Engine Advocacy

This afternoon, the House Permanent Select Committee on Intelligence released a revised discussion draft version (text here) of the Cyber Intelligence Sharing and Protection Act, or CISPA -- a piece of important cybersecurity legislation. We in the startup community raised concerns about the bill’s broadly defined terms, which posed a potential threat to innovation. Others even drew comparisons with SOPA and PIPA. In this draft, substantive changes have been made which, in our eyes, have significantly improved the bill. We raised concerns -- specifically around the inclusion of intellectual property, definitions around private and government information, and regulatory burdens for small business -- directly with the Committee and with the office of Chairman Mike Rogers (R-MI). The Committee has taken into consideration our concerns as well as others from the community and has released a revised version of the bill. The new version preserves CISPA’s stated purpose of protecting networks and systems and preventing theft of information from these networks, while enhancing clarity around the focus of the bill. The willingness of the Committee to work with those in our community was heartening. We were able to craft legislation that protects sensitive data -- such as Research and Development and financial records -- without including provisions that are harmful to technology startups. Engine is committed to acting in the best interests of our community, and that includes protection of the critical infrastructure and networks upon which our companies are built. With these changes in place, Engine no longer opposes the legislation. We will continue to monitor CISPA through the amendment process to ensure that these changes stick so that our community is protected and innovation can thrive.

Luis Arbulu is a Founder and Partner at Hattery, and an Entrepreneur in Residence with USCIS. I am a foreign-born entrepreneur. Originally from Peru, I studied engineering in Lima and was awarded a Fulbright scholarship to study in the US: first engineering at the University of Kansas and then business at the Wharton School at UPenn. I followed the immigration process - from J-1 student visa to OPT to H1B to F-1 to green card and finally in 2008 I was naturalized and became a U.S. citizen. I worked at Google as finance lead, head of investments, and manager, working on advertising products, energy, and data platforms. Now, I am co-founder of a seed stage venture fund and consultancy, Hattery. Our team is growing by the day, and I have the extremely rewarding task of helping new startups grow and thrive. Recently I was contacted by the U.S. Citizen and Immigration Services (USCIS)  and asked to be part of their Entrepreneur in Residence Program -- a really great initiative to get entrepreneurs, USCIS staff, and other experts together to collaborate on issues surrounding skilled immigration and entrepreneurship. The program embeds a small group of investors and entrepreneurs into the USCIS for 90 days, with clear objectives and deliverables. [Read our post about EIR here - Engine]. As an Entrepreneur in Residence, I’m invited to share my own knowledge based on my experience as a foreign-born entrepreneur in order to better pave the way for future innovation and economic growth spurred by immigrant entrepreneurship. This country’s success is largely based on the hard work and determination of immigrants throughout its history -- a legacy I’m very much proud to be part of. Startups are almost the sole driver of new job growth in this country, and foreign born entrepreneurs are responsible for starting some of the country’s most successful and job-creating companies, like Google. This is something that hits close to home for me -- since it was only after eleven years in the US that I was able to start my first company. What I and the other participants of the program have found is that the current immigration system for skilled foreign-born workers does not encourage harnessing the talent and drive of foreign-born entrepreneurs to grow the U.S. economy. Immigration is an issue at a legislative stand-still. While there are some measures on the agenda, the issue of undocumented workers easily gets conflated with skilled immigration and stalls proposed legislation. While it’s important to pursue legislative change, another avenue to explore is optimizing the current system: making it as user friendly as possible, and giving foreign-born skilled workers the tools and resources to use the visas that are currently available. This includes working with the USCIS to train adjudicators on how startups and tech companies have evolved (funding levels, SaaS, incubators and accelerators, etc.), in order to clarify and potentially innovate in the processes for foreign-born entrepreneurs starting companies across the US. Another way to optimize the current system is to work with the USCIS to change the rules and policies on the current visas -- a measure that doesn’t require going through any legislative branch -- in order to help foreign born entrepreneurs to start their own companies. At the moment, workers here under an H1B visa can’t fulfill the requirements of the visa unless there is an employer-employee relationship, and that’s something we will be looking into in the program. This country was built on immigration, and I am proud to be here continuing that tradition, with partners like Engine and others in the space who understand the importance of entrepreneurship to growing the US economy. And I’m looking forward to working with the USCIS to find new pathways to success for immigrant entrepreneurs. Read more about the program here.

