A Founder’s Handbook for Lobbying the Government
Today: More and more startups have to engage in lobbying. Few know how to do it. Here’s my advice.
The Agenda 👇
10 pieces of advice for startup who need to deal with regulators
Articles to go further on this ever important topic
I often field questions from portfolio founders who have issues with regulators. It’s quite normal, actually. Founders and investors like to think that the government only exists in another, completely separate dimension. But as software eats the world, we’re seeing more and more startups entering industries and markets that are heavily regulated. This means that a new playbook is necessary—rather than ignoring the government or deeming it irrelevant, you have to keep it on your radar and even, in some cases, build a relationship with it.
It’s not as easy as it sounds. Many founders have a naive view of government, thinking that a 10-minute meeting with some cabinet minister will help them see the light, letting the problem be solved once and for all. After all, how can any government official be against progress?
In reality dealing with regulators is hard, and there’s no magic bullet. But I now have a lot of experience dealing with startups in The Family’s portfolio, and after hundreds of hours spent advising them on the best approach, I realized there are recurring themes and approaches that have all been validated in action. Here I’ve tried to organize them all into a coherent 10-point list. Enjoy! 👇
1/ Don’t ignore regulators
Too many people in the tech world think that ignoring regulators is the way to go. But as I wrote not long ago, ignorance is never the right approach for a founder:
Paul Graham wrote some beautiful lines about how not seeing clearly is an asset when building a startup —you simply wouldn’t do it if you knew all the obstacles you’re bound to encounter along the way. Ignorance, on the other hand, can lead you straight into the ground because:
You’ll have a steeper learning curve when it comes to understanding the microeconomics of your business and the areas where risks are concentrated.
You’ll be unable to pick the skilled employees you need, since you can’t hire and then manage someone if you don’t understand their skills and field of work.
Nowadays, software has eaten enough of the world for tech entrepreneurs to level up their game and learn a new playbook. Today you don’t want to be a Theranos, playing cat-and-mouse with regulators. Instead, push to be those scooter companies or healthcare startups that work with city governments from the start, because they know they’ll never succeed without official support.
That doesn’t mean you should spend your whole time talking with regulators. Remember that the government is a very large bureaucracy in which you can get lost in no time! The rule is to know who they are and what they can actually do. Pick a select few with whom you want to build a relationship (see below).
2/ Study history
Regulations might seem stupid or counter-productive, but they always exist for a reason—usually a good one! Generally, past players in your industry were confronted with a situation that led them to turn to the government and ask for a regulation to be put in place; over time, that regulation proved to be a net positive for everyone, otherwise it wouldn’t have lasted long.
And so, as a founder, the best thing you can do is to study the history of your industry.
History isn’t only useful because it can uncover the most valuable secrets, as explained by Ben Horowitz here. It will also help you realize why a particular regulation was put into place, and you’ll then be able to understand why it’s now obsolete—either partially or completely. Only then can you start maneuvering and developing an argument for why the regulation should be upgraded.
Alternatively, you can tweak your company’s strategy so as to fit into the regulatory box and then count on one day being able to lobby for a change from a position of strength rather than from the sidelines!
3/ Embrace contextual rationality
Many European startups fail because they try to emulate good practices coming from Silicon Valley. But what works there doesn’t necessarily work here.
This is especially true when it comes to regulations and regulators. Founders in Silicon Valley might be able to tackle regulatory challenges by becoming even more aloof and libertarian. But we in Europe need something different, starting with entrepreneurs and venture capitalists truly engaging in policy discussions related to their industry and beyond.
Plus, founders in Europe and elsewhere need to realize that US-based founders can be libertarian…but only to a certain extent. When it comes to actually building a business, they do exactly what everyone else does: they hire an army of lawyers, lobbyists and PR firms, in no small part to speak with regulators.
I wrote about it in Fewer Regulations in America?
The US is highly regulated, in some cases much more so than Europe, but there’s a reason why many firms and entrepreneurs don’t realize it: they’re used to throwing lawyers at any regulatory problem they encounter. That’s easily done in the US because there are so many lawyers; less so in other countries, because there are fewer lawyers per capita compared to America.
4/ Learn the other’s language
Here is some sound advice from Mad Men’s Don Draper:
If you don’t like what is being said, change the conversation.
Yet if you, a founder, want a real conversation with a regulator, you need a shared language!
