The startup community is deeply troubled by the Administration’s decision to limit the movement of immigrants—including lawful visa holders—into the U.S. on the basis of religion and country of origin—a move that came with no forewarning and has engendered uncertainty for many people, including employees at America’s startups. The executive order is both morally and economically misguided, and sets a dangerous precedent that signals to the rest of the world that America is no longer open for innovation.
On Friday, the White House released an advance copy of its final International Entrepreneur Rule, which will allow qualifying foreign entrepreneurs to build their startups in the U.S. The final rule will be published in the Federal Register today and will become effective on July 17, 2017.
Conversations about talent and diversity were once again at the forefront in 2016, with a heated Presidential election, bold actions by the Obama Administration around immigration and computer science education, and efforts by major tech players to diversify their workforces. The tech community and policymakers continued to search for solutions, and while 2016 didn’t unearth a silver bullet for fixing tech’s workforce and diversity issues, significant progress was made.
A Big Year for Startup Policy in 2016. The Startup News Digest will be taking a hiatus over the holidays, but you can still get your startup policy fill on our blog. Yesterday, we began publishing Year in Review posts on some of 2016’s most notable debates in tech and entrepreneurship. Watch this space for reports on capital access, intellectual property, net neutrality, emerging technologies, and more over the coming days. Thanks for all of your support in 2016, and we’ll catch you in the new year!
Computer Science (CS) Education Week is an annual initiative that aims to get kids excited about computer science and inspire interest in technology careers—an effort that is more important now than ever. It’s no secret that demand for computer science professionals has skyrocketed in recent years. Virtually every industry has an increasing need for STEM workers, especially those with a background in computer science and coding. And yet, there is a growing gap in the availability of these skilled individuals. There are currently over 500,000 open computing jobs nationwide, but last year, only 42,969 computer science students graduated into the workforce. In fact, there are fewer students graduating with degrees in computer science today than there were ten years ago. Our workforce is woefully unprepared to meet the growing demand for IT professionals.
At Engine, we’ve seen firsthand some of the extraordinary contributions that immigrant entrepreneurs have made to the startup economy. One-third of U.S. venture-backed companies that went public between 2006 and 2012 had at least one immigrant founder. Moreover, immigrant entrepreneurs started, in whole or in part, some of the most important technology companies of our time, including Google, Intel, Yahoo!, eBay, and WhatsApp. In fact, the United States was home to almost 2.9 million foreign entrepreneurs who generated $65.5 billion in business income in 2014.
The startup community has been fighting for years for reforms that would allow the world’s brightest innovators to start and scale their companies here in the United States. Engine welcomes the Department of Homeland Security’s International Entrepreneur proposal, which will allow talented foreign-born entrepreneurs to build their companies in the U.S., in turn creating jobs and driving economic transformation. Today’s announcement is an important step towards making our immigration system work for the 21st century innovation economy.
As the Republican National Convention kicked off this Monday, the GOP also released the final draft of their party’s platform. The platform, which was written with input from the party’s base sourced via www.platform.gop, included generous mentions of issues important to the startup community.
As the dust settles from last week’s stunning Brexit vote, the broader tech community, which staunchly supported remaining a part of the European Union (EU), is taking stock of the potential repercussions of the decision. While the United Kingdom (UK) and the EU still have to negotiate the exact terms of the deal (assuming the British can cobble together a new government committed to the Brexit), uncertainty surrounds several key issues important to the tech community.
Over the past year, Engine has teamed up with veterans working in the tech industry and several Veterans Service Organizations to understand how government can better support transitioning servicemembers interested in careers in technology. Whether as entrepreneurs, managers, or engineers, it’s clear that given the proper training and support, veterans have the talent, resolve, and discipline to thrive in the tech workforce.
By the end of the year, over one million veterans will have transitioned from the military to civilian life since 2011, settling into communities across the country and charting new career paths for themselves. For some veterans, pursuing the educational opportunities covered by the GI Bill will be their logical next step.
