Meet Tech Startups’ Political Mastermind

16 minute read

Startups like Uber, Airbnb and FanDuel are increasingly engaged in high-profile battles with regulators and lawmakers, fighting over everything from worker classification rules to gambling laws. Among those helping young companies navigate the country’s halls of power is Bradley Tusk, who was Michael Bloomberg’s campaign manager during his successful 2009 New York City mayoral re-election and served as deputy governor for Illinois. Today, Tusk is founder and CEO of Tusk Ventures, which provides policy help to technology startups in exchange for equity in the company.

TIME recently spoke with Tusk to learn more about Tusk Ventures and his thoughts on some recent high-profile public policy battles involving the technology industry. Our conversation has been lightly edited for length and clarity.

TIME: How did you come to start Tusk Ventures?

Tusk: After the Bloomberg campaign in ’09, I started a consulting firm that runs campaigns for big companies. So if you’re Expedia and hotel industry is trying to pass new taxes for online travel booking in 12 states, we figure out the strategy to beat that back in each state. We put a team on the ground, we run it like a campaign. We’ve been doing that for — the big companies are Walmart, AT&T, Pepsi, Comcast, places like that.

In early-to-mid 2011, I get a call one day saying, “Hey, there’s a guy with a small transportation startup, he’s having regulatory problems, would you mind talking to him?” The guy turns out to be [Uber CEO and co-founder] Travis Kalanick. I become Uber’s first consultant later that day. I get really lucky when Travis says, “Hey, we can’t afford your fees, would you take equity?” And thank God I said yes. I’ve spent the better part of the last five years helping Uber fight the taxi industry all over the U.S. New York, Chicago, Denver, Boston, L.A., Philly, Miami, Vegas, you name it.

Last summer there was a big fight in New York between Uber and Mayor [Bill] de Blasio. De Blasio tried, at the behest of the taxi industry, to pass legislation through the City Council that would have limited Uber’s growth. We ran a very aggressive campaign and we won. That got a lot of publicity. On the heels of that, I launched Tusk Ventures, which is a venture business. It’s not really a fund, but we work for pre-IPO companies in regulated industries and help solve political problems in return for equity.

That put me in passing or blocking legislation, passing and blocking regulation, it put me in procurement, it put me in dealing with the media, it put me in dealing with unions, put me in policy work, grassroots work. We have equity now in 18 different companies. The portfolio currently has 13 that are active. The most prominent one at the moment is FanDuel, where we’re running campaigns in almost every state around the country.

We work on a lot of interesting topics from a politics perspective. For Handy [a platform for finding home repair and similar services], we’re working on worker classification, and how do you deal with workers in the sharing economy, who are probably somewhere between a 1099 and a W-2. For Eaze [a medical marijuana delivery service] we work on cannabis regulation. We work for a company called Nagare on water desalination issues.

There are lots of different companies that we work for. Almost all of them, by definition, have interesting public policy questions because they have some new platform, new technology, new idea to which the law is basically silent, because the people who wrote the law never conceived of these ideas. Almost every time, we’ve got to go in there, beat up the entrenched interest trying to stop the new idea from happening, convince the regulator that what we want to do is okay, and allow the company to go about its business.

When you’re looking for a company to work with, is the criteria: A, there’s an interesting public policy debate here and B, we think this company could be successful?

Yeah. We probably flip that around. If we don’t think they could be really successful, then we don’t engage. And then it’s, do they have a significant regulatory political problem or need that we can really help fix? And if we do fix it, does it allow the company to really be successful?

If you look at FanDuel, its biggest issue, far and away, is regulatory. No one really debates that the ability to play fantasy sports on the Internet isn’t a successful business model, except — is it permissible? We knew that if we did our job right, that company is going to be incredibly successful, and so we were very happy to take equity and we’ve been passing laws all over the country.

Sometimes we will take on companies because the issue’s really interesting or we think it’s a space that we want to learn more about. We have companies in both the cannabis and desalination spaces. I don’t know whether or not those companies are definitely going to be the ones that make it. I hope they are. But either way, those are spaces we want to be in long-term and so helping them also gives us the opportunity to learn a lot more about those sectors.

What’s been your most difficult fight so far?

