Startup Day Across America – An Important Step For The Shared Market Economy

This Thursday is Startup Day Across America, our first ever opportunity as a community to uniformly connect with our congressional representatives. Good timing too, as the sharing economy seems to face new regulatory challenges each day. Despite consumer and business support for companies like Airbnb and Uber, threats loom in all directions — major lawsuits and driver arrests to city-wide bans of service. With an approval rating lower than the Fukushima Nuclear Power Plant, what sort of action can we possibly expect from our partisan Congress? Though there are positive signs, such as the intention behind this day, let’s be cautiously optimistic.

Election cycles always bring out the clichés, don’t they? While candidates collect big donations at corporate fundraisers, they publicly proselytize about the need to support and defend our small businesses. Is it simple rhetoric or, when pushed, will they actually act on their promises? Well, here’s our opportunity to dig deeper, to hold them accountable and challenge their support. There is common ground here, as both Republicans and Democrats have a lot more to do to support small businesses.

The Sharing Economy

This isn’t a new concept. Bartering predates currency exchange and has existed alongside it ever since. If you have something I need and I have something you need, a simple swap can help us both.  Regardless of the fact that currency is the predominant exchange mechanism, individuals continue to sell items or services without a formal business. Garage sales and the classifieds paved the way for Craigslist.  No paper trail needed.

In the mid-90’s, eBay entered the picture, presenting a fresh option by expanding the ability of individuals to trade items outside their region. In the beginning, they faced their fair share of regulatory battles. Now, the multi-billion dollar corporate giant lobbies through Washington when and where needed. Rather than fighting the laws, they now help rewrite them.

eBay’s success inspired other companies such as StubHub, a ticket outlet that, at its inception, provided fans a wider platform from which to purchase tough-to-find tickets. Today, the eBay-owned company has enough political clout to essentially serve as legal scalping, an outlet that sponges up tickets to high-demand events and sells them back to consumers at a premium.

Truth is, early disrupters have always faced challenges. Many fail, falling victim to competition and regulations, while others like eBay find their footing and redefine the economic landscape.

Is this new wave of disruptors just experiencing growing pains and will they, like their predecessors, battle through the regulations and ultimately alter the regulatory landscape? Or, is the opposition more daunting this time, more powerful?

Innovation precedes regulation. Or, as in the case of Airbnb and Uber, innovation challenges the antiquated regulations originally enacted for old industries. Governments can’t regulate the enemy they don’t yet know, so the process will always be reactionary. If a company doesn’t redefine its classification, the regulators will: you may call yourself a peer-to-peer network, but that doesn’t necessarily stop the government from classifying you as a limousine service. So, in that way, the innovator can only address the concerns as they are raised, can only fight battles that have been declared. Over time, as in eBay’s case, political clout is built, industries redefined, and new regulations address a brand new set of concerns and consumer threats.

This new wave of startups is paving the way, fighting battles that future companies will also face. There’s no way of knowing how these stories will end, or at what cost, and what balance of defiance and humility is needed to maneuver through the complexities of our shamefully divided government.

The good news? We have ample data and a new day dedicated to this exact conversation.

The Data

High unemployment and underemployment during this most recent recession has hit local economies hard. When residents lack disposable income, small and local businesses suffer. Enter the sharing company, which has not only altered the flow of money from centralized travel zones, such as San Francisco’s hotel-heavy Union Square, out to more residential neighborhoods, but has opened new income opportunities. Property owners and lessees are profitizing their underused space. Drivers are making extra cash during down times and in underserved areas.

In an article published last November, Forbes wrote, “…more money from tourism stays in the local economy. The money paid to hosts goes directly to the local residents, compared to chain hotels, which do pay its local workers but also takes a portion of the money back to the corporation.”

Rather than detract from a visitor’s experience, the shared economy enhances it. You can now stay in a unique part of town, outside the range of a typical hotel. Whereas the hotel hubs tend to be surrounded by corporate chain restaurants and national retailers, the neighborhoods are more likely to be populated with family-owned and local businesses. Compare your San Francisco dining options in Union Square to that of Cole Valley or the Mission and then follow the money from there: where does it go and what percentage cycles back through the local economy?

Forbes also wrote, “In addition, for Airbnb travelers, visiting was cheaper than staying in a hotel. About 14% would not have visited if not for Airbnb. In addition, those who did use Airbnb stayed longer on average–5.5 nights in the city–compared to hotel guests, who stayed 3.5 nights. Because they stay longer, the guests end up spending more in the city, the report found, $1,100 in total, compared to $840 for hotel guests.”

At scale, this is a staggering amount of money. Not only does it benefit the local economy and a city’s residents, it brings in additional tax revenue. Change can’t occur until data like this is shared with those holding us back.

The Future

Startup Day Across America is just that opportunity to share our stories and enlighten our politicians as to how new technologies in the sharing market are unlike any we’ve seen before, enabling us to engage with one another in previously unimaginable ways. The shared economy is helping our local communities and providing additional income for many who need it.  It’s time to challenge our outdated model and highlight the dichotomy between political rhetoric and action. Plainly, we need our lawmakers to support us and help pave the way for a new way of doing business that’s here to stay.

We invite you to open a dialogue with your politicians, share your stories and educate them as to the obstacles threatening this economy.