“Dealing with regulators” is an asset, not a liability

Over the weekend, I was engaged in several conversations with investor and founder friends over Comma.ai’s announcement to discontinue its flagship product, the Comma One. I even wrote a post about the decision and what I thought was really behind it here.

As I was having these conversations, one of the things that really stood out to me in this whole story was the attitude demonstrated by the company’s founder and CEO, George Hotz, succinctly captured in the following tweet from last Friday:

As someone who spent years operating in the financial services industry, this attitude is almost counter-intuitive to me.

First, if you’re interested in building amazing products, and not just amazing tech, you must acknowledge that the more impact you have on people’s lives, the more likely you are to be “dealing with regulators and lawyers”: some of the most groundbreaking innovation is happening in healthcare, finance, and transportation, all heavily regulated industries. And even companies operating in traditionally non-regulated industries have to talk with the regulators once they become big enough.

But more importantly, and what too few founders realize, is that dealing with regulation is an asset, not a liability: in the ~4.5 years since my co-founders and I started Fundbox, I probably heard of and/or met several dozen companies that were launched in the space. It should come as no surprise to anyone that very few survived, despite what is still a very hungry, underserved market. That’s partly because dealing with regulation and compliance is a huge barrier to entry, and most founders are naturally averse to it, deciding to pivot away (or worse, ignore it) rather than face it.

Just like other assets, such as network effects, or proprietary data, regulation is a moat. And once you cross it, you’re in a much more defensible position.

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