Since the earliest days of this election cycle, the 2016 presidential candidates have been sparring about immigrants and immigration reform. Both Democrats and Republicans agree that the country’s immigration policies are among the most important issues the next administration will need to tackle (and hopefully with the support of Congress). Yet, as enormous and all-encompassing as our country’s immigration problems are, only a narrow portion of them have been discussed by the candidates.
The Diversifying Tech Caucus, the bipartisan, bicameral caucus that Engine helped establish last year, held its first briefing of 2016 earlier this week. The Capitol room was packed with over 70 congressional staffers who heard from a panel of tech workers, leaders, and entrepreneurs about African American participation in the tech workforce. The numbers aren't great, with African Americans making up just 6 percent of STEM workers, a dismal 2 percent of employees at major Silicon Valley firms, and an even smaller percentage of venture-backed startups. Yet, many efforts, from private industry as well as non-profit organizations, are underway to the bolster the participation and leadership of blacks in tech.
On Tuesday, President Obama sent his final budget request to Congress and it amounted to a whopping $4.1 trillion. In reality, the President’s budget request is typically little more than legally mandated political theater. It’s an opportunity for Democrats and Republicans to rally their bases and duke it out over fiscal strategy and funding priorities. This year’s budget request will likely go largely unfulfilled by the Republican-led Congress. In fact, it was declared “dead on arrival” by Republican lawmakers, and, in an unprecedented move, House and Senate Budget Committee leadership have elected to forgo hearings on the request entirely.
Still, if nothing more than a wish list, the President’s budget lays the groundwork for future policies and, this year in particular, represents a roadmap for the next Administration to espouse or eschew. There are a number of proposals in the President’s request worth highlighting—policies and programs that, if championed by Congress, would support innovation and entrepreneurship.
Investing in Tomorrow’s Workforce
One of the startup community’s most persistent challenges is accessing a pipeline of skilled talent in order to both help startups grow and create news ones. While the Obama Administration has been an unwavering champion of immigration reform to bolster the country’s pool of high-skilled workers, immigration represents only part of the solution (and unfortunately, neither high-skilled immigration reform nor comprehensive reform appears to be going anywhere for the time being). The other piece is ensuring that we are training tomorrow’s entrepreneurs and tech workers here in America.
The President’s budget request includes $4 billion for improved computer science education through its recently announced Computer Science for All initiative. The funding would support states’ efforts to expand CS programming and focuses largely on training teachers and expanding access to quality instructional materials. The Administration has also called on local leaders, educators, and the tech industry to get involved in expanding CS education.
The budget also proposes creating two new funds: a $75 million American Technical Training Fund, which would provide competitive grants to support evidence-based, tuition-free job training programs in high-demand fields, and a $2 billion Apprenticeship Fund, which would build on the Administration’s successful American Apprenticeship Initiative strategy and aim to spur new innovations in apprenticeship.
Finally, the budget proposes creating more than 50 new “Talent Hot Spots” that would “prioritize a sector and make a commitment to recruit and train the workforce to help local businesses grow and thrive, attract more jobs from overseas, and fuel the talent needs of entrepreneurs.” The Administration estimates that this program could create a pipeline of more than half a million skilled workers in just five years, talent that could feed entrepreneurial growth.
Expanding Broadband Access
Earlier this year, the Federal Communications Commission reported that there are still 34 million Americans (or about 10 percent of the country) who lack access to broadband at sufficient speeds. Startups depend on a healthy and competitive broadband market, and it is essential that federal policies encourage connectivity. The President’s budget request includes continued investments in existing federal programs that support the expansion of high-speed broadband to all Americans. Additionally, the budget request calls for future spectrum auctioning, which will allow for more internet service providers to participate in the mobile broadband market.
Federal investments in research and development can help spur innovation in the private sector and the creation of new companies. The President’s budget includes $152 billion in funding for research and development, an increase over last year’s request. Much of this investment is targeted for innovative technologies such as Big Data services, supercomputing, robotics, and nanotechnology. The budget also includes $4 billion for autonomous vehicle R&D, representing an unprecedented level of investment by the federal government in this new market and a huge win for proponents of this growing technology.
