[VivaTech] Regulation & start-ups: friends or foes?

How can the rules governing the public and private spheres evolve alongside exponential, game-changing technology? With GDPR coming into effect on the 2nd day of the event, regulation is one of the topics on everyone’s mind at Viva Technology 2018. It permeates every level of the event, from President Emmanuel Macron’s opening speech to panel discussions. Should regulation still be seen as the great enemy of innovation, or as a driver of trust and new markets for start-ups?

Regulating technology to (re)establish public trust

The necessity of building a new framework for new technologies featured prominently in Emmanuel Macron’s keynote address. The French president noted that “the key players of change are not always exemplary, do not always follow the rules, and this creates distrust.” He pointed to AI as an example of supporting technology while building regulation to guide its development. Mark Zuckerberg echoed these sentiments in his “fireside chat” with Maurice Lévy, noting that “Regulation, when it is good, increases the public trust, and GDPR is a step in that direction.” He also underlined Facebook’s focus on the ethics of AI, and its applications in dealing with negative aspects of social networks such as fake accounts and harassment.

Entrepreneurs, regulation is your path to new markets

From the ecosystem point of view, the consensus appears to be that with regulation come new business opportunities. At a round table of VCs dedicated to regulation and innovation, Karen Contet Farzam, co-founder of the Hong Kong Start-up platform WHUB (opens in a new window), provided a useful classification for regulation: the kind that protects users from things they cannot control (such is the model of GDPR), and the kind that protects investors “from themselves.” She argued that both can open up new avenues for growth, recalling that the current Fintech ecosystem is to some extent a consequence of the post-financial crisis regulation. “Customer trust [being] very hard to earn in the financial industry, start-ups can get a big boost by, from scratch, creating a business that is approved by regulators.”

Compliance-by-design is, therefore, a key enabler for start-ups. Dmitry Chikhachev, Managing Partner at Runa Capital (opens in a new window), also pointed to Legaltech as an industry borne out of entrepreneurial solutions to pain points created by regulation. Similarly, GDPR is likely to foster investment in AI-based solutions to facilitate compliance.

“You don’t regulate technology, you regulate use cases”

Of course, these benefits rely on sound regulatory design. GDPR meets two important requirements, in that it concerns something that is relatively easy for consumers to understand—control over their personal data—and was designed to be implemented in a harmonized manner internationally, with plenty of advance warning.

GDPR is also an indicator of deep trends, said Fiona Darmon, General Partner Investor at JVP (opens in a new window): whereas technology verticals like AI, VR, or the IoT, used to be seen as silos, they are now “horizontals” permeating multiple markets. This has broader implications for public policy and adds nuance to public calls to, for instance, regulate AI: “You never regulate technologies, not really; you regulate use cases, to protect the parties involved.” Therefore, it is incumbent on decision-makers to be more technologically-informed, and on start-ups to dive deep into matters of public policy. The latter’s ability to respond to—or indeed anticipate—how industry, technology, and policy intersect is what makes regulation an asset rather than the age-old industry bogeyman.