Whether it is paying federal taxes, deciphering New York City’s complex permitting processes or navigating the State’s maze of regulatory environments, many businesses — and especially startups — often view interaction with government as burdensome. Such an outlook, however, is narrow and short-sighted.
Regardless of a company’s specific market, businesses that are savvy enough to realize the importance of building good relationships with government stakeholders, especially elected officials, often see a return on the time and energy spent investing in the development of those relationships. When utilized effectively, such relationships can yield serious economic benefits for a company’s bottom line.
Similarly, overlooking the impact that government can have on a company’s operations can be of significant detriment to a business’ financial outcomes.
Here’s a guide to why and how startups can engage government.

Navigating a regulatory shift

One of the most blatant manners in which government can significantly impact a business is through regulatory shifts. This is especially true when a company is attempting to disrupt a pre-existing industry. Whether it’s a regulatory action administered by an executive branch agency or new laws passed by a municipal or state legislature, regulatory changes can have a substantial, and sometimes damning, impact on startups.
Zenefits, a human resource software company, experienced this impact first-hand when the Utah Insurance Department Market Conduct Division’s found that it was operating in violation of Utah’s insurance inducement and indirect rebating laws. In this instance, the executive branch regulator took an action that essentially forced Zenefits out of an entire state’s market, potentially costing the company a significant amount of lost revenue.
Zenefits subsequently relied on a legislative remedy. In the following months, the company waged a public affairs campaign, engaged amenable legislators and was eventually able to obtain the passage of legislation that effectively reversed the Insurance Department’s ruling.
At the bill-signing, Utah’s governor touted the legislation, stating that “government needs to be able to work with these innovators to ensure strong and efficient economic policies and an open marketplace.” Indeed, it helps to have friends in high places.

Don’t wait till it hits the fan

While Zenefits’ experience unfolded in Utah, businesses in New York City, especially startups, should be aware of the general impact that shifting regulations can have on their operations and bottom line. In the instance of Zenefits, having allies in the legislature was essential to the success of its regulatory strategy. Here in New York City, it’s no different. That being said, it’s much easier to identify those allies and build relationships with them before the storm hits.
In this sense, it can be strategically beneficial to engage elected officials such as City Council members and state legislators proactively. Doing so allows companies to engage politicians in a neutral environment and shape the conversation, rather than being stuck engaging an elected official under duress when a company may be scrambling to play defense. It’s also a way for businesses to preemptively shape the regulatory environment.
While there are many varying ways that businesses can engage elected officials, the most impactful and fruitful interactions will include substantive and informing dialogue about a business’ industry, its challenges and the positive impact it is making. Doing so frames the company as an educational resource to the elected official and also helps to build trust — an essential component to any business relationship.

Playing ball on both sides of the court

Engaging elected officials should never be a purely defensive strategy, as politicians can also offer proactive assistance to startups and in several different capacities.
During my tenure as the head of economic development for the Brooklyn Borough President, I often worked with startups to help them positively engage government and fostered connections to executive agencies that administered as-of-right tax incentives and even direct investment. We were also a great resource for businesses that wanted to learn more about Brooklyn’s market potential.
Indeed, it’s important to remember that elected officials are leaders in their respective communities. To this end, they can also help startups identify potential private-market opportunities through general guidance or even direct introductions, especially if they realize the benefits, such as jobs and investment, that a company can bring to their respective constituents.

Something is always better than nothing

It’s essential for startups to recognize that government, can, in fact, positively or negatively impact their business, especially when a company is attempting to disrupt a previously entrenched industry. More often than not, existing industries have utilized public policy to protect their own interests and investments. There is no reason that startups shouldn’t engage the public sector strategically as well.
Thinking proactively about the role that elected officials — both in the executive and legislative branches — can play in a company’s current and future growth can yield significant returns on that company’s investment of time and energy. Not doing so could cost them dearly.