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5 Ways That Politics Shape Entrepreneurship and Startups

May 02, 2017

Political developments can have a major impact on the world of entrepreneurship and startup companies.

Political developments such as new presidents and new parties in control of Congress obviously have a major impact on our daily lives, but it’s also important to realize how these changes could affect the world of entrepreneurship and startup companies.

The decisions the politicians are making, and the zeitgeist of the era factor in heavily in many different ways:

  • What types of startups are created? Cultural attitudes can dictate what types of startups are created; after all, most companies are started to address a specific consumer need. If politics affect those needs, startups are indirectly affected.
  • How startups are created. In a time of spending and optimism, more startups can begin and grow, while periods of pessimism may cause the decline of the startup culture, or change the way they’re funded and nurtured.
  • How startups can succeed. The type of branding, clientele and strategic direction you seek could partially depend on political attitudes of the time. Different eras have different factors that dictate success.

But what specific factors can influence these dimensions of startup development?

How Politics Influence Startups

Here are some of the biggest ways that political activity can shape entrepreneurial decisions and outlook:

  1. Demographic insights. Politicians tend to be reflections of who we are as a people. When the political party dominating Congress or the president shifts, it oftentimes represents the rise or fall of a particular demographic, which could be valuable information for an aspiring business owner. For example, much of Trump’s victory is credited to the participation of working-class white people—a demographic that felt ignored or underserved by politicians in the past. Learning to accommodate or target these spotlight demographics could be a benefit—but don’t forget, there’s also a benefit in targeting the truly underserved demographics, who may be struggling under the new administration.
  2. Periods of activity or inactivity in legislation. The creation, change, or removal of legislation could have a huge impact on your business. Economic development opportunities could give you grants or incentives for starting a business, or niche-specific developments could have a drastic impact on how you choose to move your business forward. For example, MIPS and MACRA (two pieces of healthcare legislation) could be facing delays, which could affect the financial decisions of hundreds to thousands of organizations. Pay attention to what laws are being passed or restructured, and tweak your decisions and developments accordingly.
  3. Fears over new developments. Political tumult often leads to fear, and fear leads to the rise of new needs. For example, in a political era where people feel unsafe, they may be more likely to spend money on security. In an era where they feel silenced and ignored, they may be more likely to invest in products that make them feel seen and heard.
  4. Excitement over new developments. On the other end of the spectrum, consumers may be excited about new developments, and their needs may change in different ways. For example, if consumers expect their wages to increase, they may end up spending more on luxury items, or if they expect the stock market to rally, they could be more likely to invest in securities, which could affect how you decide to structure your business.
  5. Cultural attitudes and buying decisions. Finally, one of the politicians’ biggest jobs is to serve as a figurehead for their jurisdiction. Their leadership has the potential to shape an entire generation of cultural attitudes and beliefs. Basically, politicians have the power to subtly reshape your key demographics, for better or for worse, and how you respond to those changes could have a massive impact on your overall success. Pay attention to how consumer spending and cultural attitudes evolve in the new era and develop new products or new additions that fit those changes.

How Closely Should You Watch Political Developments?

The significance of these political effects is at least partially dependent on your industry. There are some things that people will always need, such as food, and political developments are unlikely to affect these areas.

If you’re an entrepreneur but you don’t have an idea yet, watching politics could be the perfect way to generate a new concept that takes advantage of the era in one of the above ways.

Timing is, after all, one of the most important ingredients for a startup’s success. Politics may not make or break your potential, but they’re worth recognizing for the opportunities they can bring.

This article originally appeared on Startup Grind.

Photo via VisualHunt.com

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