7 Things Tech Startups Need to Know about the 2020 Election and Beyond
With the 2020 Election at our doorstep and prospects for a razor-thin Senate majority on the rise, it’s important to prepare for whatever the outcome may be. As political shifts in Administration and Congress will have impacts on how tech startups are perceived, actualized and regulated, now is the time to plan.
New ventures don’t always prioritize public affairs, leaving them vulnerable to a crisis or regulatory forces that have gained critical momentum. The fallout can leave tech startups vulnerable. Awareness of the political environment cannot be understated, and this year, that awareness is more important than ever.
Tech startups need to keep top of mind the three major themes that may dominate how Washington operates in 2020 and beyond: a heavy focus on COVID mitigation and recovery; executive orders issued during the first 100 days on a new presidential term; and, a keen understanding that promises made on the campaign trail don’t always translate into actual governed policy.
With the November election looming, tech startups will be better positioned to navigate the regulatory environment by planning for the following seven issues:
1. The differences between divided government and unified government. Whether or not one party has full control of the legislative and executive branch will have huge implications for tech startups. A unified government will be able to pursue its tech agenda much more quickly and aggressively whereas a divided government will succumb to compromise, thus slowing down the regulatory process to find areas of agreement. Preparing for both scenarios as well as identifying who is aligned or opposed to your business approach will help determine both allies and adversaries.
2. Charting a regulatory path yields benefits. Tech startups are in a unique position with regulators as some parts of their business may be within an established regulatory regime and for other parts, it might not be so clear. In some cases, engaging with regulators early in the business development phase benefits tech startups by reducing regulatory fear and uncertainty by establishing a dialogue with regulators where developments can be shared, feedback can be received, and, possibly even influence the process. Within the federal government, there are many agency innovation offices who exist solely for this purpose.
3. The rapid change and uncertainty of privacy. There are several debates impacting privacy and comprehending how to comply and calculate uncertainty creates uncertainty for small and large companies. Ongoing Transatlantic issues include EU’s General Data Protection Regulation (GDPR) and the EU-US Privacy Shield. Domestically, the California Consumer Protection Act (CCPA) debate rages in California while other states consider similar measures. For Big Tech, compliance is a drop in the bucket. But for startups and small business, regulation and enforcement around consumer privacy policies can have much bigger implications. Startups should think about how privacy laws may impact them and make sure policymakers understand their concerns.
4. The role of the Federal Trade Commission. When it comes to federal government oversight for many tech startups, the most relevant regulatory body is the Federal Trade Commission (FTC) And just because a tech startup may be small, does not make it immune from investigations. Unlike some regulators, the FTC might not be a friendly collaborative partner as the agency often seeks to find and make an example of bad actors. Be aware that competitors can report on other businesses to gain competitive advantage, leading to unfortunate ends for the party on the other side.
5. Potential for antitrust scrutiny. Big Tech is already under the microscope, subjected to Congressional hearings and the focus of a House Judiciary Committee investigation. Both sides of the aisle are considering whether existing antitrust governance can properly address large digital corporations – particularly ad-based models where consumers don’t pay for services. In addition to possible legislative changes, this investigation could have a chilling effect on the interest of large companies under scrutiny to acquire smaller ones and instead increase incentives to compete against and innovate around them.
6. Complications and barriers to content regulation. Section 230 of the Communications Decency Act which provides digital platforms a legal shield from content posted by users is currently a target of reform by both sides of the aisle. Democratic -centric regulation could mean more burden on platform censorship and a GOP-centric regulation could mean threats to encryption and more leeway on political discourse. Nearly any change to Section 230 could cause immense burden on smaller operations. As with the FTC, being small doesn’t equate immunity from regulatory measures.
7. CARES Act and general pandemic response should be carefully considered. Startups should think politically about the long-term implications of accepting federal government COVID relief funds in the short-term. The immediate result might be staying afloat but the end result could result in a hit to a tech startup’s reputation. Accepting government relief funds opens the gates to the possibility of enhanced oversight and the risk public scrutiny as these transactions will eventually be out in the open.
Navigating government doesn’t have to overwhelming if tech startups take the time to plan and understand the key issues, as well as how to evolve under a variety of scenarios.
For more on each of these issues, watch the livestream of FTI’s presentation at DC Startup Week 2020.
