By now, everyone has heard the Uber story: at its best, the “underdog” tech startup disrupting public policy; and at its worst, the venture-inflated behemoth twisting arms to prop up an illegal business. While the controversy brews, Uber is suffering: non-stop challenges of government regulation and legislation are beginning to impact the company’s ability to grow, especially in its strongest markets.
Sure, Uber holds the title of the world’s most highly capitalized startup valued at over $50 billion – but it continues to be a company that is constantly under government scrutiny for not properly complying with new and existing government regulations and legislation. The lesson here: no matter what level of funding a startup up receives or how much success a startup has achieved, the government’s ability to be an ally or enemy to your growth plan cannot be ignored. The debate is still on about Uber’s approach to challenging the transportation market with a disruptive innovation – that is, move forward, and ask questions later.
Where the debate does agree, however, is on what to do now: it’s clear that the “government problem” could not be ignored, and that the company needs a nationwide government relations campaign to keep moving forward. Enter David Plouffe, former advisor to President Obama. Was Plouffe a transportation expert? No – but he knew the only way the company and its brand could truly be successful was to stop ignoring government and instead engage with it proactively. Though Plouffe’s role at Uber continues to evolve, Uber and the government impasse is a lesson for all other transformative startups and investors to plan around engagement with policymakers from the early days.
Government Relations is as Important as Public Relations
When is the right time to focus or invest in government relations? It’s not a science, but for startups regulated by government (which probably accounts for almost 75% of businesses today) it is rarely too early. Government regulators and stakeholders do not like surprises. It’s important to have public relations professionals who will communicate your brand to consumers, but it is just as critical to have government relations professionals who can properly communicate to government stakeholders and third party groups your product, solution, or new technology. When this is done early and proactively it can make or break the success of the startup.
Recently, Washington, DC released new regulations to address the onset of alcohol delivery startups entering the city. As a result, large companies – including Amazon’s Fresh grocery delivery service – ultimately removed wine and beer delivery from their menus in the city. Many suspect this is due to the regulatory challenges. However, other alcohol delivery startups such as Drizly have thrived in the city. Nick Rellas, CEO of Drizly, describes their model as one where everyone benefits. “Before any launch in a new state, we make sure to approach the regulators to introduce ourselves, explain how our business works and get their blessing first.” The lesson here is that public relations is always an important component for a new startup, but government relations can be equally or even more important in some startup expansion plans.
In Government, There is Power in Numbers
“If you want to go fast, go alone. If you want to go far, go together”1 is a old African proverb that applies to any disruptive technology that is faced with government regulation. The fact is that government is conservative when it comes to adopting disruptive innovation. Startups that act alone have a poor chance of breaking through entrenched government contractors, bureaucracy, failure to understand new technology, and a government inclination to regulate first and ask questions later. When startup technologies band together to educate regulators and make policy change happen, they go far if they go together.
It’s hard to find a better example than the drone industry: companies of every size and every kind are coming together to push government to better understand why drone technology cannot be ignored and regulations must come quickly. Companies that are “frienemies” to the consumer present themselves as a united front before regulatory bodies in order to shape favorable regulation, keep at bay rules that would hinder industry growth and accelerate government understanding of the drone potential.
Startups in the medical marijuana industry have also gained more acceptance from government stakeholders through support from medical and caregiving communities. Government leaders are expected to listen to their constituency and startups should work together as a collective industry as well as alongside third party supporters to ensure the demand for innovation is heard loudly and clearly.
Startups Should Not Be Afraid to Work For Government
Govtech and Civictech startups like Palantir and OpenGov reach government at the highest levels and can directly spread the message of how startups can advance and optimize the political and policy process. Many startups that seek to sell to government begin and end their business development efforts with procurement officers. However, outreach to governors’ offices, chief innovation officers, and state and federal legislators can be an important component of a govtech business development approach. Smart city and smart government thought leadership campaigns are becoming a way for startups to highlight themselves as partners, not foes, to government.
Also, accelerators such as Code for America and DCode42 seek to help the startup community transform government in new and innovative ways. These programs recognize that many startups view government as only a barrier, but in reality government can be a very lucrative market for startups with the right type of guidance strategy. Recently, the White House hosted its first demo day for innovators to demo to President Obama new innovations that can transform not just the private sector but government as well.
So How Should You Engage with Government?
Factor how your company will interact with government into your growth plan. Decide if government will be a barrier, roadblock or partner and create a proactive strategy address government
Develop relationships with government stakeholders early. Do not wait until you need an “ask” from government. Introduce your company and brand to government stakeholders and help them to understand your innovation, especially if it is disrupting existing laws and regulations.
Participate in the process. Many startups are unaware of the thousands of pieces of legislation and regulations that are drafted every day. Startups must monitor these changes and be prepared to participate and involve themselves in the dialogue in order to minimize future risks to the their businesses.
Know when to bring in additional resources. Startups often do not prioritize hiring government relations professionals until it is too late. Having a government relations professional either in house or on a consultative basis has proved to be a worthwhile investment to many startups, but it must be done when there is still an opportunity to drive changes that will support the growth of your business.
For many years startups and their investors have shied away from working for and with government at the local, state, and federal level because of long sales cycles and budget uncertainties. The good news is that government at every level is looking for new innovations, with an aim to bring technology and data driven solutions to policy. So what’s a startup to do—run from government or run to it? I think the answer is clear especially for those startups that want to have long term success in highly regulated industries.