Start-Up perspective on the European Parliament
I joined the September techUK and Coadec delegation to Brussels alongside a group of start-ups whose data-driven businesses are offering new services across health, digital identity, and city planning. We wanted to better understand the implications of new EU policy on the growth of our businesses and the start-up sector as a whole.
This was the fourth delegation bringing together policy-makers and startups techUK and Coadec have organised. It’s clear to see why the formula makes sense. We met with over a dozen MEPs and aides to explain everyday examples of how key policies massively help or hinder our business. An open space for conversation and shared understanding between those directly affected by policy, and those creating it.
This was my first time inside the EU Parliament and it’s filled with all the quirkiness you’d expect in trying to build a base of operations for over 700 MEP’s representing 28 different countries from a range of political parties. The EU Parliament lives with its own rules and conventions. The quirkiest aspect is the array of fashion styles – for any people-watchers out there the EU Parliament is where it’s at.
Building the Digital Single Market
MEPs have a challenging job with national democratic mandates and a remit to shape and maintain the EU project. Right now it is a project under stress, with outdated processes and a need to reform in the face of social, economic and technological pressures.
The focus of our delegation was on both the Digital Single Market (DSM) and the General Data Protection Regulation (GDPR) and the impacts they have on our startups.
The DSM and GDPR are two major priorities of the European Commission and will have a significant impact on digital technology growth companies. The DSM aims to streamline the administrative and regulatory burden of operating across member states. The GDPR is a mechanism to reform the data protection regime of Europe created in 1995 and badly in need of modernisation.
techUK and Coadec believe that current EU proposals fall short of making it easier for consumers to understand and manage the use of their own data; and in providing the more harmonised and predictable regulatory environment that small businesses need.
As the conversation unfolded it quickly became clear that in Brussels, data has become a hotly debated topic, and Uber is a dirty word. It is used as a short cut to describe fear of technology as a disruptive force. Everywhere from employment practice, corporate taxation, and data privacy wafts distrust of large US tech giants such as Google. They are accused of anti-competitive practices, and failing to pay into the social programmes of countries where they profit.
Legitimate and credible objections, however creating the GDPR is like cracking a walnut with a sledgehammer. Start-up tech companies suddenly find themselves affected by prohibitive EU policy created in response to the footprints of tech giants.
“Data is our currency. It’s central to how we understand our users and necessary to how we innovate”
– Jonathan, Shaping Clouds
GDPR and Legitimate Interest
Part of the GDPR discussion centres around a clause of ‘Legitimate Interest’, allowing tech companies to use data collected on customers for reasons not explicitly laid out in original consent. This isn’t about selling data or spamming customers with affiliate advertising, this is literally about how we develop our product.
Data must be free to flow to a new place of value. The proposed new wording of the clause would mean that every time we want to change features or use data to respond to customers’ requests, we have to ask for consent again. Not only costly, but both impractical and anti-competitive.
Data usage versus data abuse
Tech firms innovate by creating Minimum Viable Products (MVPs). They launch a basic feature, they look at how their users respond, then optimise the feature in response to customer behaviour and feedback.
Presumably under the new wording of the legislation we will have to ask for consent before the MVP stage. We ourselves won’t know what behavioural insights will tell us about how we evolve the feature. So I guess we’ll need to ask again in a couple of weeks, and again, and again, and again. Not only will this cost us a fortune, slow us down, and irritate our customers – it would in itself be anti-competitive as we’d constantly be announcing our next move to competitors.
The Critical Disconnect
The critical challenge here is a fundamental disconnect between the policy process and the crux of our innovation process. One is emergent and responsive, the other planned and top down. This disconnect is being felt in many aspects of how we now live. It’s been evident for 20 odd years. Take for example planning and neighbourhood policy that limits the use of buildings to A1 (retail) or B1 (offices), when the reality of city densities now require much more everyday flexibility. We’ve had to shift from a zoning mentality to a curatorial one.
Many of the tech companies affected by this legislation are attempting to create a more equal playing field. They are innovating in the worlds of fintech, green tech, health tech…the list is endless. They are creating real solutions to the compelling challenges of our time.
Platforms such as Google, Amazon, Kickstarter and Etsy are more than corporate entities, they are the engines of small business. In the EU, SMEs represent 99% of all businesses and 85% of all new jobs. These platforms give them the tools to set up inexpensively, to reach sales and distribution channels, and to create those new jobs.
The MEPs we spoke with recognise this, they are intelligent, articulate, and passionate individuals with a desire to see the EU thrive. Yet they are following a regressive legislative position based on a historic vision of innovation not a future one. Why?
Some of it is based on a legitimate concern for data protection and consumer rights. Some on a sense the EU is being ripped off by US tech giants and losing competitive advantage. Some about protecting state revenue from cab and hotel tax systems amongst others.
How we move forward
The real issue is a breakdown in communication, a breakdown in articulating common interests, and a breakdown in creating a system where all actors have responsibilities and ethics.
This isn’t a one-sided debate. Tech companies also need to step up. It isn’t enough that some generate value – we can and should do more.
What would it look like if instead of top down legislation – tech businesses and policy makers worked together, closely together, to create codes of conduct to address data protection and transparency? Ethical standards that recognise a centralised taxation model in decentralised, peer-driven business models requires a new application. Competition models that level the playing field. Auditing rather than regulation. What if the process of forming policy could be more like the process of developing a new tech product – iterative and committed to finding new forms of value.
There are many things we can do but it starts with conversation not with legislation. This is why the work of techUK and Coadec is vital – but it is just the first step. As tech companies we need to be much more active in leading this debate into a progressive space.
This starts with being honest with ourselves. The internet has democratised access to knowledge, resources, and connections. Dominant business models are creating the ‘on-demand economy’. You can pretty much rent anything from cars to puppies. At the same time jobs are increasingly short-term, contract based and outside traditional employment benefits. It’s all very liberating, but it doesn’t take a big leap to see some of the consequences of these models.
Whether intentional or not we are developing models of utilisation that are divorced from models of ownership. It’s no secret that social inequality creates social instability. The push and pull for policy is to recognise that antiquated models of protectionism create their own market distortions. The Digital Single Market is an opportunity not only to create a richer and more robust European market, but also to make sure that we have the right incentives in place.
Real rules for real people
We can take collective effort and do something about this. We have an arsenal of tools to deliver new fit for purpose pension and equity funds. New insurance products based on use not ownership models. New employee benefit trusts. These can work with the existing systems as opposed to against them.
The reality is that no amount of legislation will halt technological progress. It will affect where businesses succeed. A hostile regulatory culture from Brussels, taken together with the partial response of the DSM to make it easy to do business across member states, will not, put bluntly be good for the citizens of the EU. There is an alternative.
The session in Brussels was enlightening for me and I’d urge others in start-ups to participate. What may feel like a distant game in which your voice is powerless is actually a useful tool for your business.
Go to Brussels with techUK and Coadec and have your voice heard.
Bring the debate to London. Email email@example.com and let’s discuss tech’s new responsibilities to solving legacy problems we are actively creating.
Step up. We as businesses need to think beyond product – we need to think about the communities and people we serve.