Making the Tax Code Work for Startups
Finally, the budget request includes a number of proposals that would streamline and improve tax benefits for startups and entrepreneurs. The President proposes simplifying the existing Research and Experimentation (R&E) tax credit. Last year, the R&E credit was modified to allow small companies to claim it against payroll taxes, instead of income taxes. This made it available to startups, many of which could not claim the credit previously due to a lack of taxable revenue. Still, the process of applying for the credit remains complex and difficult to navigate for startups. The President’s budget proposes simplifying the credit’s formula, making it easier for startups to take advantage of.
The Administration also proposes quadrupling the amount of startup expenses (things like legal fees, office supplies, or recruiting costs) that entrepreneurs can deduct from their federal income taxes, increasing the deduction from $5,000 to $20,000. This will make it less costly to start a business and allow innovators to put more money back into their startup more quickly.
The frustrating truth is that most of the President’s budget proposal won’t receive Congressional consideration. However, we hope that future policymakers can coalesce around some of the proposals outlined above, which represent reasonable policies that would encourage the growth of startups that drive our economic success and are responsible for all net new job growth in the United States. Finding common ground in today’s political climate is difficult, but it is essential to ensuring that America remains a place where the ideas of the future can grow and thrive.
Our weekly take on some of the biggest stories in startup and tech policy.
Obama’s Final SOTU. President Obama addressed Congress Tuesday evening in his seventh and final State of the Union, which included a few nods to the tech industry and startups, too. He remarked on some upcoming proposals from the White House, including a push to bring computer science education to more schools. The president also spoke of the country's rich history of innovation, as well as the challenges workers face in the new technology-driven economy. "In this new economy, workers and start-ups and small businesses need more of a voice, not less. The rules should work for them."
Encryption Debate Continues. A new bill was introduced in the New York State Assembly this week that would essentially disable strong encryption on all smartphones sold in the state. If passed, it would be the first state law requiring a “backdoor” for encrypted technologies—something that is not only constitutionally questionable, but also not technically feasible without undermining the security of the system as a whole. The tech industry has been pushing back against these “backdoors” at all levels of government. Just last week at a counterterrorism discussion between high-level federal officials and tech leaders, Apple CEO Tim Cook called on the administration to issue a statement defending the use of unbreakable encryption. The White House has yet to take an official position on encryption.
New Regs and Report for Ride-Sharing in NYC. The New York City Council will soon introduce new legislation regulating for-hire vehicles, the Wall Street Journal reported last week. The proposed legislation would require for-hire vehicle services such as Uber and Lyft to make their cars more accessible to the disabled, among other regulations that may address surge pricing. These new laws could be introduced as soon as next week, following today’s release of the highly anticipated traffic congestion report from the Mayor's office. The study, which examines the impact of new ride-sharing services on the city’s traffic, was commissioned by New York City Mayor Bill de Blasio last summer after proposals to cap the number of for-hire vehicles were defeated. We’ve just started digging into it, but among other things, it claims “For-hire vehicles are a vital part” of the city’s transportation mix and does not blame any one company for local congestion. We’ll be watching whether the report’s findings will influence the city council’s new legislation.
Big News for Autonomous Vehicles. 2016 is shaping up to be the year of the autonomous vehicle. At last week’s Consumer Electronics Show, a number of automakers announced their forays into this rising market. Then, on Thursday the Obama Administration unveiled plans to include $4 billion for autonomous vehicle R&D in the proposed 2017 budget. The Administration also promised to issue regulatory guidance for companies around compliance with safety standards within six months. The federal government has remained relatively hands off in this new market, but the Administration’s announcement this week represents a new level of involvement and a huge win for proponents of this growing technology.
The Size of the Sharing Economy. The results are in. A recent and first-of-its-kind poll conducted this fall found 44 percent of American adults have participated in the sharing and on-demand economy—that's over 90 million people who've booked a room on Airbnb, hopped in an Uber, or ordered groceries from Instacart. The poll also found that 22 percent of American adults have offered goods or services through these new platforms in exchange for income. And despite a spate of recent lawsuits over worker classification, the vast majority of these workers describe their experiences as positive.