Too many startups approach regulators using startup language: “technology”, “algorithms”, “disruption”, “funding rounds”, “changing the world”.
Rather than indulging your fellow entrepreneurs and embracing words that are typical of an innovator, you need to remember what keeps a politician awake at night. Think: “jobs”, “opportunities”, “public services”, “reducing the deficit”, “purchasing power”, “economic security”, “dignity”.
Keep in mind that interacting with regulators requires selling your vision rather than selling your product. Oh, and one more important thing: when lobbying government people, stick to a single point.
These people are busy and they lack the resources needed to accomplish much. If you come to them with a laundry list of 10 items, there are only two possible outcomes: either they will tell you to go f*** yourself, or they will just pick the easiest one and forget the rest. So pick one important thing and stay on message!
5/ Make yourself indispensable
This is a key lesson that I’ve learned from regulators themselves:
They hate to see a tech founder they’ve never met storm into their office looking for a favor because of some “urgent” situation.
But they do like to know about what’s happening in the tech world and to have a trusted expert they can call if they have questions.
So pick your target(s) carefully. But if you do find someone that is a/ rather influential and powerful in the system and b/ fun to be with or extremely knowledgeable, do everything you can to build a long-term relationship:
The first time you meet them, just explain who you are, what you do, and your vision of where your industry is going. Ask them for their time but nothing else, and leave a short, neat memo to which they can come back if they want to know more.
Later, remind them of your existence by sending them material, interesting articles from the media, the translation of a good article originally written in English (if you’re in a non-English-speaking country), or another memo if you have new things to share.
If you do that often enough, you’ll find your way onto your interlocutor’s map. They’ll see you as someone that’s not constantly lobbying for a favor, but rather that knows a lot and can be a reliable source regarding the industry.
If you manage to build such a relationship, it can become your most precious asset. What do you think will happen when you finally do need that favor? Just ask your friend, whom you’ve helped as a reliable expert over the past months or years!
6/ Use content as an infrastructure
Sometime I have the impression that I advise everyone to start their own newsletter! It sounds obvious these days, but I’m really a true believer in publishing content as a lever for adding value and being more effective. That’s especially true when it comes to lobbying:
Publishing content will force you to reflect and to find better words to actually make your point. That will be invaluable when the time comes to interact with a regulator.
Publishing content creates a public archive to which you can refer those who want to know more, including regulators (and journalists!).
Publishing content is even relevant for your core business, because your early adopters (the first user segment you have to conquer) are actually interested in regulatory matters!
Keep in mind that publishing good content is hard: make it clear, short, educational. Write as if you will be read by children—smart ones, sure; at the very least write for people who don’t know much about technology. Your interlocutors in the regulatory world will appreciate you saying things with simple words.
In addition, if your content is the best there is, even your competitors will consume it, putting you in a position to craft the narrative that will eventually become the direction for the entire industry! Publishing your own content and turning it into a reference for regulators puts you in this central position that can turn into a competitive advantage.
7/ Beware trade organizations
I love this quote from Chariots of Fire: “It’s absolutely fundamental: You never look.”
It’s from a scene in which the main character, Harold Abrahams, loses a race to another runner because instead of looking straight ahead in the last stretch, he turned his head to check on the man on his right, thus losing focus and a precious few milliseconds.
The startup world’s like that, too: at the earliest stage, you don’t have a second to waste on looking at what your competitors are doing. And it’s exactly the same when it comes to regulatory matters! That’s why I usually advise against joining a trade organization dedicated to lobbying the government. There are several reasons:
There’s a high probability that other members will end up being more feeble and more cautious than you, slowing you down.
Those meetings take time, especially when potential competitors are in the same room! The suspicion makes communication more difficult and the whole effort less effective.
I’m not saying that such organizations are bound to fail, quite the contrary! I’m saying that you should be shameless and use them as a free rider: send them whatever they need to succeed, but don’t allocate too much time or money to the effort. Let your competitors or whoever else take charge and then reap the benefits when the regulator, rightly pressured, finally moves in the right direction.
8/ Don’t point fingers at other startups
There’s a pitfall that must be avoided at all costs when dealing with regulators: never, ever denounce your competitors and their supposedly bad practices. Tech founders may be on the right side of history, but they still need to close ranks and support each other as their respective startups grow.
