29/07/2019 - 16:10

"Is the Startup Founder and Lobbyist an Essential Partnership in Winning the New Versus the Old Cultural Battle?" by Soliman Chaouche

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The general public and the media generally associate lobbying with disreputable industries. Subconsciously, people continue to see it as synonymous with abuse and bad practices, despite efforts to educate people and make it transparent. Seen as the privilege of multinationals and blue-chip companies, few intermediate-sized companies, SMEs and VSBs are interested in lobbying. Misunderstood, “too expensive”, “no really measurable return on investment”, business people often consider the role of lobbying in an overall sales strategy of no value. From the point of view of start-ups, it would seem that what we often refer to as “public affairs” or “institutional relations” in business jargon is not a strategic priority either.

And yet, in these turbulent times when digital and new technologies disrupt traditional business models every day, creating new markets, the lobbyist is essential if, at the very least, you are to anticipate, or better still, influence the legislative and regulatory framework of the future.

 

The Lobbyist, a Necessary Middleman Between Business and Institutional Spheres

Focused on the value of their product, the continuity of their business model, the search for new customers, keeping an eye on competitors and also marketing strategy, the start-up founder is not particularly interested, if at all, in the legal or regulatory disruptions that could affect their business. And there is a reason for this! With a failure rate of 90%, often occurring in the second year of business, the primary concern of a start-up is day-to-day survival until it raises its first funds. We understand that a legislative procedure that is often several years long (between the draft legislation, its submission to Parliament and the publication of the implementing decree) is the last thing such businesses are concerned about. This is also true for the increasing number of European regulations, which can take nearly ten years to enter into force. And yet, such is the impact of new legislation that it can mean the end of a business. Just one section of law can sometimes undermine an entire business strategy.

In this context, the lobbyist’s role is vital: first, by looking out for the information that will help anticipate opportunities and risks connected with a legal text, then by acting as a middleman and sometimes even a translator between the business community and the institutional sphere, who do not always understand each other. They also counteract or obtain legal developments securing the protection of a business’s concerns.

 

Anticipation the Most Effective Strategy for Successful Lobbying

As start-ups are fundamentally innovation drivers, they very often disrupt whole segments of the traditional economy. The development of the so-called “new economy” and the collaborative economy, which undermine established businesses, illustrate this phenomenon perfectly. Making good use of an institutional network that has been around for many years, traditional businesses go so far as to lobby ferociously on a local to European scale, coupled with a legal dispute strategy, to defend their market shares. Take the dispute between hotel owners and Airbnb, not to mention between taxis and hybrid bikes. Although, with its considerable financial weight, Uber was able to shoulder the impact of the dispute, the business of its French rival Heetch was banned. It was found guilty “of complicity in the illegal practice of the taxi trade and unfair trading practice”. The company was obliged to abandon its innovative business model, based on the sharing economy, in France.

More recently and less widely known in Europe, but equally as informative, is the example of Josephine, a symbolic start-up of the Food Tech in the United States. Also based on the sharing economy, its co-founder recently announced that it had ceased business. The main reason was poorly anticipated regulatory hurdles and lobbying too late.

The two cases demonstrate the importance of implementing a public affairs strategy at a sufficiently early stage to enable the formation of a network of political allies and stakeholders (other business concerns, community and consumers), to anticipate any legislative development, if necessary, and to lobby vigorously to protect the business model and the people who benefit from it. Although the return on investment may seem a long way off, the “early stage” is the most promising window of opportunity, on condition that some of the resources from the risk capital funds can be directed this way.

 

Capitalizing on the New Blood in Politics to Launch a Lobbying Campaign. 

Start-ups across the Atlantic have long integrated the institutional approach in their overall strategy. Although the lobbying expenses of the GAFA have now exceeded those of the automotive industry, smaller digital companies are also taking this route. In France it is harder to take this leap. A rationalist approach to the common good, a legacy of Rousseau’s philosophy, has been running through French politics since the revolution, and it resists even the smallest of private interests. The federations and associations that were created in the sector in recent years to act as an intermediary (France Digitale, France FinTech, France eHealth, etc.) herald a change of paradigm. But these still remain confined to lobbying in favor of general subjects (self-employed worker status, sharing economy, access to private data, etc.). French start-ups shy away from lobbying on a small scale. Yet, the new blood in politics following Emanuel Macron’s election represents a golden opportunity.

The President of France supports the development of a “start-up nation” and has also introduced several business people into government. If ever there was proof that the environment is favorable, this is it. Several parliamentary panels were created by the new legislature, like the “SME” group renamed “Start-ups and SMEs”.

Nothing could be timelier in winning the cultural battle between old and new than an alliance between start-up founders and lobbyists… before the start-ups themselves disrupt the traditional lobbyists.

 

Soliman Chaouche