Startups increasingly turn to lobbying

Published 12:00 am Monday, November 23, 2015

WASHINGTON — Last year, the personal butler service Hello Alfred won a top prize in Silicon Valley created for promising new technology startups, putting the company on a path toward millions of dollars in investment.

This year, the startup has received attention of a different sort, for being at the center of a national debate about the rights of the workers hired through its service and others like it.

Unlike startups of years past, though, Hello Alfred has not shied from the political stage. Its leaders have appeared on numerous policy panels and have written op-eds. They have been invited to a White House summit event on the future of labor. And Marcela Sapone, the company’s chief executive, has made two trips to Capitol Hill to urge lawmakers, research organizations and the political press to rethink labor laws for the digital age.

“We have old rules about how you act as an employer,” said Sapone, 29, who started Hello Alfred with a Harvard Business School classmate. “We are a young company, but we also have to make decisions early that are ethical and business-oriented, and that means engaging in Washington early.”

The efforts by Hello Alfred underscore how today’s tech companies — even the youngest ones — have accepted lobbying as an essential part of doing business.

In addition to knowing the language of computer code, founders are speaking the language of Washington, keenly aware of the potential regulatory battles that could be on the horizon.

The examples are suddenly legion. Magic Leap, an augmented reality startup, does not have a product on the market — but its lobbyists are promoting what the company may eventually do. Zenefits, an online benefits manager, is only 2 years old but is a member of two trade groups and has hired lobbyists and public relations strategists from the Obama administration. The chief executive of Handy, an on-demand household chores service, was recently in Washington on his third charm offensive with lawmakers.

Attitude shift

It is a sharp shift from past generations of tech companies, whose founders almost made it a point of pride to be distanced from, or above, politics and politicians. The antitrust troubles and headaches encountered by the older companies, including Microsoft and Google, play some role in the new thinking. The real change, though, came after Uber, the ride-hailing service, and Airbnb, the home-sharing site — two of the largest startups — started facing a barrage of questions about their operations.

“For these new companies, the scale of innovation is so big and impactful they necessitate interacting with Washington writ large,” said Kenneth Baer, a former spokesman for the Office of Management and Budget who now advises Zenefits. “There are huge amounts of questions that society has to grapple with that didn’t exist before.”

It is difficult to say whether all the early lobbying is delivering results. So far, it has at least allowed Uber and Airbnb to continue growing. But the arrival of money from tech companies so early in their life cycles has definitely shaken up K Street, the capital’s thoroughfare for lobbyists.

While total annual spending on lobbying has decreased slightly over the last five years, Internet companies have tripled their lobbying spending, to $47.5 million, during the same period. The industry now spends just a little less than the auto sector, according to the website OpenSecrets, which tracks lobbying and campaign finance.

Much of that money is still from the biggest tech companies; Google and Facebook, for example, spend millions each. But in a sign of how many new companies have come to town, one trade group, the Internet Association, has tripled its membership in the last three years. And a cottage industry has emerged of boutique Internet lobbying; crisis public relations; and niche trade associations for drones, digital health services and financial technology.

“There are few industries like the Internet for which a rise in expenditures has been so dramatic,” said Sheila Krumholz, the executive editor for the Center for Responsible Politics, which runs Opensecrets.org. “They are now engaged in a number of battles where they see opportunities to push legislation or fend against legislation.”

A broad reach

The companies’ reach extends beyond Washington, too, with Uber and Airbnb placing lobbyists in hundreds of cities around the world. They are also putting their weight behind city and state lobbying efforts to overturn transportation, insurance and hospitality regulations that stand in their way.

For many startups, though, the immediate goal of lobbying is simply to create goodwill.

Coinbase, a digital currency platform based in San Francisco, is one of a number of financial startups that have looked for help in Washington, knowing that finance is highly regulated. Last year, it hired John Collins, a former senior adviser to the Senate Homeland Security and Governmental Affairs Committee, as employee No. 50.

As the head of government affairs for Coinbase, Collins regularly prepares talking points about the Bitcoin virtual wallet and meets with officials at the Treasury Department, Consumer Financial Protection Bureau, Federal Trade Commission and multiple congressional committees. Nearly every month, he escorts the company’s chief executive, Brian Armstrong, to meetings with government officials.

“So much of what I do day in and day out is not even advocating for anything necessarily but talking to folks about the technology,” Collins said.

Combating regulation

The standard mantra of tech companies is that they are a boon to the economy and improve the lives of consumers. The underlying message is that any changes by regulators could cast painful ripples across the economy.

The Internet Association has taken that message straight to the congressional districts of key lawmakers. Last year, the group hosted Rep. Fred Upton, R-Mich., chairman of the House Energy and Commerce Committee, on a talking tour in downtown Kalamazoo to meet shop owners who had been primed to extol the virtues of the Internet.

A jewelry store owner talked about her ability to connect inexpensively with suppliers online. Bridgett Blough, the owner of a food truck, talked about how she used the Web to connect with customers and warned that regulations would make it harder to run her business.

“These businesses may not have been businesses without the Internet,” Upton said in a video on the trade group’s website. “We don’t need to regulate the Internet. It’s not a problem as long as it’s not regulated.”

Perhaps no issue has become more of a focal point than the working conditions at so-called on-demand companies — businesses like Uber and Alfred, which enable customers to request a service at the touch of a button.

Sen. Mark Warner, D-Va., has been one of the more vocal lawmakers on the issue and has expressed concern that freelance workers lack benefits that ensure long-term economic stability. Warner has said his main concern is about whether contract workers, some of whom work dozens of hours a week, will have basic protections without classic employment contracts.

In the last six months, his office in Washington has had a steady stream of visitors, including the chief executive of Airbnb, Brian Chesky; venture capitalists; and more than 100 lobbyists for startups. Many of them have argued against such a classification change, saying the costs of providing full employee benefits are too high and that their workers mostly clock part-time hours.

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