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When you’re a disruptor, you’re going to make waves – whether you’re delivering goods by drone, renting out that urban apartment, or launching an autonomous ride-share. As a disruptor, you’re likely going to act first and seek permission later. And as you do so, you’ll inevitably bump up against regulations, bending them and testing them as you push the envelope with your technology.
It’s an inescapable part of the creative and entrepreneurial process in an age when the old rules don’t always fit. For any startup looking to break through in a regulated or soon-to-be regulated environment, it’s important to remember that new technologies are also new to regulators. It can often feel like the rule makers are trying to apply old paradigms to a new space, but it doesn’t have to be a constant battle.
Every company working without a regulatory template behaves differently. Understand that working to remove barriers and to make business more consumer friendly in today’s digital age is a journey. It takes tenacity and building relationships with regulators. With that mind, here are five rules for how you can work with regulators while helping your company and – most importantly – your customers.
1. Understand the rules of engagement. Good business gets done with good relationships. Startups constantly create new technology at the same time regulators are trying to set policies around it, which makes it important to have good and trusting relationships with them. Having a good relationship with regulators can allow you to point out the challenges a regulation presents while understanding what the regulators are really trying to accomplish and why. Approach each conversation with a mindset that the other party is operating with the best of intentions and keep an open mind.
2. Be first. Being first – with a new product or feature, or in a new market – means you can be the baseline for rules that others will follow as regulations become refined and formalized. In many cases, regulators don’t know what they don’t know. They base their approaches on the past. Especially in newly regulated areas, sitting back and waiting for somebody else to lead is often not the best practice. When Tesla announced it was the first to offer self-driving capabilities in all of its electric vehicles, that was a prime example of setting the par for the course. That doesn’t necessarily work for everyone, but sometimes regulators need you to take action so they have something they can react to.
3. Be tenacious. Failure is a constant when you’re dealing with a newly regulated or highly regulated environment. You’re going to try something and regulators may say “you can’t do that” or “that’s not within the boundaries of what we’re trying to accomplish.” So you’re going to fail, feel deflated, and have concerns about the expense involved. Their response may feel detrimental to your business model or to what you’re trying to disrupt. It may require product changes or business-model changes. The reality is you will break through if you are tenacious. You’ve got to keep at it until you do break through to define the market space and define the rules of engagement. Then you’ll go – and grow – from there.
4. Set priorities and work sequentially. You can’t take on everything at once. Identify priority markets and work from there. I work at DocuSign, for example, so we’ve been dealing with the legality of electronic signatures for quite a while. The construct for legality for electronic signatures in the U.S. has been around since 2000, but refinements continue to play out in many states and even internationally. In Europe, before new regulations took effect on July 1, 2016, we worked in partnership with regulators to lay the groundwork for policy. We didn’t try to go after the European market at the same time we were going after the U.S. market. But because we had already experienced regulations in the U.S., we were ready. And in both cases, we took a customer-centric approach operating with what would most help our customers achieve success, which leads to the last rule.
5. Educate your customers. Your customers want you to take the risk. You’ve disrupted something in a way that is interesting and valuable to them. But they also have a lot of questions: “Is this legal? Can I use it? Is it better than how I do it today?” Being able to give them the confidence that you’ve done your homework – that you have the use cases and case law behind you – becomes very important. Customers can also be a great source of help in the conversation with regulators. After all, those regulators are in the very business of helping protect and empower customers (and presumably so are you). If your customers are saying, “We really want this” and “We really should be doing it this way,” it can be a very powerful influence in terms of guiding the future direction of laws or regulations. Align your approach with your customers and regulators will often follow.
Now: ready, set, disrupt!
Reggie Davis is General Counsel and Chief Legal Officer at DocuSign. He previously served as general counsel and EVP at Zynga, where he successfully brokered 48 acquisitions and oversaw the company’s IPO. Before Zynga, he spent nine years at Yahoo and was a partner at Hancock Rothert & Bunshoft (now known as Duane Morris).
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