In many ways, Facebook pioneered the modern startup ethos: “move fast and break things,” a mantra that’s defined many entrepreneurial ambitions for nearly two decades.
When applied to coding and creative endeavors, this idea can produce compelling results. But there are limits. As the Theranos trial has illustrated, there’s a need for oversight sometimes, and that’s particularly true in the sectors in which we most need innovation. Regulations govern significant parts of the US economy as everything from transportation and hospitality to healthcare and energy are protected by established oversight standards.
Going forward, the companies that offer the potential to truly change our standard of living will have to operate in regulated spaces. Many of these will also offer the biggest financial returns. These industries offer huge opportunities, but they also require sophistication not just in sales, or engineering, but in dealing with the administrative state. Often, regulators want to support healthy and beneficial innovation, just like entrepreneurs. But they need to be shown how to do it. That is a core challenge for entrepreneurs going forward.
Huge opportunities await entrepreneurs who can find the best way to interact with regulators and push innovation while operating within an oversight environment.
The Regulatory Impact
Regulatory oversight exists to promote fairness and safety.
It’s critical in many industries. We wouldn’t want to live in buildings not built to code, share a road with unlicensed drivers, or invest in companies that face no consequence for lying to the market. For example, the financial sector has a substantive and protracted history of inequality, and governments have a responsibility to promote equity and fairness within this critical sector.
At the same time, regulation can restrain growth, shifting more slowly than many fast-moving industries and innovations. Yesterday’s regulations don’t always support today’s realities. This is particularly true today as climate change requires a massive overhaul of existing energy infrastructure, including source diversification and delivery methodologies.
As entrepreneurs create new business models within the confines of a tightly regulated industry, they will need to work hand-in-hand with regulators to make new opportunities available and accessible.
This is emblematic of the opportunity entrepreneurs have to impact policy direction. While some will pursue this responsibility greedily, striving to alter existing standards to benefit their business’s bottom line, others will pursue a broader rationale – primarily that it’s good for a lot of people – when advocating for change.
Exerting Influence at the Intersection of Regulation and Innovation
Startups are in a unique position to influence policy decisions because they’re doing something new. They will bump into all the barriers that are accidentally or inadvertently in their way.
Because regulatory obstacles present an opportunity cost, entrepreneurs are incentivized to advocate for progressive regulatory policies that allow more people to thrive. To achieve the best outcomes when advocating for change, startups and entrepreneurs should:
- Look local first. Federal policy is important, but local standards are often more accessible and changeable. Assess your target market, and identify regulatory standards that hinder growth and harm people.
- Know your audience. Identify the people that will listen to support your perspective. Develop relationships with local leaders and leverage those interactions to better understand people’s needs and possible solutions.
- Demonstrate the impact. Self-interest won’t change policy, but many leaders are willing to listen to changes that improve people’s lives. Many startups are innovating critical sectors that change the way people work, play, and enjoy their lives, so updating regulatory standards is often a win-win for everyone.
Startups have the capacity to exert influence at the intersection of regulation and innovation. Embracing best practices will make their efforts more effective, helping them build the best products, services, and opportunities for the communities.
Don’t Shy Away From Change
Plenty of startups don’t require regulatory action, but many entrepreneurs avoid areas that might require regulatory change, assuming that it can’t happen. In reality, regulatory standards are constantly evolving, and startups can uniquely impact the laws that often define their success.
In short, as fintech, healthcare, climate, and other timely startups prepare to launch, they should focus on policy developments, ensuring that they are ready to advocate for the best regulatory standards that help the most people.
Michael Sachse is the CEO of Dandelion Energy. As the nation’s leading home geothermal company, the mission of Dandelion Energy is to mitigate climate change by making renewable technologies more accessible and decarbonizing homes. Today, Dandelion’s heating and cooling solutions for the 21st century allow homeowners to save up to 50 percent on their heating and cooling bills and help the environment by moving away from conventional systems to reduce homes’ carbon dioxide emissions by up to 80 percent.
Before joining Dandelion, Sachse was the Entrepreneur in Residence at New Enterprise Associates, a position that allowed him to cultivate growth opportunities in the startup space. A graduate of Amherst College and Harvard Law School, Sachse has served in multiple leadership positions across various organizations where he facilitated growth and operational maturation during his tenure.
Sachse sees sustainable living practices and environmental responsibility as foundational to our future and consequential to our collective good. Sachse’s multifaceted background, including work in legal, nonprofit, governmental, and corporate environments, has informed his efforts to advocate for local rules and regulations that incentivize a greener, more sustainable future.