The State of Computer Science. Code.org, a national organization dedicated to expanding computer science education, published its 2015 report, revealing K-12 student enrollment in computer sciences courses is growing nationwide. Today, 25 percent of U.S. schools teach computer science and programming and several major school districts including New York and Chicago have made recent pledges to the subject in every school. Computer science is also the fastest-growing AP course of the past decade.
Americans Online. Last week, the Federal Communications Commission released updated numbers on broadband access in the U.S. While the percentage of Americans with access to advanced broadband has improved over the past year, there are still 34 million Americans (or about 10 percent of the country) who lack access to broadband at sufficient speeds. While this report suggests improvements in the broadband ecosystem, more needs to be done to connect the 34 million currently cut off from broadband opportunity.
Our weekly take on some of the biggest stories in startup and tech policy.
Patent Lawsuits Up in 2015, Trolls in the Lead. Surprise, surprise! The latest numbers are out, proving that patent litigation is still out of control and patent trolling is indeed a real problem. Unified Patents’ latest breakdown of data indicates that 2015 saw the second highest number of patent cases ever (nearly 5,800 cases filed). Further, non-practicing entities (or NPEs, aka, trolls) filed two-thirds of them, largely in the Eastern District of Texas, a judicial district notorious for its friendliness to patent trolls. Additionally, 64 percent of patent litigation in 2015 occurred in the high-tech sector and NPEs were involved in over 88 percent of these high-tech cases, a 10 percent increase over 2014. Until the patent system is fixed, the trolling problem evidently isn’t going anywhere.
Net Neutrality Kerfuffle Over T-Mobile’s “BingeOn” Program: Recent reports about T-Mobile's treatment of streaming video services has many net neutrality advocates up in arms. Its latest offering, BingeOn, has actually avoided most of the criticism typically directed towards so-called "zero rating" programs. With BingeOn, T-Mobile allows any video provider to participate for free, thus skirting net neutrality rules that bar preferential data treatment for some paying companies. However, apparently, T-Mobile has been throttling (or, from T-Mobile's perspective "optimizing") all streaming video its users consume, not just streams from companies participating in BingeOn. Throttling lowers the data consumption associated with watching a video, but also diminishes video quality. Because the FCC's net neutrality rules essentially ban throttling, it's possible that the FCC could find T-Mobile in violation of its Open Internet Order. T-Mobile points out that users can opt out of BingeOn and the associated video throttling, but critics note that T-Mobile makes opting out excessively difficult. While FCC Chairman Tom Wheeler has praised similar offerings from T-Mobile in the past, BingeOn raises difficult questions about the application of the Open Internet Order that the FCC will need to resolve.
Drone Registration Challenged in Court. In December, the Federal Aviation Administration (FAA) announced new rules requiring the registration of recreational drones. According to data released by the FAA this week, over 181,000 drones have been registered since the registration site went live just three weeks ago. But not everyone is keen on registering their brand new toy. Some stakeholders have criticized the rules as being burdensome and unnecessary, while others have raised concerns around the public availability of registry data. And now a Maryland “model aircraft hobbyist” has sued the agency over the contentious rules, arguing that the registration requirement violates a federal law that prohibits the FAA from regulating recreational drones. The court has denied his request to immediately halt registration.
#CES2016. The annual Consumer Electronics Show takes over Las Vegas this week and along with the new electric cars and Ultra HD TVs, policymakers and government officials are also taking the stage. In fact, it was at last year's CES that FCC Chairman Tom Wheeler first indicated the agency's support for net neutrality. We don't expect any news of that nature, but this week FTC leadership told conference-goers the commission is close to striking a data-transfer deal for U.S. tech companies with its EU counterparts and FAA officials discussed new recreational drone requirements. USPTO Director Michelle Lee and Rep. Darrell Issa (R-CA) talked patent reform and Sen. Mark Warner (D-VA) made a showing, addressing policy challenges facing both government and emerging gig-economy startups as did . The new technologies unveiled at CES—virtual reality devices, autonomous cars, and other smart, connected tools—also offer a preview of new tech policy challenges to come.
