What explains the growing number of collisions and collaborations between law and entrepreneurs? How are startups responding? What are some of the implications of these developments? I explore these questions in a new book chapter, available here, and forthcoming in The Handbook of Law and Entrepreneurship in the United States (D. Gordon Smith & Christine Hurt eds, Cambridge University Press).
Beginning with recent history and startup culture, the chapter identifies four developments contributing to the rise of regulatory affairs in innovative startups. First, with mature technology and widespread internet connectivity, many twenty-first century startups have focused on innovations in the physical world. This means startups are creating new products and services in industries that are situated in webs of regulations. Second, a generation of engineers has grown up in a culture of “hacking” problems and pursuing “permissionless innovation,” which has fostered a willingness to create technology that challenges existing legal frameworks. Third, in recent years, established technology companies and their individual leaders have modeled a new level of political engagement that may also affect norms and expectations for startups. Fourth, changing market trends and regulations have helped startups stay private longer on average and, in some instances, raise millions or even billions of dollars that can be used to fund efforts to lobby, change laws, engage experts, and battle incumbents and regulators.
After examining why startups are frequently bumping up against regulatory issues, the chapter looks at how the startup community has responded by bringing in and creating new opportunities for individuals with government and policy expertise and connections. Examples abound across different types of startup participants, including board members, employees, investors, and consultants.
Finally, the chapter takes up one of the fascinating implications of startups colliding with regulations and having the expertise to navigate politics and policy—that the story of legal change is not as simple as sometimes portrayed, with the law always lagging behind technology. Although the law may often fall behind the times, there is also evidence of a more collaborative new governance model. Lawmakers are concerned about making room for innovation to flourish. Entrepreneurs have found ways to have a seat at the policy table. The chapter contends the “lagging law” story is therefore worth re-examining in light of private and public collaboration in the governance of innovative technology.
Elizabeth Pollman is Professor of Law at Loyola Law School, Los Angeles.