Bradley Tusk on starting a company and seed investing in the coronavirus era

Bradley Tusk has carved a unique path in the VC investment landscape: A longtime political and communications operative, he has built a track record for Tusk Ventures by going after highly regulated industries, rather than shying away from them.

Whether it is ride-hailing, sports betting, cannabis or myriad other regulated sectors, Tusk takes the approach that laws are ultimately malleable, and if a service is popular, its users can mobilize to effect change.

Given his unique perspective, it was great to have him join us this week in an Extra Crunch Live call — our new initiative here at TechCrunch to bring tech-world thought leaders right to your screens.

In our conversation, Tusk talked about edtech, telemedicine, cannabis, mobile voting, biotech, pandemics and the future of regulated industries in this dastardly economic environment. We’ve transcribed a handful of his answers to our and our readers’ questions and have embedded the entire video below the fold.

We’ve edited his written answers for clarity and brevity.

What’s the opportunity today for startups in a COVID-19 world?

So as I think everyone who’s watching this is aware, we’ve been in this kind of “techlash” over the last couple of years, more aimed at really big companies like Amazon or Facebook than Series A startups, but tech kind of gets conflated into one big thing a lot of the time. And probably the most heightened example was when Amazon tried to create 25,000 new jobs in New York, and we told them no, and sent them on their way.

The politics have shifted incredibly not just in the last year, but in the last month. And I think right now you’ve got a few things. One is city and state governments are desperately hunting for revenue. The federal government does not have to balance their budget, but the city and state governments do, which means that on some level on paper, P&L have to match up with each other. [Because of coronavirus, there are these massive government deficits coming through,] but I think in some ways, that’s opportunity.

So for example, we’re investors in FanDuel. Right now, not a great place to be because there’s no sports to bet on. But, mobile sports betting now becomes an obvious thing to legalize for all the states that have not yet done so, because if it can produce tens or even hundreds of millions of dollars of new revenue into the tax coffers, and you don’t have to cut spending on something that’s really important, or you don’t have to raise taxes, that becomes very appealing.

On cannabis, I think you’ll see “recreational” adopted much faster in lots of states, simply because they really need the money. If you assume that every single choice made in politics and government is sort of a “what’s the least bad political option” for the people making the choice, then in this case, generating new revenue from outside sources becomes that.

Ultimately, this is the time, almost counter-intuitively, if you’re a startup, when it comes to government regulatory issues: be aggressive, try to get stuff you normally couldn’t get, take a little more risk.

How to think about “risk-taking” in regulated industries?

The first thing to ask yourself is just, what’s the penalty for violating this thing, right? Because, think about when we were doing Uber or Bird, a scooter gets impounded, a car gets impounded, you get a ticket, it’s not that big a deal in the big scheme of things. If it’s, hey, you’re looking at five to seven at a medium security penitentiary, that’s a really big deal.

So the first thing is you’ve got to understand what the consequences are. Some of them you’re willing to take the risk for and some of them you’re not, and I think you can just go online, do a little bit of research and find that out pretty quickly. That’s number one.

Number two I think is having some awareness of the situational politics, and you don’t have to be us and have spent a whole lifetime at all different levels of government in politics to know this. But you may be, for example, in California right now, and you’re not sure whether AB-5 totally applies to you or not, because the bill when it passed last September was pretty vague in a lot of ways and they were going to clean it up this year. But now, of course, that may or may not actually happen.

In a normal environment, you would have to say, the zeitgeist would be against you at the moment if you’re a startup in California. But now, that has probably changed a little bit because people have bigger things to worry about than exactly how a company classifies between independent contractor and a W-2. And so you can kind of take your chances a little more. So I think it’s, know who you’re dealing with and where you are, how much risk are you taking by doing this and what’s the upside, right?

Is Tusk Ventures open for business?

We invested in a Series B last week, we did an extension of a series A where the money was wired on Monday. We did a deal at the end of February and yeah, we’re writing [checks] and reviewing stuff.

Look, we don’t want to overpay for things when everything might be a lot cheaper in a few months, so we’re trying not to be stupid about it. But we’re early-stage investors. We’re almost always — with the exception of the one Series B check I just mentioned — seed or A, we’re going to win or lose because we picked the right company and help them become a great company. And whether the valuation at the seed was $4 million too high or low, it isn’t really that material.

So yeah, if you’re a great company, and you’re in a regulated industry, we’re just as interested now as we were two months ago.