Demand, Supply, Technology - Don't Forget Regulation


"Bike taxis illegal, do not use them: Govt"

                                                                              - The Times Of India(read here) 

"ZipGo suspends operations"

                                                                                                       - The Hindu(read here)


Both of the above 2 headlines came within 1 month of each other. Ola, Uber and Zipgo are start-ups trying to ease the way people commute. But all of them have hit a road block in the innovation hub of the India "Bengaluru". The RTO has declared bike taxi operations of both Ola and Uber as illegal, and Zipgo had to suspend its operations because of RTO orders. This is not the first instance when Ola and Uber have ran into regulatory problems, on a previous instance both of them were in trouble in the NCR.

So this make me think about 2 key questions, which are -:

1. Does the strategy guy overlook the legal aspect to succeed fast - So you did a fantastic market research to figure out the business opportunity, the $ dollar value in the market, built incredible technology and growth plans but errr did you just forget the fact that there is a regulator who might just put brakes on your juggernaut. This is a question to answer if you are operating in a domain which will effect a lot of people and the government has made ambiguous laws which are interpreted according to convenience.

2. Do highly funded startups learn from the past or others - Ola and Uber both have ran into legal troubles with the government authorities in the past in the NCR. Whereas the bike taxi was a lucrative opportunity and waiting to be grabbed, it would have been a pleasant experience for both the companies had they done little due diligence and obtained necessary permits. Maybe peer learning would have been a good idea; bike taxi startup Baxi is operating after taking the necessary RTO permissions.

A 3rd question is also pondering on my mind - Is it the beginning of license raj once again. This is the 3rd big instance I am hearing about innovative companies coming under the regulator watch. Other instances have been between Amazon and Karnataka government over taxation issues, then Zipgo and Bangalore RTO and now again OLA, Uber with the RTO. The RTO could have been a bit lenient by giving a word of caution and asking the companies to obtain permits without suspending operations. Through blanket bans is the government trying to give the message that innovation is not encouraged?

I advise startups to to study the regulatory scenario diligently . A prominent sector that is coming to my mind is healthcare where lot of startups are innovating is healthcare which is governed by law of privacy protection laws which differs across countries. Since most of the startups use cloud based storage it will be worthy to give regulation a check.

All the best.

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