We've been looking into skilled immigration and its benefits to the American economy. Click here or anywhere on the image above to view our infographic.

Seasons change, people change. While your relationship building might seem best focused on leadership and committee chairs, keep in mind that the pieces are rearranged after every election.

So where are these bills? Let’s take a look at one of them  -- The Fairness for High Skilled Immigrants Act. Sponsored by Rep. Jason Chaffetz (R-UT), the bill received overwhelming bipartisan support and passed the House 389-15. Then Sen. Chuck Grassley (R-IA) effectively killed the bill in the Senate, citing a greater need for protections for American workers. Grassley is already critical of H1B, saying in 2009; “Employers need to be held accountable so that foreign workers are not flooding the market, depressing wages, and taking jobs from qualified Americans.” Grassley’s statement is representative of the commonly cited misconceptions about skilled immigration, so let's examine them in more detail. First off, with regard to the Chaffetz bill, changing the country caps wouldn’t increase the numbers of H1B visas, it would simply change the distribution process. So, under Grassley’s logic, the new legislation wouldn’t harm Americans any more than they are now. Furthermore, when the current mode of visa distribution was conceived, it was likely optimizing for a diversity of immigrants rather than for a specific skill set need. Altering this model just changes the optimization for our current needs -- more skilled high-tech workers from STEM fields. Then there’s STEM visas, which, according to Grassley, carry with them the danger of flooding the employment market and depressing wages. Actually, it’s pretty unlikely that the amount of visas granted through a program like this would have a big impact on the employment market or wages. The unfortunate truth is, extremely few Americans choose to pursue an advanced degree in STEM, and even fewer -- only 8% of all STEM Bachelor's graduates 10 years after receiving their degree -- use that degree for occupations like programming or computer science. Studies show that most Americans currently prefer to pursue other, more creative or prominent fields that use STEM competencies, like healthcare. This is where skilled immigration can be a complement to the existing workforce; filling the unmet demand for workers in the jobs for which most workers born here are not trained. In order to stay competitive globally, we need to remain at the forefront of technological innovation, and that means encouraging those who are educated in the U.S. to stay here after receiving their degrees. Skilled immigration should be the beginning of a larger conversation about education. In the long term, an increased focus on entrepreneurship and STEM education at a younger age for all American students will help to ensure we remain at the forefront of innovation and growth. Investment in K-12 will iterate in massive gains to American society in a few generations, and will help us grow a high-tech workforce alongside our continued ability to draw and keep overseas talent. In the meantime, we can’t afford to fall behind. Skilled, foreign-born workers were how this country was made great in the first place, and can continue to drive the engine of economic growth, all while creating American jobs. We need to pay attention to the legislation being proposed, and when we see a bill like the one proposed by Rep. Chaffetz, we need to bypass the hornet’s nest of misconceptions and competing political interests to get it passed.

-Michael McGeary, Co-Founder and Director

Alan Simpson is a veteran of traditional media, having cut his teeth at C-SPAN and NPR, before moving on to advocacy in the tech space with a particular focus on opportunities for children and learning. He currently works at Common Sense Media, and lives with his wife and mutt in San Francisco.  This post represents his personal views, and not necessarily those of any organization. I spend a lot of time with people working in technology, and even more time with parents and teachers who might be described as less than comfortable with technology.  It’s no surprise that conversations in the startup world focus on the many opportunities and improvements created by the Internet and technology.  On the other hand, when talking with parents, teachers, and policymakers, the conversation hinges not just on the upsides of technology, but also on the serious concerns many of this group have about potential downsides for children. Many parents and educators are embracing the benefits of digital technology, and are hopeful about opportunities for personalized learning innovations that can be accessed in school, at home, and many places in between.  But there are also parents who worry about trouble their children may get into with technology.  The perceived problems are as varied as the parents – issues ranging from porn and piracy to child ID theft and the risk of jeopardizing college applications. Some people might be tempted to dismiss the concerns of parents, but we should all recognize that worrying about children –- and weighing upsides and downsides -– is a big part of their jobs. When I talk with parents and educators, I usually stress the importance of finding balance, and of engaging with new platforms and tools, so that they can make smart tech choices for their children, and perhaps more importantly, teach their children to make smart choices as they grow.  This works in many cases, but sometimes I encounter parents or teachers who are frustrated, and know that they understand tech less than children do.  They wish there was an off switch, or a time machine to make the Internet disappear.  As we’ve seen recently, some policymakers agree. It’s important to remind them that there is no time machine, and that kids are going to embrace digital technology, just as they’ve always embraced innovation.  Parents, teachers and all adults can, and should, help teach kids to make smart choices about technology.  What we can’t do is tell a generation of kids to stay offline, because they’re going to live their lives online.   This can be a challenging conversation, and it may be one most tech folks don’t want to have.  But it’s a crucial conversation, and startups need to be part of it.  Because in the end, the biggest potential digital downside for our nation’s children is that we may block them from technology innovations that can significantly improve their opportunities for learning, and help them prepare for the digital world where they will live, work, play, bank, vote, and more.