The State of Female Founders. CrunchBase released their latest data on women-founded companies, illustrating that there is still a long way to go for gender parity among startup founders. Though 18 percent of companies that received seed funding in 2015 have at least one female founder, only 8 percent companies that received seed funding have at least one female founder CEO. For companies that received Series A and B funding in 2015, these numbers drop to 14 percent and 5 percent, respectively. The numbers may seem dismal, but this is a strong improvement from 2014, when only 10 percent of founders raising Series A rounds were women.
Our weekly take on some of the biggest stories in startup and tech policy.
CISA Sneaks into Omnibus. As Congress scrambled to clear its legislative calendar before leaving DC for the year, it packed a bunch of unrelated bills together into a 2,000 page omnibus spending bill that will need to pass in order to adequately fund the government. This potpourri approach to legislation raises serious concerns about government transparency and access, as all but the most well-connected groups are effectively blocked from the closed-door dealmaking that resulted in the omnibus. This year’s omnibus produced one notably terrible outcome: the resurrection of the much-maligned Cyber Intelligence Sharing Act (CISA), which is meant to allow companies to share information on cyber attacks with government in order to help prevent future hacks. Critics argue that the bill creates more problems than it solves by jeopardizing user privacy, incentivizing companies to secretly monitor user activity, and allowing the government to obtain consumer data without a warrant. With the ECJ’s nullification of the EU/U.S. data transfer safe harbor so fresh in policymakers’ minds, it is a particularly inopportune time to pass a bill that many believe is effectively an expansion of government surveillance authority.
EU Sets New Data Privacy Rules. On Tuesday, the European Parliament and Council effectively agreed upon a negotiated version of the EU Data Protection Reform originally drafted in 2012. The measures will be formally adopted in early 2016 and go into effect in 2018. US businesses are concerned with several of the law’s provisions that make compliance challenging and also expensive. Among their concerns: Companies that violate the rules could face fines of up to 4 percent of global sales; the law also formalizes the “right to be forgotten” statute, allowing users to not only correct inaccurate personal data, but also the right to remove irrelevant or outdated information; the age of consent for data processing is set at 16 years; companies must alert authorities within three days of a reported data breach; and larger “data-processing” companies must designate a data protection officer.
An Uber Union? Seattle has become the first city in the nation to allow on-demand drivers for companies like Uber and Lyft to unionize. The legislation, passed by Seattle’s city council on Monday, is seen as a test case for the changing 21st century workforce and will likely be contested in court. While some have argued that the new policy conflicts with federal law and raises antitrust concerns, others insist that the local law has teeth. Regardless of its merits, the law further complicates the broader debate around worker classification in the emerging “gig economy” and whether policies can support both innovation and workers.
California’s New Self-Driving Car Laws. A month after a study by California’s Department of Motor Vehicles, the state released proposed rules for driverless cars. Some of the rules came as no surprise to driverless car manufacturers such as Google, Tesla, and Ford: consumers must receive special training certificates and the autonomous vehicles must meet certain cybersecurity standards. However, one proposal, if passed, could significantly impede innovations in this emerging industry. The California DMV wants a licensed driver present in the vehicle, preventing the kinds of functions—package-delivering vehicles or transportation for the blind—that could truly revolutionize transit. This rule also complicates the liability question by making the licensed driver legally on the hook for any accidents. Google, on the other hand, has thus far stated that it is willing to take responsibility for any accidents on the road. There’s still room for debate though; these rules open for public comment next month.
BingeOn? Maybe Not Says FCC. In its net neutrality rules from earlier this year, the FCC declined to enact a flat ban on “zero rating” programs whereby ISPs exempt certain data from user data caps. Instead the FCC decided to tackle such issues on a case-by-case basis. Since then, ISPs have begun to test the FCC’s willingness to regulate data exemption policies, such as T-Mobile’s Music Freedom and BingeOn plans. While T-Mobile’s programs do not implicate the most concerning net neutrality problems by allowing any music or video streaming company to take advantage of the data exemption without payment, some net neutrality advocates have taken aim at T-Mobile’s policy of throttling all video traffic regardless of whether it is a part of the BingeOn program. FCC Chairman Tom Wheeler has previously applauded T-Mobile’s programs as creative, pro-consumer innovations, but now, the FCC wants to take a closer look. With the Commission’s data cap inquiry and the DC Circuit’s pending decision on the validity of the FCC’s net neutrality, 2016 looks to be an important year for the future of the open Internet.
