This is how my initial conversation with a founder or CEO of a startup in a regulated industry typically goes.
Me: “You guys are potentially regulated by x, y and z. They may not like what you’re contemplating. How do you plan on dealing with that?”
Them: “Well, we’ll just do what TK did, right? We’ll do what we need to do for our business and work it out with the regulators later. Worked for Uber, should work for us.”
Me: (shifting uncomfortably in my seat, wondering why they’re referring to Travis as TK if they don’t really know him): “Maybe.”
Every startup in a regulated industry at some point faces the question of how to proceed when something they want to do might be looked upon unfavorably by a regulator or a politician. There’s no blanket answer on whether it makes more sense to just move forward anyway and deal with the fallout (begging for forgiveness) or to work proactively with the regulators and electeds before launching (asking for permission). It depends on the activity you’re considering, the jurisdiction, the laws on the books, the entrenched interests in the space, and a number of other factors.
Here’s a primer on how to best evaluate how each factor impacts you:
Can you count on outside support? Uber’s historical approach to regulation works because of a very unique context: they are disrupting an awful incumbent (taxi) who has treated everyone poorly for decades, refused to innovate or improve, and whose only support comes from making political contributions. At the same time, Uber offers a strong, reliable product that people like and frequently use. The threat of losing that product motivates people to advocate on Uber’s behalf to regulators and politicians.