This week, Engine is fortunate to have Alan Simpson (no, not the former senator of Wyoming) posting here about online child safety. We’ll be seeing that post later this week, but in the meantime, we want to share the scope of the existing debate around the pros and cons of new media for the under-13 set. Here’s a little background: the main piece of legislation that has dealt with children’s safety online for the past decade is the Children’s Online Privacy Protection Act of 1998 (COPPA). COPPA mandates specific requirements that web operators must adhere to for children under that age of 13 -- namely requiring parental permission before collecting any personal information from children and not distributing the information to third parties. Standard stuff. The bill was written over ten years ago, though, and technology has changed markedly in that time -- social media, smartphones, and tablets have made COPPA both restrictive in some areas and inadequate in others. Amendments were proposed last year by the FTC to ease the way for parental authorization and to institute additional protections for location based and facial recognition technologies. The FTC amendments were lauded by the internet community, who had long seen COPPA as a thorn in its side. The legislation, for instance, prevents children under the age of 13 from signing up for Facebook, which CEO Mark Zuckerberg said impedes the educational potential of social networking. Zuckerberg may not be the most impartial commentator on the issue, but he is not alone; plenty of others advocate for the educational possibilities of new technology. Alan Simpson is one of those advocates. His argument? It doesn’t matter whether you think the internet is good or bad -- It’s not going away. This is a world in which kids are growing up and media is a huge part of their lives. There are enormous positives that come out of that, and there are also things that you as a parent might decide are negative. The positives are pretty universal: the opportunities especially in education and learning that new media create for kids and adults are widespread. Giving people more tools to address the downsides -- without dismissing the positives -- allows parents to maintain the ability to be a filter without having to completely ban a technology which is an integral part of our lives now and will be even more so in 10, 20 years time when these kids are entering the workforce. Look out for Simpson’s post here in the next couple days.

Minutes ago, startup financing bill JOBS Act passed the Senate 73-26, with an amendment to further protect investors. The bill, which we discussed here, seeks to ease the way for startups to access investment capital through provisions that address the transition between being a privately held company and a publicly traded one -- eliminating the 500 shareholder cap, allowing general solicitation and crowdfunding,  creating an IPO onramp -- and provides startups with more financial pathways to success. Concerns that greater access to investments -- especially through the crowdfunding provision in the bill -- prompted fears from many quarters that investors would be opened up to fraud, or worse, that a “free-for-all” environment for investing in startups would create a reiteration of the dot-com bubble burst. An amendment offered by  Sens. Merkley (D-OR) and Brown (R-MA) passed along with the bill which addresses these concerns. The amendment requires companies raising up to $1 million to be transparent with potential investors about certain financial information, and prevents investors with an income lower than $100,000 from investing more than 5% of their annual income. JOBS Act always called for “reasonable protection” of investors against fraud, and now the Merkley/Brown amendment further distinguishes what safeguards will be extended on behalf of investors. Another amendment offered by Sen. Reed (D-RI) that changed the definition of the “emerging growth companies” that JOBS affects was rejected. The Merkley/Brown amendment means the bill will go back to the House before being signed into law by the President. We’ll be tracking.

