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The Political Startup's Rocky Road [Campaigns & Elections](Campaigns & Elections Via Acquire Media NewsEdge) Why basing a startup in D.C. could spell doom... or not People think launching a campaign startup in Washington, D.C. is easy. It's where the money is, after all. And most national spending decisions are made in buildings along K Street or around the U.S. Capitol. So wouldn't it be easy to just lease some office space, hang a shingle, and get a piece of the $6 billion being spent on winning elections? Wrongsort of. I speak from experience. I launched a political startup in D.C., and some of the challenges we encountered thanks to our geography are obvious only in hindsight. So what follows is some food for thought for anyone thinking about launching their own startup and struggling with where to do it. Where's the Action? This is the first critical question you must ask. We're designing and developing a startup called VoteRaise, a platform to apply crowdfunding to campaign finance. While a great deal of fundraising, and all of federal compliance, needs to be done in Washington, most campaigning doesn't actually happen in D.C. It happens in the rest of the country. Anyone working on a campaign is going to be in the lawmaker's district or state most of the time, not in D.C., especially if they're a challenger. Consequently, it takes a lot of effort to connect with people currently staffing campaigns, and face-to-face meetings are usually not possible. And there aren't many events focused on politics, campaigning, and technology. Still, it's not all a bridge too far. Congressional races happening in Maryland, Virginia, Delaware, West Virginia, Pennsylvania, and New Jersey are all within a short drive from D.C. Moreover, the Federal Election Commission is located in the District, as are all the best campaign finance lawyers in the country. I met in person with a dozen of them in the span of four days thanks to the fact that I was based in D.C., and I was able to get assurances that our idea wasn't completely crazy. Better yet that I wasn't going to land us in trouble with the feds. The Disinterested Political Professional Most of the seasoned campaign experts in D.C. don't have experience or interest in participating in developing products. Most of the seasoned campaign experts are consultants, and consultants think and operate their businesses differently from product developers. Product developers require information like best practices, lessons learned, raw data, and other domain expertise to derive requirements that drive the design and creation process. Consultants view this type of information as key differentiators and trade secrets that provide a competitive advantage in marketing to customers. It's understandable why campaign consultants would limit how much they share of their experience with a product developer. While this is a significant challenge, we also recognize there is huge opportunity. An industry dominated by service providers is one that can experience huge gains in efficiency and growth if well-designed tools are made available. Forward thinking service providers who adapt and adopt new tools quickly are the ones that benefit the most. The Time Factor Soliciting over-worked, sleep-deprived campaign staffers is far from ideal. But they are your customer base. Trying to court clients during campaign season sounds like a good idea-at least it's when the organizations are active. But in reality, it's far from the ideal time. Political campaigns are a lot like very short duration startups. There is an intense period of activity as you are trying to get investors (donors) to fund your business (ideology and platform), while also trying to sell your product (the candidate) to the voters. You have a small window of time to differentiate your message from the other startups (campaigns) and grab market share (votes). As a consequence, most of the people with hands-on expertise in political campaigning and campaign finance are either 1) incredibly busy working on a campaign, or 2) incredibly burned out from just having wrapped one up. There is small window of opportunity in which to catch the attention of someone, when they are sufficiently recovered, to start thinking about what to do next. Otherwise, the most attention a tech startup is likely to get from a campaigner is a conversation over a coffee. A related challenge is that "startup people"-those on campaigns, as well as those building companies-are risk averse. This is counterintuitive to people on the outside of campaigns and companies. But startup people actively mitigate risk whenever possible. There's a lot at stake in running a campaign and creating a new product. Those who take on those tasks have enough work accounting for "unknown unknowns," without making things more complicated by introducing "known unknowns." Even the most innovative campaigners will use the battle-tested practices and tools they already know, abandoning them for something new and different only when there is nothing left to lose, or ideally, after careful testing, measuring, and transitioning. A Regulated Activity Since my company is a crowdsourcing platform for financing campaigns and increasing voter engagement, we have to abide by FEC and 1RS rules and regulations. A startup operating in a