It was only a few years ago, in 2010, when San Francisco announced its first strike against Uber, leaving the rest of the startup world with a feeling of “huh?”. The company formerly known as “Ubercab” had received cease-and-desist orders from the city in an attempt to protect the local transportation industry from Uber disrupting the market.
Fortunately, several years later, the California Public Utilities Commission (CPUC) finally recognized that it had more to gain by working with Uber and other innovative transportation companies, including Lyft and Sidecar.
In September of this year, the CPUC announced a new legal framework for a new category of business known as “transportation network companies” – and regulation-wise, it’s a big step in the right direction.
The Uber story may end well (in San Francisco, at least), but whenever the US takes a regulatory strike against its local, star startups – including the likes of Airbnb, Uber and many others – the rest of the startup world watches horrified from afar.
After all, if the country that is home to some of the world’s best-loved “disruptions” prefers to protect traditional incumbent businesses instead, then what does that mean for the rest of us?
In Europe, the regulatory situation has been nothing shy of incredibly confusing – and harmful – for local entrepreneurs.
Governments that have recently been striving to build their local startup communities with innovation-friendly policies and measures have hit back equally harmful cease-and-desist measures. This isn’t anything new – European governments have a history of being a little all over the place when it comes to supporting new business. Even the companies that Europe now brags about – like Skype or Deezer – have faced their fair share of regulatory nightmares.
Putting the ‘no’ in innovation
One of the companies that has recently been hit by a wave of innovation-unfriendly policies in a number of European markets is Accel Partners, Index Ventures and Balderton Capital-backed Housetrip.
The Lausanne-based startup launched in 2009, got investment from all three aforementioned prime VC firms, and seems like a potential candidate for Europe’s next leading startup – in fact, the Financial Times even called it “one of Europe’s fastest growing technology businesses” earlier this year.
Maintaining offices in three European countries – Switzerland, the UK and Portugal – and employing over 200 people on the continent, the HomeAway rival currently offers over 260,000 properties for rent, in 150,000 destinations worldwide.
The company was started by a husband-and-wife team – both under 30 years old – and the company’s rather chairman happens to be former Skype chief and European head of eBay, Michael Van Swaaij. What’s not to like, right?
Ryan Levitt, the company’s PR director, however, outlines some of the regulatory horrors Housetrip has faced on the old continent.
Short term holiday rental marketplaces – including the likes of Airbnb, 9flats, Wimdu, Housetrip – have been hit with temporary bans, demonstrating that these local governments prefer to shut down “disruptive” businesses rather than finding ways to support new and innovative ones. And Spain, a country whose economy has been shrinking or flat since 2008 with very high unemployment rates, has also set bans and fines in place for short-term holiday rentals.
Sometimes these bans are due to safety and security issues, even though Housetrip and others have numerous measures in place to protect and help users, making them much safer than more traditional means of finding an affordable short-term holiday rental. Thus, the only real reason for such platforms to be in danger is the threat they pose to the traditional housing and rental market. Policymakers simply don’t have the resources needed to draft new legal framework and therefore threaten to pull the plug on the entire industry.
Notably, Levitt doesn’t anticipate any problems in London and believes that even if such a situation came about, Tech City would be able to protect its local startups. As for the situation in other countries? “European tech industries don’t feel they have a voice,” Levitt argues.
Which is why organizations like Tech City, France Digitale, Deutsche Startups, the Danish Entrepreneur Association and other organizations protecting the interests of the local entrepreneurial communities in various countries, are becoming increasingly important. They are in the same boat as other verticual industry-focused associations that strive to work with policy-makers in order to protect their respective innovations, like the UK Crowd Funding Association (UKCFA).
As Tech City Investment Organization CEO Joanna Shields brilliantly stated in an article published in the FT, “Europe must not try to regulate the internet” – nor should it consistently try to protect traditional business from the natural competition of new businesses.
If Europe wants its own home-grown Google and Facebook equivalents, it will need to begin approaching innovation with a more startup-friendly policy making strategy across the board – not just when it comes to the Internet.
Otherwise, it risks sending very confusing harmful and confusing messages to its entrepreneurs, thus damaging all the innovation-friendly campaigning.
Featured image credit: Christian Wagner / Shutterstock