Startups have a higher chance of success when they’re part of an ecosystem that brings everyone together around the best practices. The reason why Silicon Valley works so well is precisely because local players don’t settle their disputes publicly — they just root out the bad practices and the bad people early on, before their venture turns into a full-blown debacle with the potential to harm everyone (and if that fails they’ll keep those outliers at arm’s length and feign indifference — as in WeWork’s case).
Don’t point fingers at foreign competitors either! When you’re in Europe, it’s very tempting to strike the patriotic chord and present yourself as the nicer local version of a US startup with a bad reputation. Alas, that rarely works.
Typically, it just brings your ambition down: if you’re the local champion, you might end up trapped in your local market—as happened with French startup Viadeo, which was once considered a direct competitor to LinkedIn.
Even worse, it tends to turn you into the government’s pet, with the minister in charge constantly citing you as an example and showering you with government money — the most toxic thing that can happen to an ambitious startup, since government money tends to come with red tape and compromises that impede your ability to achieve your vision.
You don’t want to be the local DailyMotion when YouTube is winning!
9/ Be wise when it comes to working with professionals
One piece of generic advice is never outsource a task that you haven’t done, and hopefully mastered, yourself. That holds true for lobbying regulators: you need to do it yourself and get a feel of the game before you deal with a specialized firm.
As always with startup advice, you need to adapt this depending on whether you’re before or after product/market fit. Before product/market fit, you certainly don’t want to hire a lobbying firm because you don’t even know what you’re lobbying for (and you probably can’t afford it anyway).
After product/market fit, it’s a different story: while it’s always better to do it yourself for a while, your growth rate could get so high that you really need to focus on the core business, delegating the lobbying stuff to another executive who could in turn rely on outside professionals. Keep it on your radar, though! Regulation matters.
10/ Keep pushing
Here’s something I’ve observed many times: Too many startups wage their pet regulatory battle and then stop when they’ve obtained enough concessions to move forward. But it’s much better to stay in the fight over the long term, even after you’ve reached your goals.
It might feel like fighting for more than what you need today and it might even enable competitors to race ahead of you tomorrow. But that’s what a thriving ecosystem is about: pay it forward to the next generation and create the conditions for others to launch challengers to your company. Ultimately, such challenges are a guarantee that you will keep scaling up your ambition rather than being content with what you have.
So don’t go straight to rent-seeking: keep pushing to benefit other startups, even if your company isn’t one anymore.
And don’t forget that no matter how you feel today, the wind can change direction on the regulator’s side because of one important thing: elections!
If those currently in power aren’t amenable to your arguments, maybe it’s better to not waste your time lobbying them: just make friends with their opponents, win them over to your cause, and hope that they win the next election, thus giving you friends in high places.
Conversely, it’s not because the ones in power have changed regulations to your advantage that you’re perennially safe. Maybe their opponents will win the next time, and things will turn for the worse! Here’s what Kim-Mai Cutler wrote in the article I commented on yesterday:
Even if you have one favorable politician now, it doesn’t mean you’ll have favorable politicians three or four years from now — especially if you don’t take the time to support a strong downballot bench of future leadership. There is almost a Newtonian law of politics in the sense that every force creates an equal or opposite force and if the technology industry moves into a city and doesn’t deliver a better quality of life for the average voter or constituent, a backlash and organized political opposition will emerge
Regulation, The Internet Way: A Data-First Model for Establishing Trust, Safety, and Security (Nick Grossman, Data-Smart City Solutions, April 2015)
Regulating the Trial-and-Error Economy (me, The Family Papers, May 2016)
How to Plan your Regulatory Hacking Strategy (video—me, The Family, January 2017)
New Technologies Need New Regulations (me, European Straits, August 2017)
Silicon Valley Fits Its Market Now: Time For A New Playbook(me, Forbes, February 2019)
What Trump Did to Silicon Valley (me, European Straits, October 2019)
What European startups can learn from the success of the fintechs (me, Sifted, February 2020)
Startups and public policymaking: a guide for early stage founders (Leo Ringer, Form Ventures, June 2020)
Regulation is Tech’s big blind spot — (or) — Why Form exists (Patrick Newton, Form Ventures, September 2020)
Fewer Regulations in America? (me, European Straits, October 2020)
Blindness is bliss, ignorance a curse (me, The Family’s Newsletter, December 2020)
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From Munich, Germany 🇩🇪
Nicolas
