Tech startups go from political darlings to political punching bags
High-tech entrepreneurs suddenly find themselves in an unusual position: the political crosshairs. Candidates usually scramble to align themselves with innovators and job creators — often falling over each other to do so.
Over the past two decades, Washington has turned to Silicon Valley for answers and talent. Tech gurus have truly been the darling of the political class.
That seems to be changing. When Hillary Clinton addressed the sharing/gig/on-demand economy yesterday, she did so with a mix of admiration and skepticism, with perhaps even a dash of disdain mixed in.
Some of Clinton’s most direct remarks on the topic include:
Many Americans are making extra money renting out a spare room, designing websites, selling products they design themselves at home, or even driving their own car. This ‘on demand’ or so-called ‘gig economy’ is creating exciting opportunities and unleashing innovation but it’s also raising hard questions about workplace protections and what a good job will look like in the future … I’ll crack down on bosses who exploit employees by misclassifying them as contractors or even steal their wages.
Although she didn’t name them explicitly, numerous media reports linked the comments to Uber. The ride-sharing company faces perhaps stronger political headwinds than any other current high-profile startup. From local taxi regulators all the way to the White House, Uber has multiple fights on its hands.
But turning the tech sector’s most prominent innovators into a political punching bag has implications far beyond Uber. In part, it signals that the Internet ecosystem is growing up. It’s no longer the mysterious maker of wealth that politicians didn’t really understand. We’re now two decades past the Netscape IPO that electrified Washington and convinced the political class that the Internet should be worshiped for its economic and job creating powers.
It was once unthinkable to discuss taxing Internet transactions. Today, governments at all levels are looking at how to do so, with the notion of “Internet tax freedom” an almost lost concept.
The direct attack on the business models of so many hot startups these days — headlined by Uber and Airbnb — represents a new phase. It’s no longer nibbling around the edges, but actually zeroing in on the fundamental underpinnings of the new economic theory that emanates from Silicon Valley and other high-tech hotbeds.
Entrepreneurs — and their advisors — must be prepared to deal with this development. Although it’s a distraction from the things that most startup founders and their teams would prefer to focus on, it’s likely to become more volatile and attract more media attention as the campaign season continues for the next 16 months. And this isn’t just a minor distraction. Changing the entire business model of so many of these new companies could have a dramatic impact on the future of Internet entrepreneurship.
Rather than merely defending against these attacks as they erupt, high-tech startups need to prepare a proactive approach to dealing with the anticipated criticisms. It’s not a case where these companies can sit on the sidelines and assume that politicians will eventually understand and appreciate what they’re trying to do. It’s not a situation where entrepreneurs can merely assume that political gridlock will prevent any serious policy changes from taking place.
With populist political sentiment energizing the grassroots of both major political parties, this is not something that will resolve itself or just go away. It’s here to stay and high-tech startups, entrepreneurs, and investors need to be prepared.