Drone Registration Goes Live. The Federal Aviation Administration unveiled new recreational drone requirements this week. Starting December 21, drone hobbyists must register their unmanned aircrafts and pay a $5 fee through a new FAA web page. The registration requirements represent a mostly uncontroversial attempt to maintain safety and accountability in national airspace as more and more drones populate the skies.
GOP Misses on Tech Issues. While many observers called this week’s Republican debate the most “substantive” yet, tech experts heard uninformed positions and misconstrued information on issues such as surveillance, the operation of the Internet, and encryption. For instance, Gov. Kasich inaccurately assumed that encryption prevented law enforcement from collecting information that could have foiled the San Bernardino shootings. Yet, whether encryption played any role in law enforcement’s access to important digital communications has not been confirmed. Meanwhile, Mr. Trump suggested that parts of the Internet should be “closed,” a preposterous suggestion that would not only hinder communication amongst bad guys, but also the good guys who drive ambulances, operate hospitals, and alert the world to vital information. Such superficial positions on high-impact tech policy are disconcerting - legislating these areas will require thoughtful (and, frankly, more complicated) solutions.
Prisoners Turned Coders. San Quentin State Prison just graduated 21 inmates from its tech incubator, which teaches inmates to code as well as the skills it takes to design and pitch a business to investors and peers. The program, made possible by The Last Mile organization, has become so popular that inmates are requesting transfers to San Quentin. Next up: A new program from The Last Mile will provide inmates with paid coding jobs for businesses outside prison walls.
Back in January, we worked with Senators Shelley Moore Capito, Tim Scott, Amy Klobuchar, and Representatives Barbara Comstock, Tulsi Gabbard, Ruben Gallego, Robin Kelly, Cathy McMorris Rodgers to launch the Diversifying Tech Caucus (DTC). The Caucus was organized to address one of the most pressing issues facing the tech sector today: the alarming lack of diversity in the tech workforce. DTC members have been instrumental in promoting a variety of bipartisan bills that would not only strengthen the tech talent pipeline by providing Americans with better access to STEM (science, technology, engineering, and math) education opportunities, but would make it easier for new entrepreneurs and workers to participate in the startup ecosystem.
Here are a few pieces of legislation introduced and sponsored by DTC members (and others) that have our support:
- Diversity in Science Technology and Nurturing Capable Educators Act (DISTANCE) Act
Sponsored by DTC Chair Rep. Robin Kelly (D-IL), this bill would provide scholarships to college students studying in a STEM field who agree to teach in a K-12 school for five years after they graduate. The Department of Education’s most recent teacher shortage report highlights the consistent shortage of math and science teachers, which affects 28,000 students a year in California alone. The DISTANCE Act would incentivize STEM college students to become teachers, improving America’s ability to train the next generation of tech innovators.
- Innovate America Act
Sponsored by DTC Chair Sen. Amy Klobuchar (D-MN), the Innovate America Act would, among other things, create 100 new STEM-focused secondary schools, measure graduation rates for students majoring in STEM degrees, increase the number of scholarships for aspiring computer science teachers, and expand undergraduate research opportunities to encourage more students to enter STEM fields. Since computer science is often not designated as a core academic subject, administrators are less likely to hire teachers who are prepared to teach it. Bills like the Innovate America Act help increase the pool of skilled computer science teachers who are crucial to building the STEM pipeline.
- GI Bill STEM Extension Act
Introduced by Rep. David McKinley (R-WV), this bill would authorize nine months of additional Post-9/11 Educational Assistance for a veteran who has used all his or her benefits and who: (1) is enrolled in a postsecondary education program that requires more than the standard number of credit hours for completion in a STEM field; or (2) has earned a postsecondary degree in one of those fields and is enrolled in a teaching certification program. Given that a typical undergraduate engineering program takes around 4.5 years to complete, this bill provides important financial relief for veterans transitioning into STEM jobs.
