Three Questions to a More Politically-Resilient Startup
By Chris Oates
I'd argue that any startup that isn't considering politics or political risk is missing a trick. Generative AI companies that could be undone by an enforcement of intellectual property laws, clean tech companies reliant on lithium from China vulnerable to tariffs, or software companies that may soon need to segment data are all vulnerable to changes in governmental action. Here are three questions to ask yourself about whether you should be devoting more resources to it.
First, Are there any government programs available to your industry? If yes, are you actively working to get them and how long do you think they'll last? If no, is there a chance that they could happen?
For all of Elon Musk's libertarian arguments, Tesla wouldn't be here today without billions of dollars in US government support. What happens if the White House conditions program support to companies with union workforces? And is Tesla ready if so.
Second, are you planning on riding macro currents to success? What are the chances that they change? And are you prepared if so.
The crypto world said they were building a new type of money, but it turned out that they were actually built on low interest rates and retail investor speculation. When the global economy changed, it turned out that there was not much holding them up. There are some companies, like those in clean tech, that appear to be based on very solid trendlines. But are they all solid? What if you're working on wind farms but solar becomes much more cost-effective via subsidies to homeowners? Will your projects no longer be viable and, if so, is there a Plan B. Or will the reverse happen because states want to bolster old port communities and your competitors who have already established operations in the cities designed to get government backing have an inside track? Look at the assumptions your business model is based on and then what assumptions those are based on.
Third, where is your supply chain located? Is it secure from disruption?
Startups need a competitive advantage and that might be sourcing from places that aren't used by the incumbents. That's fine unless a war, conflict, or other trade restriction happens. Are you ready for that?
For more about incorporating political risk analysis into a startup, you can get in touch at croates@twolanterns.co