Rule-breaking is great for startups—sometimes

In San Francisco, electric scooter firms went rogue at launch. City officials were not amused. Disrupters should know how the game is played before they try to upend it.

This past spring, my hometown of San Francisco was invaded by electric scooters— thousands of them, all on the streets at the same time. It seems that three companies— Spin, LimeBike, and Bird— had simultaneously decided to make the city a test site for their transportation revolution, and didn’t wait to ask for permission, according to city officials.

San Francisco is a natural place for such an experiment. The streets are chock-a-block with alternative transport devices, from hoverboards to unicycles, and the techy workforce is eager to play early adopter (see: Uber, Postmates, TaskRabbit). But what pissed people off—especially local politicians—was the upstarts’ audacity in dumping their experiment onto the sidewalks. Not only did they sidestep city officials; they apparently didn’t care about whether their business plan might encourage people to break any, you know, laws.

Fantasy plays a big part in entrepreneurship. You have to be crazy to start a company, the cliché goes, and there’s more than a little truth in that. Delusions of grandeur fuel many a startup slide deck. If entrepreneurs truly knew what they were getting into, fewer would make the leap. Maybe that’s what the scooter people thought: The more you know the rules, the more you’ll feel compelled to play by them—and that’s no way to build a breakout company.

But there’s another, more pragmatic school of startups that maintains the opposite: that the companies with the best chances of success have founders who actually know what they’re talking about. These entrepreneurs not only have the inside dope on where the true needs and opportunities lie; they also have the networks to turn contacts into contracts.

I’ve seen both approaches firsthand. Years ago, as a reporter at The Wall Street Journal, my beat was the travel industry, and I witnessed this new thing called the internet inspiring a flock of entrepreneurs, some of whom had deep roots in the arcane world of airline-reservation systems, and others who saw an industry destined for disintermediation. The successful ones, it turned out, knew how to make the calls and get the deals done.

More recently, I’ve gone deep into health care, watching the “make the world a better place” set founder while the more seasoned—and more reasoned—startups manage to line up paying contracts with health insurers and hospital systems. Virta Health, Omada Health, and Pear Therapeutics, among others, all recognized they’d be headed into regulatory waters and built proper expertise into their founding and executive teams. These people know the rules well enough to squeeze through the pain of the startup phase and move quickly to contracts and revenue and profit.

Transportation and health care are both highly regulated industries, in which it seems only prudent to know the rules before you play around them. But that hasn’t stopped oodles of startups from jumping in without knowing much only to— at worst—crash and burn, or—at best—quickly realize that they had better hire expertise, fast.

I still believe in the power of blind ambition to shake up the status quo. But whether you’re an old-school methodist or a swaggering iconoclast, some awareness of what you do and don’t know is probably the most valuable asset you can have. This seems like common sense, but it’s more the exception than the rule, as the scooters littering San Francisco prove.

Oh, about those scooters: Officials, having learned their lesson from Uber, quickly cuffed the startups with new rules that limit the number of scooters allowed in the city. Although the three rogues will likely survive, the city offered no guarantees that they’ll be licensed to rent out scooters just because they’re already there. Being a first offender is not exactly the same thing as being a first mover.