- America Can Code Act
Introduced by DTC members Reps. Farenthold and Cardenas, the bill would designate “computer programming languages” as “critical foreign languages,” which would provide incentives for state and local schools to teach more computer science classes in K-12 curricula. Creating incentives for schools to boost computer science curricula might seem peculiar, considering the well-known need to train a ever-growing need for skilled programmers, but currently, only one in four schools teaches coding. The bill also establishes a Task Force on Computer Programming and Coding (in the Department of Education) to identify and prioritize challenges of educating and training a workforce equipped to fill jobs in emerging STEM fields.
- Veterans Entrepreneurial Transition Act (VET Act)
Introduced by Sens. Moran and Tester (and co-sponsored by DTC chair Sen. Shelley Moore Capito), this bill would establish a pilot program enabling veterans to use their GI Bill benefits towards starting a new business or purchasing an existing business. We described the context (and our support) for this bill here. The VET Act would make it easier for veterans to participate in the tech startup economy and achieve entrepreneurial goals that don’t require higher education.
Congressional interest in working on legislation that addresses the tech world’s diversity problem remains high, but adding your voice to the conversation about these bills will go a long way towards moving the agenda forward. Bill sponsors are always looking for emails, calls, and letters from the public in support of the provisions in the bill; personal anecdotes are particularly impactful in order to highlight the importance of a bill’s goals. You can find contact information for members of Congress on their respective websites (also linked to their names in this post).
Are you a startup that cares a lot about improving the tech talent pipeline? Do you want to work with Engine to support legislative solutions? Send us an email at email@example.com.
Our weekly take on some of the biggest stories in startup and tech policy.
Net Neutrality Has its Day in Court. The net neutrality debate that has dominated tech policy headlines for the past two years finally got its day in court last Friday. A panel of three judges from the DC Circuit heard oral arguments in the lawsuit brought by a consortium of ISPs to invalidate the FCC’s net neutrality rules. Proponents of the FCC’s rules came away from the hearing fairly optimistic. A majority of judges seemed to side with the FCC in the most crucial aspect of the dispute: whether or not the Commission had adequate authority to reclassify Internet access as a “telecommunications service.” The court pushed back more significantly on the FCC’s authority to reclassify mobile broadband and the adequacy of the notice the FCC provided about the final rules it adopted. While we remain optimistic about the Court’s ultimate decision, the net neutrality debate will almost certainly not go away when the Court issues its ruling early next year. It seems likely that the case will ultimately end up before the Supreme Court, and Congress continues to ponder whether it should pass anti-net neutrality legislation.
Feinstein Wants Tech to Report Terrorist Activity. As terrorists attempt to use Internet platforms to mobilize followers, disseminate propaganda, and coordinate attacks, working to diminish militants’ capacity to organize through social media is critical. But the Requiring Reporting of Online Terrorist Activity Act, introduced by Senator Dianne Feinstein (D-CA) earlier this week, is not the answer. The bill would require tech companies to report “any terrorist activity” that they have knowledge of to law enforcement. This obligation seems innocuous on its face, but as often happens, difficulties arise in determining how to actually apply this standard. Emma elaborates on all of the reasons the bill’s controversial (and previously rejected) framework could potentially do more harm than good here.
Computer Science in Classrooms. An education bill signed into law on Thursday acknowledges computer science as a foundational academic subject. By doing so, the bill puts computer science “on equal footing with other subjects when state and local policymakers decide how to dole out federal funds.” This new designation could potentially accelerate computer science's introduction into classrooms across the U.S. and ultimately help address the country's growing tech talent shortage.
