companies is KeepTruckin, which provides truck fleets with electronic tracking of truck movements to make sure drivers aren’t clocking an unsafe number of hours on the road, Niehenke says. He’s on the company’s board.
Tech firms have broken into regulated fields in two different modes, he says. One of them is the disruptive steamroller model initially pursued by Uber and Airbnb, which took the stance that prevailing regulations governing taxi licenses and hotel taxes didn’t apply to them.
That “high-risk, high-reward” strategy can work when companies have mass appeal and can attract a large customer base fairly quickly, Niehenke says. Their leverage over regulators is to say, in effect, “We’re going to have so many happy users that as regulators, we dare you to shut us down,” he says.
But that plan doesn’t work in industries such as insurance, where startups can’t sign up a single customer without complying with regulations, he says. In any case, the current trend is for tech companies to dig in and work with regulators to influence the rules in their own favor, Niehenke says.
“Uber and Airbnb both have so many lawyers employed full-time that they could operate a small law firm,” Niehenke says. “Google has become one of the largest political contributors.”
That shaping of regulations to suit established tech companies could set up a new cycle of disruption for the next generation of startups, Niehenke says. For example, if Uber and Lyft achieve monopolies in city transportation, and use their complete control of pricing to hike up rates, they could trigger a backlash from consumers demanding government antitrust measures, he says.
“Uber could become the quickest company to de-regulate an industry, only to re-regulate it,” Niehenke says.
Photo courtesy of Scale Venture Partners
