Why Venture Capital needs Public Policy Teams
Technological progress exponentially shapes our economies, societies and ways to live (indeed maybe even on which planet we will live). New products, business models and technological solutions to the big (and seemingly small) problems of our time have always forced humanity to strike a delicate balance. Allowing for and actively pushing for that progress on the one hand and the needed legislative, regulatory and political guardrails for these technologies on the other given that they often challenge and change our existing norms and behaviors.
The purpose of most Public Policy teams in technology companies is to translate between the worlds of technology “the builders”, politics “the rule-setters” and regulation “the enforcers”.
It’s time Venture Capital firms start to build Public Policy functions to engage more directly in the debate between technological progress and the political and legislative reactions to it. The discussion goes to the core of their raison d’etre — pushing and backing entrepreneurs who are building cutting edge technologies and companies with the ability to ensure “powerful, positive change that endures”.
Both the firm and their portfolio companies would benefit from having the capacity to engage in a dialogue and building a base-level of understanding of the current and future legislative environment their technologies and products will have to operate in.
Entrepreneurs? Investors!
Venture Capital provides a unique vantage point as it places bets on new technologies and business models from BioTech, ClimateTech, HealthTech and FinTech to the Gig Economy to Autonomous Vehicles and Robotics to Crypto and Artificial Intelligence. VCs work with, support and get ROI from successfully injecting capital into companies that are at the forefront of a new trend, solution and technology that will scale rapidly and often re-define the way we live, work, interact, eat and consume for decades to come.
They have become incredible progress machines and unapologetically demand others to jointly imagine and then help bring about a different future. Change is the only constant or as Marc Andreesen argued in his much debated essay “It’s time to build”:
The problem is desire. We need to *want* these things. The problem is inertia. We need to want these things more than we want to prevent these things. The problem is regulatory capture. We need to want new companies to build these things, even if incumbents don’t like it, even if only to force the incumbents to build these things. And the problem is will. And we need to separate the imperative to build these things from ideology and politics. Both sides need to contribute to building.
Indeed the biggest problems of our time — if we use the UN Sustainable Development Goals as a yardstick as done by Atomico in their State of European Tech Report — are being tackled by the builders Marc describes and fueled by VC firms who help them to build better and quicker. Good Health, Clean Water, Affordable Energy, Sustainable Cities, and Climate Action are just a few of the SDGs which are being addressed by VC-backed technology companies.
Where Public Policy Teams (should) come in!
Elected officials and the public policy machinery are grappling with those very problems too, albeit from a different vantage point. Governments are deliberating about the right policy and legislative approaches to advance against their while the role of technology in helping to address these challenges has become increasingly clear. It has also opened up a whole range of discussions between government and tech companies. Indeed, we’ve come to understand over the past 10 years that there is a critical need for better and more interaction between technology companies and policy-makers.
Public Policy professionals focus on finding and building the mechanisms and processes to exchange information and knowledge about the technologies and business models on the one hand and the political goals and legislative trends they will bump into on the other.
If VCs are thinking long-term — placing bets in decades — then they ought to take into account and ideally actively shape the discourse and political thinking about the very technologies that are going to define our future.
So yes, do continue to build and focus on that! However, if you understand where the legislative puck is going early or bring societies and their elected officials along when a new technology is developed, you will become a trusted and responsible actor and member of the political discourse. In turn, it helps you guide your portfolio companies who will inevitably find themselves in these debates and issues when they scale.
So what exactly would a Policy team at a VC do?
There are 3 obvious areas of focus but I’d be curious for additional thoughts and ideas!
1 — Due Diligence on their investments — Does the founding team have a grasp of the legislative and political environment their product will interface with? What are plausible political and policy reactions to their product scaling quickly and does that reaction determine in part the long-term success and TAM of the business?
2 — Help portfolio companies spot & navigate legislative changes — Provide a “policy as a service” and keep an eye out on legislative trends and activities that will impact the ability of your portfolio companies to scale, expand and launch new products. Across the portfolio invest in building a political network on the verticals that are most likely to be affected by legislative changes.
3 — Build a policy-brand for the VC firm itself — Position the firm on a select number of policy debates that are connected to the verticals you are investing in and thus build the capability to advocate on these in the future. In today’s world there is arguably a moral imperative to speak up on certain political issues.
What did I miss? Do you think these would add value?
Have VCs not started to do this already?
Yes — to a certain extent.
Notable mentions here are
Atomico and their fantastic work on the State of European Tech report (Tom Wehmeier), Index Ventures and their highly influential campaign on Stock Options reform Not Optional (Vojtech Horna), as well as Sequoia who have created and hired Public Policy positions in India and the US. There are of course also VC associations like the NVCA which I think could be more powerful if their members had their own policy teams.
Many of these initiatives however are driven by the communications, research or marketing partners and teams in these firm — what stops them from creating a Partner-level position for a Public Policy professional or at least building out a small Public Policy group within the firm?
No better time than now!
From the future regulation of Crypto-assets to the definition of Gig-Workers and their social protections to providing health-care services over the Internet on-demand to the move towards renewable energy through new technologies — the political and policy debates about the balance between innovation and regulation are happening at this very moment.
In addition to building and backing new technologies to tackle the problems of our time I think it’s time VC firms build the institutional muscle and capabilities on Public Policy.
To go back to Marc Andreesen’s point — yes — regulatory capture is real and incumbents across all industries quite naturally have the ear of policy-makers because the rules they set were written with the current set of technologies and business models in mind, not those of the future. It should be in the interest of VCs to make sure that starts to change.
What are your thoughts and opinions on this? Are there notable examples of VCs who are engaged on this that I have missed? I’d love to be challenged on my thinking here!
