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This Crisis Is a New Regulatory Minefield For Startups
Moments of change can create tremendous opportunities — and risks — for startups
Over the past few weeks the U.S. has passed the most comprehensive stimulus package since the Great Recession, and the largest-ever relief bill — with more likely on the way. This stimulus package represents Covid-19’s expansive impact on businesses, beyond revenue and hiring: substantial regulatory shifts looming, and the changing context in which startups and other entrepreneurial firms operate. These shifts both present tremendous opportunities for companies that can be responsive to the needs emerging from recent events, but also risks that are flat-footed in their response.
Are startups even regulated? (Yes.)
I distinctly remember a period of sleepless nights in late 2008 and early 2009 — working closely with the CEO of the fintech startup where I was leading business development — in preparing a joint proposal with a much larger incumbent company to bid on administering the Troubled Asset Relief Program (TARP) for the U.S. Treasury. We ultimately lost the bid and the winner, BlackRock, went on to become the largest money manager in the world (admittedly for many additional reasons, including this specific effort). Suffice to say: Moments of regulatory change can create tremendous opportunities, as well as risks.
In their early days, most startups pay little attention to regulation because many of them operate in sectors where government involvement is traditionally limited.
This time, as with any ground-shift in regulation, there will be winners and losers — and many firms that won’t be impacted much at all. A critical lesson for me from the 2008 to 2010 period is that founders who are wise to (and expecting) these shifts will be well-positioned to help their companies navigate the evolving and choppy seas. For many companies that have emerged over the past decade, recent events will present crucible moments — and some are ill-prepared for the changes they’ll need to make, including in how they think about regulatory shifts.
