3 Startups Scaling in Tough Industries
Industries like education, healthcare, energy, transportation, and smart cities — arguably some of the most essential to society — are just starting to see the potential of the digital revolution. With tech innovations, entrepreneurs and startups have opportunities to revolutionize the industries that directly impact everyday life. Plus, huge opportunities lie in these staler markets.
However, those same industries are also the most entrenched and regulated ones. So, how can those striving to scale world-changing products and services be successful when at odds with governing bodies?
The key is to not be at odds but instead scale by way of a strategy that 1776 calls Regulatory Hacking — finding the best ways to navigate the rules already in place as well as the news ones. Countless examples illustrate the value of engaging with government and other regulatory entities to disrupt outdated business models stifling innovation.
At 1776, entrepreneurs are working hard day in and day out to do just that — innovate with existing policymakers, who make the rules for just about every aspect of citizens’ everyday lives. As evidence of the strategy, three impressive 1776 startup members are working with government regulation to not only scale their businesses but to drive lasting change.
RideLeads and its CEO David Miller are helping to innovate and improve the taxi industry, where new entrants have threatened incumbents in recent years. RideLeads, originally launched with a self-branded e-hail app (in Washington, D.C.) as a service for taxis in 2012 but pivoted to become a “Universal Taxi App” provider which only sells software. Their platform equips the taxi industry to offer services similar to Uber, enabling ordering and dispatching nearby taxis easy for riders, strengthening the taxi industry.
RideLeads is different from services like Uber or Lyft for multiple reasons. First, RideLeads leverages a go-to market model based on a co-op business model, which empowers fleet owners and drivers. Second, serving only a technology provider, RideLeads does not claim ownership of the customer (the passenger), which is the industry’s most valuable asset. Finally, their software platform provides customers the option to pay either via credit card on file, or with cash in the taxi, and doesn’t require a credit card to sign up. The app is also compliant with Section 508 of the Rehabilitation Act. RideLeads displays taxis with handicap access on the map and even helps the visually-impaired by providing audio options.
The D.C. City Council passed regulation giving Uber the right to operate in the District last year. At the same time, taxi drivers gained permission to leverage flex pricing to allow them to compete head-to-head with TNC app companies, like Uber. The problem, however, was that drivers weren’t able to leverage their new rights without the proper technology. Ron Linton, the former chairman of the D.C. Taxicab Commission, established the vision for a universal app solution in response to that technology need. The new DC Taxi app, created and owned by the DC Government, and now available in the app stores, was built on or “powered by” the RideLeads Universal App Platform.
RideLeads joins a growing list of Silicon Valley software companies who “power” other apps or services. Other companies doing similar things include Urban Airship and Twilio. Similar to “Intel inside” for hardware, these companies power other companies’ products and services in the software space.
According to Miller, the hardest part of navigating the regulatory process has been stakeholder alignment. As a result, Miller believes, “You really need to pay attention to what regulation gets passed, and act quickly and accordingly. You also have to build relationships with those in both government and the private industry, and help them help their constituents.”
Current real estate lending is riddled with frustrating inefficiencies, regulatory hurdles, and costly fees. Yulia Yaani, a third-time entrepreneur, is working to reform the industry with Interactive Shares, an online “non-banking alternative lending” platform.
The startup was founded just last year as an online lender of small balance real estate loans ranging from $100,000 to $5 million. Its business model connects institutional funding directly to borrowers, focusing on debt to small multifamily and commercial properties. Interactive Shares’ technology allows it to partner with traditional lenders to fund the loans they cannot finance due to regulatory or capacity constraints.
Interactive Shares is the only online marketplace lender with a focus on small multifamily properties, the unsubsidized affordable housing that serve low-income households. The industry is projected to grow very quickly, giving the startup an undeniable advantage and an opportunity to set the standard for incoming companies.
Interactive Shares’ technological innovation, coupled with its location, make it the ideal partner for the Federal Housing Administration, Fannie Mae, and especially Freddie Mac. Freddie Mac is looking for transformative concepts for the small multifamily lending, making Interactive Shares a quintessential potential partner.
According to 1776, Interactive Shares is definitely a Regulatory Hacker.
With sea levels and temperatures rising each year, the topic of climate change is on the tip of everyone’s tongues, especially following the significant agreement to come out of COP21 in Paris. Climate change is an urgent and growing concern for federal and local governments – especially for hazard mitigation officers, flood plain managers, urban planners, and the like.
Vizonomy, a startup founded in D.C. just last year, is here to help with its real-time data platform for climate change risk assessment.
Vizonomy is the brain child of Ricardo Saavedra, a civil engineer with a background in climate consulting, who spent years helping the Federal Emergency Management Agency and other federal agencies understand the risk of flooding and rising sea levels. Over time, he realized that “many of the processes we used, like acquiring or soliciting data from different communities, were very repetitive.”
So, Saavedra came up with the idea of Vizonomy to automate the process and make it more accessible for any U.S. community. Excitingly, the White House within showcased Vizonomy just weeks after the startup launched in April 2015. Its founding is also representative of the convergence of multiple trends: an increased availability of open data at the local, state, and federal levels following Data.gov; a more powerful and diverse set of open source visualization and mapping software for data-driven applications; and a heightened awareness of climate risk following Superstorm Sandy and Hurricane.
How does regulatory hacking come into play? Vizonomy purposely targets local governments, rather than state or federal, because they allow Vizonomy to navigate a simpler procurement and skip the procurement process along with the hassle of difficult regulations.
Saavedra is passionate about helping people understand the risks and effects of climate change, and he wants Vizonomy’s strategy to be as fast and effective as possible through working directly with local governments. This integration of web and spatial technologies for climate risk planning is what Vizonomy calls Resiliency 2.0.
Scaling in Regulated Industries
Clearly, startups can take a number of routes to scale in highly regulated industries such as education, energy, health, and cities and transportation. Furthermore, a lot of startups are building brand new industries and still up against age-old frameworks. Many startups know that if they are to successfully infiltrate entrenched industries and implement real, lasting tech solutions for the better, working with governing bodies is not optional.
Some startups roll out modern versions of traditional public affairs and lobbying strategies, and some have fierce grassroots movements behind them for support. Additionally, keeping abreast of and capitalizing on the latest legislation, lobbying for more, and knowing where efforts can be most effective are just pieces of the larger puzzle that is regulatory hacking. In short, entrepreneurs need to prepare to engage governments and policymakers to scale their startups.