Helping Tesla fight the auto dealers was really hard. Unlike taxi medallion owners or casinos on behalf of FanDuel or Uber, auto dealers are fairly sympathetic. They’re very entrenched in the local community, they’ve been there for a long time, they know everyone. They’re much harder to beat.

Worker classification is hard because it really should be resolved by Congress and the IRS. But because Washington is so dysfunctional, we’re dealing with it on a state level instead. Trying to make these massive public policy changes on a state level is tough. I think we will succeed eventually because there are just so many people in the sharing economy that I think it will force the question, but it is a lot harder than we’d like it to be.

With FanDuel, it’s hard to pass legislation in dozens of states on any topic. Even if you’re saying the word “Hello” is the most popular word, it wouldn’t matter, it’s hard to pass that many bills. But what we found is our customers are so rabidly in favor of FanDuel and DraftKing and daily fantasy sports being allowed to remain, that mobilizing them is not that hard. Once representatives, state senators and governors see how much support there is on the ground, they get it and they typically allow it.

You mentioned the idea of mobilizing users. How powerful of a mechanism is that in terms of drumming up support for a startup’s position on a certain issue?

It’s powerful at times. Meaning if you can do it, it’s incredibly powerful, but it’s not applicable to all startups.

For Uber, it works really well because the juxtaposition of an Uber ride — which is typically clean and efficient — and your given taxi in any city is so significant that when customers of Uber in a typical market say, “Oh no, I don’t want the taxi regulator to put Uber out of business because then I’ll have to go back to these really bad taxis,” we can mobilize people. We can do it right through the app itself. So they’re on the app, they press a button and we can generate a tweet or a email or whatever we need to. It works really well with FanDuel because our customers are so passionate about the product itself.

We don’t work with Airbnb, but they’re a good contrast. They have a real mobilization problem because most of the scale happens on the guest side. By definition, an Airbnb guest is not a voter in the jurisdiction they stayed in. Airbnb, which has had a lot of problems in New York recently, if a New York State senator gets an email from someone who lives in Stockholm saying they had a lovely time at an Airbnb in Brooklyn, what does he care? That person’s not a voter here. And most hosts are afraid to be mobilized because they don’t know if what they’re doing is legal or not. It’s sort of legally tenuous. Because of the nature of their business, a company like Airbnb is obviously a great product, but they have a very hard time mobilizing their customers.

If you’re interested in the space of tech intersecting with public policy, why not get involved with Airbnb?

In this case, they’re not a company that we have worked with. We tend not to take equity from companies that are that late stage because the growth potential at that point is pretty limited, so it doesn’t make sense from a business standpoint.

But we are working with a company called Flip, which is really interesting because they’re really young and it’s all 30-day rentals. What they do is, they’ve got a mechanism that allows you to sublet your apartment without dealing with any fees, without dealing with the hassle of paperwork and dealing with your landlord and everything else.

So it’s sort of the ease of booking at Airbnb, but you’re doing a sublet instead. We feel that’s a really good solution that complies with the law here in New York and other jurisdictions. We would rather own a chunk of a company like Flip and help them grow and succeed than own a tiny, tiny, tiny fraction of Airbnb at series E or F or whatever they’re in.

What we have found is frequently, especially in startups whose laws are governed by municipalities as opposed to states, they have a problem where they have to get the same kind of permit or approvals from town after town after town, and it’s not a sustainable thing, they just don’t have the bandwidth and resources to do that. So we came up with this idea called “innovation lanes” that we sent off to governors saying, “Why don’t you create a program that takes startups who want to operate in your state and pick a few that you think are interesting and give them a one-year operating permit with a set of rules that they have to abide by?” Then it exempts them from having to go from municipality to municipality and it allows them to operate and get off the ground.

If at the end of the year they’ve complied with everything and it makes sense, you can pass legislation to make it permanent. If it doesn’t, you can take it away from them. We think that’s a sensible way to deal with regulatory challenges that a lot of startups are facing.

On a philosophical basis, do you always view startups as the good guys and the incumbents and the regulators as the bad guys?

No, not at all. I think there are a lot of times where regulators are not backwards, they’re not corrupt, they’re just trying to do their job and enforce the law that’s on the books. Some of them are smarter than others, some of them are more creative than others. But just because they’re incomparable with a startup doesn’t necessarily make them evil or wrong. And not every startup is right, either in terms of the technology or the regulatory position.

