that need to deal with regulation, this may be an unusually good time to get what you need.

The federal government does not have to balance its budget, which is why billions of dollars in laws such as the CARES law are possible. But cities and states have to create a budget every fiscal year that looks balanced, at least on paper. In good times, this leads to many new issues. But in bad times, it requires a painful series of cuts, tax and fee increases, and tough decisions that politicians usually avoid at all costs. All of this creates opportunities for startups.

Local government will urgently need new sources of income. It’s not that difficult to figure out what a politician will do: identify the election with the least political disadvantage, and that’s almost always the answer. For this reason, controversial political issues such as the legalization of mobile sports betting or recreational marijuana often remain in state legislation when the budget is tight (disclosure, we are investors in FanDuel). . Now, however, the legislature is faced with a completely different situation: to balance the budget, they either have to make far-reaching spending cuts, increase fees and taxes or find new sources of income. Suddenly, the legalization of games of chance and drugs does not appear to be so risky, neither politically nor in terms of content.

Any company that can offer significant new tax revenue can now see that their product or service is legalized and approved in a fraction of the time that is normally required. Companies that can offer direct savings to the government can now secure contracts and win procurement faster. A broken government is a friendly government. This is the time to be aggressive.
It was less than a year ago that Amazon tried to set up its second headquarters in New York City.

Despite strong support from Governor Andrew Cuomo and lukewarm support from Mayor Bill de Blasio, the project was widely mocked as an unfair corporate boondoggle and Amazon was quickly driven out of the city. In good economic times, voters have the luxury of focusing on issues that are not critical to their daily survival, and politicians have the luxury of saying no to new jobs and tax revenues to try and base points on achieve.

No longer. Startups in blue cities and states on both coasts have a far greater political impact than they have for years. Issues such as data protection, employee classification reform, and AI fears take a back seat to paperback issues such as jobs, crime, and access to healthcare. Startups that can promise to keep jobs can now make significant changes to policies, regulations, approvals, zoning, licensing, and everything else they need to operate.

Startups that can offer solutions for life in a pandemic (digital payment, D2C, telemedicine, conference calls, tele-everything) are becoming shiny new toys with which the legislator wants to be seen. Delivery drones, autonomous cars, home medical tests, and other concepts that seem a little nervous are now becoming ideas that legislators need to seriously consider. If a new technology could potentially save lives during a pandemic, you really don’t want it to be the politician who killed the idea.

Proposals to screw up with startups do not automatically become a top priority for the San Francisco Supervisory Board. Facebook already has a much stronger reason to stand up for the Libra (nobody in this climate wants to use cash if they can help). The performance dynamics just turned upside down. But this only works if you understand and use it.

In the ongoing debate about whether tech startups should ask the government for permission or ask for forgiveness in recent years, the zeitgeist has shifted significantly towards permission. The tech whip against Facebook, Google, Amazon, Apple and Twitter caused regulatory problems for virtually every technology company, even some early stage startups.

All of that has just changed. Regulators and legislators now have to worry much more than if an electric scooter needs a certain type of permit. And if the no to new ideas from new companies means rejecting much-needed jobs and tax revenue, for the same reasons that it was politically important for lawmakers to classify all California sharing economy workers as full-time workers or the offers or restrictions of Rejecting Amazon With the spread of home sharing, the opposite is now the case.

Now you get points for creating jobs and avoiding spending cuts. Now you are much more reluctant to tell a voter that renting a room will not make them any extra money (assuming someone ever travels again). The job killer label becomes politically toxic even in the most advanced boroughs, districts and neighborhoods of the bluest cities on every coast. The momentum is clearly shifting back to asking for forgiveness (don’t be stupid and do things that are clearly illegal, but interpreting gray areas of regulation as friendly is now much easier).

In contrast to the financial crisis in 2008, it is not the companies’ fault. Tech companies are even some of the heroes in the fight against the corona virus. Above all, punishing startups is no longer a clear political winner, even in the most liberal cities and states. Even if it doesn’t seem intuitive, now is the right time for startups to aggressively search for policy changes and regulatory relief.

Politics is about leverage. Startups have it now. You should use it before things change again.