To take action on JOBS Act, sign the petition at AngelList here. And stay tuned, in the coming weeks we’ll ask you to take further action in support of Startup Act. -The Engine Team

About a month ago, we posted about a study we sponsored entitled The Sky is Rising. The findings of the research confirmed that the moral panic surrounding the purported demise of creative industries (music, film, publishing) is largely unwarranted. The fact of the matter is, fuelled by increased exposure and new methods of distribution, our creative industries are actually growing rapidly. What’s more, the artists are seeing more direct financial benefit than before, and are more in control of their careers -- which goes a long way toward explaining the chagrin of traditional content distributors (record labels, big name publishers), who lose out in a scenario where a middle man is no longer required. Today in Austin at SXSW Music, the Future of Music Coalition released research that explores the revenue streams of musicians. The findings of the research follow the same vein as The Sky is Rising: artists across all genres are collecting a relatively low percentage of their incomes from affiliations with record labels, and instead are generating revenue across many different, self-directed revenue streams (The FMC identified over 40 different revenue streams associated with a music career). The upshot is, musicians -- and especially musicians who are “full-time” and earn all of their income from music -- are a lot more like entrepreneurs than anything else. While the findings showed an across the board reliance on revenue streams associated with performing, and performing costs were not scalable, performances were crucial to generating other revenue streams -- such as sales of CDs and merchandise. The FMC study not only presents a valuable data set, it also gives us a new way of conceptualizing the music industry. New technologies, like it or not, have changed the face of the industry; traditional gatekeepers no longer dominate the industry and there is now much more room for the “self-employed” artist. We encourage you to go and check out the study, and chew on the findings. Let us know what you think. Will small-business music ever really replace traditional record labels?

The Engine Advocacy crew is on its way home from its first SXSW. We found ourselves among friends there: entrepreneurs trying to build partnerships, consumers looking for the next great app for business or personal use, investors in search of the next high growth or long-run bet, reporters who actively engage with new media channels, and activists who, like us, want to advance policy that fosters new technologies and technology startups. Engine’s panel featured a cohort of voices that had been active against SOPA and PIPA -- Andrew Rasiej, the chair of NY Tech Meetup; Mark Stanley, the leading communications voice from the Center for Democracy and Technology; Laurent Crenshaw, the legislative director for Rep. Darrell Issa; Mike McGeary, Engine co-founder and director; and Boonsri Dickinson from Business Insider, who moderated the panel. The panel was both a discussion of the tactics that made the SOPA/PIPA protests so effective, and of how to use those tactics and others to mobilize the SOPA and PIPA protesters to take a proactive stance on tech policy issues in the future. This has consistently been a sticking point,for all types of advocacy -- how do you take the momentum gained from one urgent campaign, and turn it into sustained, positive action to advance a long term agenda? While the tech community might find it easy to block or defend against a piece or type of legislation, we have yet to determine the best advocacy tools for actively promoting legislation we like. Our stance: the community needs compelling data that it can take to members of Congress to expand the knowledge on specific legislation, and we need to connect members of Congress directly with startups that employ their constituents. In essence, we need to facilitate a really effective conversation. This became more and more evident as we circulated the conference, meeting with entrepreneurs who were pitching innovative, useful products and services and building the businesses to support them; and seeing a fundamental disconnect between this sphere and that of policymakers. This was cemented when we met with Senator Jerry Moran (R-KS), who restated his commitment to assisting startups and fostering high-growth businesses in Kansas, and throughout the country. He highlighted the divide between the tech and non-tech communities by pointing out his own sense of being an outsider sitting at the table with a bunch of tech folks. This discomfort, which seems to be a common problem for members of Congress, clearly stems from a lack of effective communication. The best possible outcome would be to educate policymakers about what we do; to make technology less alien, and to present them with hard data that proves the overarching value of what we do.  The Kauffman Foundation leads on researching these issues, but there are many other groups working toward this goal. We’re working on some exciting research as well that we think can help shift the debate. This easy, effective communication we’re talking about may not happen overnight, but we’re confident that it will happen. Getting together in Austin was a great next step in the process. We look forward to the next phase -- the action phase -- as we move forward.