The reality is, right now, the relationship on both sides is a lot more hostile than it needs to be. Startups tend to, as a general rule, approach the idea that they don’t believe in regulation broadly. That’s basically telling the regulator, “I don’t think you should even have a job.” All of a sudden, you’re right away in a bad dynamic, and it tends to get worse from there.

Are there times where you have a regulator who’s so entrenched or even maybe corrupt that the only way to get through is through fighting? Yes, absolutely. I think that was totally true with de Blasio and Uber. He was taking payoffs from the taxi industry in the form of campaign contributions and he wasn’t going to listen to reason because he didn’t care, he had a political incentive.

But most of the time, there’s a lot more common ground than either side realizes. That’s why we put that innovation lane idea out there. Rather than starting where there’s some conflict, let’s let states take a look and say, “Okay, let’s find some startups who want to do business here, recognize if their model doesn’t necessarily comply with the law that’s currently written, and figure out a way to make it work.”

Is it hard to get founders who might want to move fast and break things, so to speak, to acknowledge the role of regulators?

It was much harder five years ago. When I started working for Uber, it didn’t take that long to see that A, this was fun and B, the equity was going to be pretty valuable. I wanted to do what I’m doing now for a long time, but I could not get founders to recognize the importance of it. They basically said: the regulators will have to realize that we’re really smart, we know what we’re doing, and that we can do what we want.

I tried to explain that’s not how it works, and they ignored me. I really couldn’t get other companies. It was only after all the high-profile fights that Uber, Airbnb and others had that the dynamic in Silicon Valley started to shift, where I could go from one company in our portfolio and now I’m at 18.

Do you think there’s warning for disruptive startups and founders in what happened to Theranos?

Yes and no. Yes, because they were so f–ked up, excuse my language. But no for the same reason, which is what they did seems like — I’m just an observer here — was just out of fraud. It doesn’t matter what kind of business it is, if it’s just pure fraud, the only lesson is: don’t commit fraud.

I think Zenefits might actually be a better example, in that what they did was, they ignored the regulatory requirement and they paid a very, very steep price for it. I think that’s a really good cautionary tale. Or I think Airbnb is one right now. Some people at Airbnb are probably not happy with me, because I’ve been pretty public about this lately, but to me Airbnb has a very good cautionary tale that’s useful for startups to learn from, which is, they had an opportunity a few years ago to settle their problems and make it work, but they had this very Libertarian-like view you described, so therefore they rejected the idea of a compromise. They allowed the affordable housing advocates and the hotels and the hotel unions to get their act together and they’ve lost very badly to the point where I don’t really see how they can legally operate in New York City anymore.

To me, Airbnb or Zenefits are examples in different ways of not taking the regulatory stuff seriously and paying a very steep price, whereas Theranos seems so extreme that it may just be in the category of fraud and nothing else.

If Airbnb CEO Brian Chesky comes to you and says, “Hey Bradley, what do I do now?,” what’s your advice for him?

It’s funny, I’ve thought about that. I don’t know that their problem in New York is fixable at this point. You have an incredibly powerful hotel union, you have an incredibly powerful affordable housing coalition. The hotels themselves are actually the least powerful of the three. If you assume that most of the decisions made in the state legislatures, city councils, mayor and governor’s offices are political, it is very hard to see — now look, if they ran a $50 million dollar campaign next year to change the legislation, could they succeed? Potentially, but maybe not. It may not be worth that much money to them.

The problem they have said publicly, well, New York and San Francisco are only about 3% of our total market. That may be true, but even if it is, combined it’s the home of technology sector, the home of the financial sector and the home of the media. If you were illegal in Singapore and Stockholm and that was 3%, okay, fine. Uber’s not legal in Budapest, no big deal. New York and San Francisco are bad places to be illegal.

What’s on your plate for the rest of the year?

For companies within our portfolio, they all have very specific regulatory goals. FanDuel would be to pass legislation in different states around the country, Handy, creating a portable benefit system.

But then for us beyond that, it is, get this innovation lanes concept across to governors so that we can come up with some more efficient ways to allow startups to operate. Then it’s to continue to seek out companies that we think are really interesting and have some real potential and keep building our portfolio. We think we can handle actively between 15 and 20 companies at any given time. We’ve got 13 as of this moment, so we’ve got room for probably a good five more. We’re out there every day talking to people and looking at it and trying to find the right ones.

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