Tech and its impact on humanity has been a focal point for many politicians, fueled by the industry’s growing influence; social and mainstream media-fueled fear; and past mistakes.
In the last decade, social media has received much of the blame for societal outrage, rising rates of depression, and election manipulation. More recently, crypto, AI, and hardware infra are taking center-stage, emboldening new regulations.
Spaces undergoing increasing regulations include:
Teen regulation: Utah recently signed bills, SB152 and HB311, that would require social media to introduce age verification, prevent teens from using their service between 10:30pm-6:30am, and more starting March 1, 2024. Politicians in Arkansas, Texas, Ohio, Louisiana and New Jersey are pushing for similar regulation to the Social Media Regulation Act while the Senate is considering the adoption of the Kids Online Safety Act.
AI regulation: The EU is proposing heavy restrictions to the use of AI, requiring companies like OpenAI and new startups offering AI models to be licensed by a third party. The AI Act extends to distributors of this code such as GitHub and apply to open source contributors. And of course, the US is also evaluating its approach to AI regulation as illustrated in the recent Senate hearing with Sam Altman.
Crypto regulation: Politicians and the crypto ecosystem have had a complicated relationship, and tensions are building. The collapse of UST/LUNA, FTX, and several large banks (notably Silvergate) is emboldening the lawmakers to instrument more oversight and controls on crypto. There’s too much to summarize in a paragraph but some are calling this moment “Operation Choke Point 2.0” as more crypto companies like Coinbase are establishing operations outside of the US.
Hardware regulation: We’re seeing a shift toward onshoring, fueled by war and macroeconomic uncertainties, and the introduction of regulations banning non-US sanctioned hardware in certain industries. Florida recently banned the use of Chinese-made DJI and non-approved drones for law enforcement, fire departments, and government agencies. Texas, California, Mississippi, and Tennessee may also follow. Last year the Chips and Science Act passed to subsidize the development of US-based chip manufacturing alongside export restrictions to limit China’s access to cutting-edge semiconductor chips.
We expect this trend to accelerate. Regardless of your stance on this topic, it’s an important shift that will lead to new challenges and opportunities.
Changing regulations and emerging compliance standards create opportunities for the adoption of new tools. In some cases, these tools (or changes in process) become mandatory to avoid fines or even jail time. We’re interested in funding startups building tools that help companies follow emergent laws or industry standards.
Of course, compliance tech isn’t new. Here are just a few early-stage players solving new and increasingly important problems:
TerraTrue is building a single source of truth for product compliance. Hadrius is building an AI-powered Copilot for SEC compliance. Commonbase ensures companies aren’t sharing sensitive PII data with external LLMs. Arklow is a rules engine that ensures companies don’t incorporate data that breaks rights holders protection to avoid litigation. Cable helps customers comply with financial crime requirements.
New laws lead to new opportunities. We’re interested in companies that are building tools that:
Facilitate collaboration between product and compliance teams
Embed compliance monitoring to automatically flag risks, trigger reviews, etc. and update data maps and other compliance documentation
Offer a compliance “operating system” to ensure companies stay up-to-date with increasingly fragmented regulations across states and countries
Support emerging categories of technology that are under heavy regulatory scrutiny like AI and social media