| RANCHO PALOS VERDES, Calif.
RANCHO PALOS VERDES, Calif. May 30 Internet
startups are starting to see what could come between them and
their ambitions: regulators.
Recent lawsuits and government investigations into
high-flying "sharing economy" services have put the issue front
and center. Now, Web companies developing services in everything
from healthcare to transportation are crafting strategies for
working with government agencies.
That's a marked change from a few years ago, when the mantra
was, "Grow first, worry later."
"The issues of an Internet company 10 years ago were
different because you weren't affecting the real world," Travis
Kalanick, chief executive officer of car-ride service Uber, told
Reuters at the Code technology conference in Southern California
"Once you get in the real world, you've got a whole other
thing you've got to deal with, and that's where regulations and
regulatory bodies and politicians and campaigns and all this
stuff come into play."
This month, 15 taxi companies in Connecticut sued Uber for
skirting state and federal regulations. The company faces
scrutiny in several other states as well.
Kalanick said he would fight back with a "political
campaign" employing consultants, lawyers and grassroots tactics.
As Internet services shake up industries, they must answer
to state and local agencies. Take California's little-known
Bureau of Private Postsecondary Education, which threatened
several computer coding "boot camps" in January with closure and
fines unless they got licensed.
To some startups, the lessons of Uber and home rental
service AirBnB, which is disputing claims by New York's attorney
general that some of its users effectively operate as illegal
hotels, are cautionary tales.
"The day after we got incorporated, our first call was to
our lawyers to discuss all the regulatory issues," said the
founder of a health app startup, who asked not to be identified
because his company wants to keep a low profile.
"If you're diagnosing somebody with something, all of a
sudden you put yourself in a situation where you are going to be
regulated pretty heavily," he said.
The proliferation of health apps, such as those that monitor
heart rates or sleep patterns, could mean more Uber-like
In November the U.S. Food and Drug Administration warned
Google-backed genetics startup 23andMe to halt sales of its $99
DNA test kits, because it had not received clearance from the
agency. The company stopped offering consumers health reports
Tech industry insiders say they understand the need for
consumer safeguards, but they argue that regulations can be
abused by businesses fending off upstart rivals.
Wesley Chan, a former Google manager, noted that the Federal
Communications Commission in 2009 opened an inquiry into Google
Voice, a voice service he helped launch, after complaints from
"Running to regulators is one tactic that they can use to
thwart your growth," he said. "It's an unfortunate fact, but one
where you have to just be faster, stronger and better at playing
the game than the incumbents."
(Editing by Douglas Royalty)