Bill of the week: S.1933, or the Reopening American Capital Markets to Emerging Growth Companies Act of 2011. You might also know it as the Sub $1 billion Revenues IPO Act -- a shortened working title conferred by Fred Wilson at A VC, who championed the bill last Friday. The bill amends the Securities Act of 1933 and Sarbanes Oxley to ease the time and financial burden of regulatory compliance for small companies going public. Specifically, the legislation would give “emerging growth companies” -- companies with revenues of less than $1 billion -- five years to comply with SEC regulations for an IPO. The temporary exemptions would allow smaller companies an eased path to IPO, while maintaining compliance obligations that protect investors. Eased regulations for IPO would give smaller companies greater access to markets and capital at a critical stage in their growth. This bill corresponds to part of the Obama Administration’s Startup America Legislative Agenda, a detailed list of priorities released a month ago to spur job creation by addressing the needs of start-ups. We wrote about the agenda in detail here. You probably already know how vital start-ups are to job growth -- Kauffman research shows that start-ups are responsible for nearly all net new job growth in the country since 1977. But in case you need a refresher, this video is short, sweet, and explains the issues well. Bottom line? Election year or no, stimulating job growth and the economy is a non-partisan issue.This is an important bill, and one that we want to see passed sooner rather than later.

We hope to see you there!

A Kauffman Foundation study shows that innovative startups are largely founded by users who create products for their own use and then commercialize them -- an inspiring statistic that bears witness to the fact that innovation is closely related to democratic entrepreneurship and economic growth. A study released today by the Kauffman Foundation looks for the first time in any significant detail the statistics on “user-entrepreneurs” -- entrepreneurs who make products for their own personal use -- and found that these types of entrepreneurs were particularly prevalent in innovative startups, comprising 46% of innovative startup founders. The study tells us what we have known anecdotally for some time - innovation is intuitive, personal, and easy to sell. User entrepreneurs are not only more likely to get venture capital financing from the outset for products they build with a business purpose than other kinds of startups, but those who create their products for personal use are also more likely to have women and minorities as founders. Read more about the study here. We’re looking forward to seeing more research that hones in on the amazing potential of bottom-up innovation.

Ultimately though? We’re with Downes on this one: we need to rethink spectrum. We need to spend time hashing it out and crafting legislation alongside innovative processes that will work with our constantly evolving needs. We need to turn spectrum licensing into a responsive and nimble machine instead of a lumbering beast that needs massive overhauls every decade just to keep the system from complete collapse. So let’s look at this as an opportunity, rather than a disaster; as a chance to help shape long-term policy that fosters innovation. Let us know what you think. Head over to Step2 to tell us your thoughts on spectrum as part of the innovation agenda.

Today, our friends at Public Knowledge launched the Internet Blueprint, where they will be hosting new ideas for positive policymaking where people can vote up or down ideas and help them draft legislation. We encourage you to take a look at all the bills, they’re proposing. We’ve found one in particular we’d like to support, right out of the gate. A much needed amendment to the Digital Millenium Copyright Act of 1998 has been proposed by our friends over at Public Knowledge to modernize and improve the legislation. The Strengthening and Protecting DMCA Safe Harbors Act would amend section 512 to penalize bogus takedowns -- like the takedown of an anti-SOPA Techdirt post we wrote about previously. The amendments include penalties for anyone who knowingly or recklessly misrepresents that material or activity is infringing, including liability for damages incurred by the alleged infringer and reasonable legal fees if the takedown is proven to be without merit. The proposed legislation would require proof that the alleged infringer was served with a notice, or an explanation of why this did not occur, as a safeguard against surprise takedowns. The legislation also calls for a free, publicly accessible, and searchable database of all takedown notices and counter notices to increase transparency and guard against bogus takedowns. Finally, the proposed amendment seeks to protect subscribers to infringing sites with due warning of takedown and prompt return of files owned, in order to protect users who subscribe to services which turn out to be infringing. Click here to read more from PK’s blueprint for DMCA Safe Harbors. Now that the dust has settled after the fight against SOPA and PIPA, it’s time to take positive action in becoming involved in shaping future policies that protect an open and vibrant internet, one which is safe for commerce and property, and one that fosters innovation. Legislation like the Safe Harbors amendment, and others already listed on the Blueprint are the kinds we at Engine would like to see more of, and the sooner more work can be done on these important issues, the better.