The Milltown Tech Policy Conversation #6: Targeted and effective policymaking to unlock innovation and support startup ecosystems
Welcome to the sixth edition of the Milltown Tech Policy Conversation.
With the help of some of today’s most influential and interesting tech policy thinkers, each month we dive into a different theme to try and answer some of the big questions facing tech policy and responsible innovation professionals.
This issue focuses on how targeted and effective policymaking can unlock innovation and support startup ecosystems. Companies, governments and regulators alike self-describe as enablers of “innovation”. But what do those building startups actually need from policymakers in order to unlock innovation? And given the egregious overuse of the term “innovation” (four times in this paragraph so far) how can we have a more focused conversation around the best way to drive forward technological progress in the UK specifically?
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In this issue:
The Conversation: Dom Hallas, executive director at the Startup Coalition.
The Milltown POV: How global or US organisations can convey their value to policymakers in Brussels and London.
Date for the diaries: Following our social in London last week, we’ll be hosting another event in Brussels this evening (Tuesday 9 April) - get in touch by emailing info@milltownpartners.com if you’d like to attend!
THE CONVERSATION – DOM HALLAS ON STARTUPS, INNOVATION AND LESSONS FOR THE NEXT GOVERNMENT
(Image source here.)
Dom Hallas is the executive director at the Startup Coalition, an organisation pushing to make policy better for startups. He also sits on Seedcamp’s advisory council and on the Department for Science, Innovation and Technology’s Digital Economy Council.
Below are the key themes from our conversation with him. Read here for the full interview.
The UK startup ecosystem has flourished over the past 14 years. The Conservative-led administration's policies have been - though you have to whisper it quietly these days - pretty good for startups. The ecosystem has gone from a few people in a building in Shoreditch to a success story so good that it's the first line of every government minister's speech when they talk about growth in the economy. Even while everyone is in the mood to pile on as they are at the moment, it’s worth understanding, appreciating and learning from the role the government has played in that - whether by incentivising investment, supporting on talent or in the regulatory environment. Whatever comes next should build on that, not knock it down.
All policy initiatives to help startups should focus on the fundamental building blocks: access to talent, access to finance and a proportionate regulatory environment. The word "innovation" has become a miraculous defensive weapon in policy conversations - a substitute for “help my company do well” or “support my particular policy perspective”. But while startup ecosystems are very diverse, there are three basic building blocks needed for them to succeed: access to talent as freely and openly as possible, at a reasonable price; access to capital to be able to build; and a regulatory environment that is as free from unnecessary restriction as possible, whilst protecting the people who need to be protected. Pockets of government funding through programmes can be helpful especially in fixing market failure in a targeted way, but really effective policy interventions almost always come back to those three things.
AI is a huge economic opportunity, but we need to focus on identifying where real value will accrue to the UK and focus our policy accordingly. At the moment, government policy seems to be just thinking about sexy policy questions like regulating LLMs or protecting end users from deepfakes. They’re not wrong but that’s not necessarily what will help the UK succeed. For example, as well as things like narrow AI and specialist models, a lot of the economic value of the extraordinary innovation that AI is going to bring to the UK will likely be in the companies building on top of foundation models. What would that mean for how we think about regulation? Can we learn lessons from other examples where developers are building on top of foundational tech like app stores or the cloud market? Are we even asking these questions or thinking strategically about where we want the UK to be?
There’s a lot of value in using policy to unlock markets where the UK can actually succeed. Policymakers aren’t always very strategic in thinking about markets and shaping the regulatory environment to support those where we already have a pretty good chance of succeeding. In part because that’s not necessarily their remit - but it should be someone’s remit! Open banking was a success story because the regulator shaped a market in favour of competition in a place where the UK startup ecosystem had a real chance of success. There are places where that will work today - and there are places where it won’t.
Exit markets are bad because the investment market is bad - but regulators should avoid exacerbating the problem. The cyclical capital that comes from companies growing, scaling, exiting and then recycling that capital into the ecosystem, creates value and spurs innovation. But if you block up those routes to exit, the market becomes constipated. There is a fundamental problem at the moment, which is that [the acquisition] route to exit isn't necessarily available and whilst a lot of that is a wider economic issue, a part of it is because of a shifting regulatory landscape.
THE MILLTOWN POV
All tech companies innovate. But the term “innovation” is now used to argue for and against a wide range of issues (see the debates in the European Parliament on the AI Act, and in the UK Parliament on the Digital Markets, Competition and Consumers Bill, even age verification in the Online Safety Act).
In any case, policymakers are becoming increasingly resistant to the argument that companies which aren’t headquartered in the UK/ EU can contribute to the twin holy grails of “UK innovation” or “European innovation” - so policy teams need to use new (dare I say it, “innovative”) strategies to convey their value in the UK or EU.
While it’s sometimes possible to point to a substantial domestic investment (large engineering base, data centres etc.), another strategy that can work is to show that the company is aligned with and promotes the values and goals of the stakeholder in question.
Becoming a science and tech superpower has been a target (and a tagline) for the current UK government. Labour’s goals will be different: and companies will need to change their language to align with the new priorities. The best outcomes will continue to come from knowing your audience’s (i.e. the stakeholder you’re meeting) priorities and concerns, and adapting your strategy and messaging specifically to them.