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Knocking on Government Doors: Why should companies knock on government doors in the first place?

Irene Liu  Executive in Residence / UC Berkeley / School of Law and Founder / Hypergrowth GC

· 6 minute read

Irene Liu  Executive in Residence / UC Berkeley / School of Law and Founder / Hypergrowth GC

· 6 minute read

In a new blog series, “Knocking on Government Doors”, Irene Liu, the CLO at Hopin, shows how proactive engagement can help companies with their government relations and policy strategies

With boundless ideas and desire to innovate, tech startups and their founders desire to move fast, disrupt the status quo and bring their innovation to life. “Move fast and break things” — Facebook’s well-known motto — became the anthem for many startups who believed that their companies and products are changing the world.

Startups often view themselves as disruptors of traditional industries; and in order to grow quickly, they attempt to operate outside the framework of existing laws and regulations or ignore those laws altogether. They figure they can ask for forgiveness later because after all, it’s important to take risks, and asking for permission beforehand might take too much time. While this growth strategy may work in some instances, the reality is that the regulators can be an ally or your worst nightmare to your strategic growth — indeed, some regulators may not easily forgive. And regardless of the size of your funding or how many consumers love your product, the government can make or break the success of your startup.

Lessons from the e-scooter wars

Take for example, the electric scooter industry in San Francisco. Around March, three scooter companies — Lime, Bird and Spin — flooded the streets of San Francisco with their motorized scooters. They came into the city unannounced and kicked off a new transit trend using the playbook Uber had used in its earlier formative years — launch in as many markets as possible without permission, win consumer hearts, and ask for forgiveness later.

These e-scooter companies dropped their scooters all over the city streets suddenly without warning nor permission from the city. Within days of its launch, San Francisco’s 311 Customer Service Center received nearly 1,900 complaints regarding scooters between April 11and May 23. In June, San Francisco ordered all electric scooter companies to remove their scooters from the streets and cease operations. The city then required all of the scooter companies to apply for permits before again operating in San Francisco.

Similar bans of electric scooters happened in other cities throughout the U.S. In August, San Francisco announced the e-scooter companies eligible for its one-year pilot program. To the surprise of many, San Francisco shut out the largest players, Lime and Bird, among others, for the pilot program and instead issued permits for electric scooters to the new kids on the block, Scoot and Skip. Bird and Lime’s original decision to drop their scooters onto the streets of San Francisco and ask for forgiveness later may have factored against them; now, they’re banned for one year from operating in one of the largest urban markets for scooters.

While these experiences can be painful to a company’s growth strategy, these companies learned an important lesson from these experiences — reactive responses to government leads to adversarial contact with regulators. Also, it is important to develop relationships with government stakeholders early while there are no issues. As a result, Bird CEO Travis VanderZanden is now “doubling down” on proactive outreach and collaboration with the government. It recently announced “Gov Tech” collaboration with cities, to make electric scooters “the most community-focused, people-friendly, car-reducing, and safest mobility solution.” Lime also hired reputable policy leaders, including its new general counsel, Lindsey Haswell, to help lead its growth, risk management, and policy decisions.

It’s a smart move by these companies to hire such leaders and increase collaboration efforts with the government given the increasing number of cities introducing new regulatory frameworks to manage the deployment of e-scooters on their streets. Because shared e-scooters are a completely new concept for cities, many are figuring out strategies to manage e-scooters, and it’s helpful at these early points of policy development that companies engage to help the government stakeholders think through the issues and shape regulations and bills.

Engaging with regulators before they regulate you

The e-scooter industry had to learn this lesson through painful ways because of their reactive strategy in the companies’ early years. But other companies and industries do not have to suffer the same folly. They can leverage the learnings of other companies and industries before them and proactively knock on government doors of those entities that already regulate or may regulate their products.

And while the government says it wants to foster innovation, the reality is that they do not like surprises from companies. If your company or product is entering a new industry and if there are existing laws in place that could potentially regulate your product, you should consider engaging government regulators early and introducing them to your company and your products. Go in without any “asks.” If you can get in before they’ve even thought about the issues, you can then help shape the policy or regulation before it is even drafted and lay the groundwork for a long-lasting interactive relationship.

Even if you think your product is outside the scope of existing laws, it could be worthwhile to meet with regulators early on in order to explain how those laws do not apply or should not apply to your product because it’s possible that regulators may consider the product as under their regulatory authority.

We’ve seen technology companies battle traditional laws time and time again — Airbnb with hotel regulations, Uber and Lyft with taxi regulations, coding academies with education licensing regulations, etc. So, it’s possible your company could also endure the same battles with regulators unless regulators are made to understand how your product fits or does not fit within the laws.

Because it can take time to engage and educate regulators on a new business model or the latest technology or product, it’s worthwhile hiring policy or government relations professionals on your team early. Just like PR professionals who communicate companies’ brand to consumers, policy professionals are trained to communicate your company’s brand, product, or newest technology to government regulators and third-party groups. These policy professionals can help government stakeholders understand your innovation, especially if it is disrupting existing laws and regulations.

When engagement is done early and proactively, it can also influence new policies and programs and protect the reputation of the company. And if you go in earlier than other players, you will likely be viewed by regulators as thoughtful industry leaders, which can foster a deeper collaboration and interactive relationship with your regulators.

Check out the full blog series, Knocking on Government Doors, by Irene Liu, CLO at Hopin, here.

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