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7 Ways Laws Can Avoid Killing Startups

The great Sir William Blackstone was an English jurist and professor who produced the historical treatise on the common law called Commentaries on the Laws of England. He once said that, “the law, which restrains a man from doing mischief to his fellow citizens, though it diminishes the natural, increases the civil liberty of mankind.”

What this means is that the purpose of the law is to help a society remain fair and just. For a city to become great and startup-friendly, it must maintain a legal environment that facilitates innovation and disruption.

1. Signaled Stability from Legislators

Having elected officials who signal a stable environment that is conducive to business is paramount to a successful startup city. An example of this would be when Governor Doug Ducey of Arizona made public and written statements that Uber and Lyft could safely operate in Phoenix without being hassled by burdensome rules and regulations.

For innovation to happen, innovators need to know that their products or services will be respected by the law and not hindered.

Elected officials can have “business freedom tours”, meet with CEOS of high job, revenue, and growth companies. Not only that, meeting with Venture Capitalists, Angel Investors, and Incubators can help encourage growth and innovation within the city. 

 

2. A Consistent Government

Having a government and legislature that is consistent, is also crucial to creating a city that is startup-friendly.

If a government fluctuates between massive regulation and open freedom, it’s hard for the startup to determine if it will be hammered or helped by the government.

In other words, minor deviations are fine and the expected norm of society, but there needs to be a general consensus in the government if it will support startups or not. If a city really wants to create the startup culture, then it needs to recognize the role of government, which is to maintain fairness in the marketplace and enforce contracts, not pick winners or losers among companies.

3. Rethink Non-compete Agreements

Perhaps one of the most limiting factors in startups and innovation are non-compete agreements, non-disclosure agreements, and non-circumvention agreements.

Yes, these all can be viewed as good, from the perspective of the employer. Taken from the perspective of the consumer and marketplace, these are bad.

And yes, every big company has these, and that’s a problem. Many entrepreneurs have fantastic industry experience that they can leverage to create new companies, but are restricted because of these agreements. Remember, the point of these agreements it not to serve the public, it is to protect the company.

Barriers put up by these agreements can be reduced by making changes to existing laws and employment agreements. A better way to increase innovation and reduce competition is to create a company and workplace that fosters these two things, while creating the proper incentives that motivate people to stay, instead of go off and build their own companies.

4. Reduce Professional and Occupational Licensing

Before you cry out, “what about public safety?!”, consider the following. The purpose of licensing is to protect the profession by limiting the number of folks within the profession. This translates to higher wages for those within.

Sure, licensing and registration can be great if you’re already within the profession. But for those starting out, entrepreneurs, and low-income people, these arbitrary licensing agreements are disastrous, preventing good people from getting into the marketplace.

This isn’t a Republican or Democrat thing. This is back to the idea that if a city wants to cosmic growth and an environment that creates startups and innovation, it has to make the hard choices that actually facilitate this.

If you want innovation in the areas most precious to people’s lives such as healthcare, education, government, and energy, then the barriers to entry must be reduced.

5. Create a Regulatory Hiatus

Lastly, moving, operating, and growing companies is difficult in itself. If a city wants to market itself as the place to be for startups, it needs to create a 12-month regulatory hiatus so that transplants can adjust and build a foundation. 

Even better, lower the amount of rules, regulations, and taxes enough that a hiatus isn’t necessary, so that regulations don’t hinder small businesses.

6. Streamlined Approvals and Guidelines

Rules are tough to follow and laws are difficult to ascertain. If you don’t believe me, spend 10 minutes trying to understand your state statutes.

First, make the guidelines, rules, and processes as simple as possible. This means eliminate paperwork. Make everything able to be done online, quickly, and cheaply. 

Don’t put people on hold, don’t force entrepreneurs to go in-person, and don’t make it take forever to get something approved.

Second, things like land-use and zoning regulations are often reported as big concerns for entrepreneurs. Part of this is because many entrepreneurs start their businesses from their homes (to save money). A starting point would be to have zoning be as local as possible with clear and transparent guidelines as to what it takes for approval, with a quick-decision at the end of it.

Think about it this way, difficult and long waiting times are in many ways a de facto rejection and denial to do business, because entrepreneurs are forced to float cash, postpone ideas, and delay customers.

7. Smart Traffic Laws

In 2013 traffic congestion cost Americans $124 billion in direct and indirect losses, this number will rise to $186 billion in 2030. Evaluating both direct and indirect costs, the study found that in 2013, $78 billion resulted from time and fuel wasted in traffic (direct costs) and $45 billion was the sum of indirect costs businesses passed onto American consumers.

This is bad. Real bad.

The purpose of roadways is to create a conducive way to travel. This means that commuting is efficient, safe, and common-sense. Laws increase speed limits, enforcing “stay right to pass“, and penalizing bad drivers should be enforced.

One of the worst things a city can do, politics aside, is remove 1 lane from traffic during peak hours of house (morning & evening). Basic economics would tell you that if you take away one lane during the busiest time of day, you’ll have worse traffic. We’ve all been on the freeway, bumper to bumper, while the HOV or carpool lane is wide open. This is crazy.

Cities should be concerned with how to most quickly get people to and from work safely and efficiently. The metric should be commute-time.

Your Next Steps

Be involved, get to know your elected officials. Spend the time reading and understanding what is behind somebody’s politics and what political decisions actually help startups. 

When a city decides to be a home to startups or not, there are laws associated with this. Be smart, be aware, and be an advocate for your startup community.

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Jeremy Webb

Chief technologi.st & Adventurer about.me/jeremy.webb

Jeremy Webb7 Ways Laws Can Avoid Killing Startups

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