heavily regulated industry naturally assumes legal burdens and costs above and beyond one operating in a space without many rules and reporting requirements. As a startup, it's not financially feasible for us to lobby for rule changes that may or may not take * effect. In addition, campaign finance rules are subject to change at any time as new guidelines or court rulings are issued. We have excellent legal counsel. But before we even thought about talking to campaign finance lawyers, we had to spend a lot of time developing our own expertise in the established framework of rules and regulations, and in thinking about how we could develop an innovative business within those constraints. We also had to project how potential rule changes would impact our business, as well as plan those contingencies to mitigate our risks. The regulated nature of campaign finance impacts our product development strategy and schedule, too. There is a concept in the startup world of a "minimally viable product" (MVP), which is a product that has the minimum set of core features implemented in order for that product to be usable by the customer. The MVP is used by the startup team to learn about the market and to learn what features customers need and how they use them. That learning is used to determine how to refine and enhance the product in ways that increase the customer base and generate sustainable and growing revenues. Our MVP is more complicated and our development schedule longer than would be required in another industry because one of the core features we have to provide is an ability to help our users (and ourselves) maintain compliance with campaign finance laws. This is not all bad news, though. Any company that might seek to develop a competing service to ours would also have to spend the time, effort, and resources to figure out what we have, and then figure out how they are doing to do it differently, or do it better, faster, and cheaper. Most Angel Investors and VCs Will Shun You The broader entrepreneurial community hasn't really viewed politics as an area for innovation. One reason for this is that there is only a superficial understanding of the organizational and operational aspects of politics by those who aren't in politics. There are companies started by people that know politics well that successfully develop and provide technology solutions for politics and campaigning. But there appears to be a cultural tendency in the political arena to develop and provide innovations on a consultative basis, not as a scalable product or service. Consulting companies don't have "Silicon Valleytype exits." The lack of a political tech company success story on the order of an Amazon, Netflix, or WhatsApp, or the development of a political tech company brand with the name recognition of an AirBnB, Uber, or even Tinder, means that few entrepreneurs are trying to figure it out. And you can't innovate what you don't know about. The lack of poli-tech startup exits leads to consequences on the investment front: The number of investors actively seeking to invest in these types of businesses is small. This is because venture capital and angel investors tend to be successful entrepreneurs who invest in businesses and industries that they have experience in. They have very good reasons for doing so. Investors in early stage companies provide more than just growth capital. They provide expertise and business connections. If an investor doesn't understand an industry, then all they can provide is capital. That investor would also not be able to accurately assess how viable the business is and what risks it faces. They would have little ability to help mitigate risks, protect the investment, and save the business if problems arise. We've seen trends recently, though, indicating that these perceptions may be changing. This past spring, Lawrence Lessig, the notable technology free speech advocate, political activist, and Harvard Law professor, launched an online campaign for the Mayday PAC, a crowdfunded political action committee to elect candidates to Congress who would pass campaign finance reform. Mayday reached its goal of raising $1 million within 13 days. In April, Sean Parker, the billionaire cofounder of Napster and the first president of Facebook, announced that he has funded Brigade Media with $9.3 million to "combat a lack of political engagement and interest in all levels of government across America." Brigade Media received additional funding from other investors, including "super angel" investor Ron Conway and SalesForce.com founder, chairman, and CEO, Marc Benioff. Politics is increasingly being viewed as an area that can benefit from the application of innovative technology and new business practices. Geography, though, will play a big role in determining how fast that rubs off. Culture isn't shaped by outside influence. Sure, Washington, D.C. isn't Silicon Valley or New York-there are plenty of cons to basing a startup here. But for us, the benefits outweighed them. 85 "Trying to court clients during campaign season sounds like a good idea-at least it's when the organizations are active. But in reality, it's far from the ideal time." Ram C. Singh is CEO of Afiniate, Inc., the developer ofVoteRaise.com, a crowdsourcing Software-as-a-Service (SaaS) platform for campaign finance. (c) 2014 Votenet Solutions Inc. |