VCs in NYC Get Serious About Policy
VCs in NYC Get Serious About Policy
VCs in NYC Get Serious About Policy

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    Today I attended a terrific day-long conversation organized by Union Square Ventures. The meeting brought together venture capitalists, entrepreneurs, academics like Larry Lessig and Yochai Benkler and policy advocates. The topic was “Innovation, Entrepreneurship and Public Policy,” and as the name implies, focused on the impact of telecommunications and intellectual property law on start up companies funded by venture capitalists.

    Not surprisingly, the conversation veered almost immediately to net neutrality (thanks to PK Board Member Jon Taplin). Here was the opportunity pro-NN policy wonks were looking for – to convince the VC community to get engaged, particularly to offset the constant drumbeat of Wall Street against enforceable net neutrality legislation.

    On that score, we came away disappointed. While nobody disputed the importance of an open and non-discriminatory Internet, the distrust of government regulation was palpable. It seemed not to matter much that the Internet became the great engine of economic growth it is today because the on-ramps were required by law to be open and non-discriminatory. This anti-government posture was based not on history, but on ideology.

    That mindset was not the only obstacle, and perhaps not the biggest, as many in the room understood that NN was necessary because of the telco/cable duopoly, and that NN needn't stay on the books forever if broadband competition eventually arises. What probably keeps the VC and entrepreneurial community out of the NN debate is the mind-set that they can innovate around any problem – if the “big, fat, slow” telco and cable companies (as one VC put it) operate closed networks, VCs will invest in and entrepreneurs will build an open one.

    Of course, that is much easier said than done, and as Lessig and Benkler pointed out, the best possible workaround – deregulation of spectrum to allow a multitude of unlicensed uses, will necessitate government action. In the broadband space, it is not possible simply to ignore government, since they control the many rights of way necessary to build another last mile broadband solution.

    After lunch, we talked about copyrights and patents. Larry talked about how Creative Commons provided a workaround to the problem of copyright law being ill suited to the digital culture. As he has previously discussed, the copyright laws are perfect for the “Read-Only” culture, but are a bad fit for the “Read-Write” culture we find ourselves in now. Then we talked about government tech mandates and DRM in the marketplace. One VC argued that the broadcast flag was no more a tech mandate than FCC certification of radio devices for spectrum use. I'm happy to report that his colleagues understood that to the extent that the flag extracts enormous costs in that it limits consumer rights and requires FCC pre-approval (pressured by Hollywood) for a whole range of devices, including general-purpose computers, his analogy was very imperfect.

    The patent discussion was far too brief. Fred Wilson, one of the Union Square Venture partners, provocatively proposed that perhaps patents should be abolished, since he believed if anything, they have been a tax on innovation. One VC half agreed – that for pharmaceuticals and biotech, patents are essential to innovation, but for information technology, they add very little value. Another urged the development of a market for patents so that innovators can know their value, which would then limit the possibility of huge damage awards from lawsuits. Others argued that the patenting process, which results in bad patents, was the real problem that needed to be fixed.

    I closed with a plea for VCs and entrepreneurs to work with PK on policy issues affecting innovation, and argued that their influence in the policy process would far outweigh their relatively small numbers. The VCs interest in policy issues makes me hopeful – but I recognize that their timelines are not the same as the timelines under which we in the policy world operate. Undoubtedly there will be substantial challenges to engaging the tech investment community – but at least the conversation has begun.