Bill Would Cut Back H-1Bs. Senators Bill Nelson (D-FL) and Jeff Sessions (R-AL) introduced a bill this week that would reduce the number of H-1B visas available by 15,000 and also modify the way those visas are allocated—requiring they go to workers who will earn the highest wages. The H-1B program allows companies to hire foreign high-skilled employees, including those with expertise in science, engineering, and computer programming. While these visas are highly coveted within the tech industry, accounts of program abuse have galvanized members of Congress to restructure the program. “This bill directly targets outsourcing companies that rely on lower-wage foreign workers to replace equally-qualified U.S. workers,” Sen. Nelson said in a statement. While attempting to prevent bad practices by specific outsourcing companies, this bill would unduly harm the wider tech industry by further limiting global talent from contributing to U.S. companies, big and small. 2015 saw a record number of H-1B applications: 233,000 for the current 85,000 spots.
Investment Crowdfunding for Tech? Not So Fast. An article in this week’s Wall Street Journal highlighted a few of the shortcomings of investment crowdfunding, a new fundraising tool for startups made legal last month with the release of SEC rules. Those rules contain numerous burdensome requirements for companies raising equity from the crowd, potentially deterring high-growth technology startups. For instance, once a company takes on over 500 investors or grows to a certain size, it must file regular disclosures with the SEC: “It is all the pain of an IPO without the benefits of the IPO.” We’ve previously detailed some of the other issues with those rules, concluding that policymakers must continue to work to lower the cost of raising seed capital through crowdfunding or the impact of investment crowdfunding for startups will be modest.
What We Heard in Iowa: Earlier this week, Engine teamed up with the Technology Association of Iowa to discuss technology policy with Iowa entrepreneurs, caucus goers and two of the 2016 presidential candidates in Cedar Rapids. As the Cedar Rapids Gazette reported, the candidates agreed that education is “vital to innovation” but, not surprisingly, disagreed on the federal government’s role. O’Malley’s address focused on his track record as governor of Maryland. While Fiorina took a different approach, focusing on national security and technology “as a tool and a weapon” in those efforts. The forum offered a glimpse on where at least two candidates stand on a handful of important tech issues and as we look to 2016, we hope to hear a lot more.
Patent Suits Cost Universities. Universities have been getting more involved in patent reform policy and a recent Brookings article explains why. Its author also emphasizes that universities are turning observers off by engaging in offensive litigious actions, which is seen as contrary to the public mission of a university. Furthermore, it doesn’t make sense for universities to be involved in patent reform conversations since universities as a group do not have a financial interest in patenting: 87 percent of tech transfer offices operate in the red. Since there is a false belief among some that without patents there would be no innovation, it is important that the public voice of universities acknowledge “that the debate on the impact of patents on innovation is not settled and that this impact cannot be observed in the aggregate, but must be considered in the context of each specific economic sector, industry, or even market.”
Where are the Women in Tech? A new list was published on the “Best Cities for Women in Tech” and Washington, DC topped it, with women making up about 37 percent of the tech workforce (New York, NY comes in at number five and San Francisco, CA at 23). Kansas City, Missouri (at number two) was one of the only two cities in the study where women in tech don’t face a gender pay gap. Recruitment of women and underrepresented groups in the tech community remains a large part of the diversity conversation: language used in outreach and job descriptions could be turning well-qualified applicants off from even applying. One startup, Textio, is trying to address this problem with their product that “applies a form of artificial intelligence (AI) called natural language processing (NLP) to study the verbiage in documents” and can help highlight words with certain negative connotations.
Our weekly take on some of the biggest stories in startup and tech policy.
Trade Secrets Bill Resurfaces. On Wednesday, the Senate Judiciary Committee held a hearing on the Defend Trade Secrets Act (DTSA), a bill purportedly meant to help curb international trade secret theft by creating a federal cause of action for trade secret appropriation. However, like most intellectual property laws, trade secret litigation is rife with abuse as companies regularly use trade secret claims to stifle competitors and hinder employee movement. The proposed legislation would exacerbate these problems by creating an ex parte seizure procedure whereby a party can—without detailed factual inquiry and without a presentation of both sides of the case—ask a judge to seize a defendant’s property. In this regard, the DTSA goes well beyond what state trade secret law provides, making it a potent tool for incumbents to use the courts to unfairly hinder legitimate competition. And, international trade secret thieves will be able to avoid this federal law as they have avoided prior state laws by simply being outside of the US, it’s hard to see how this bill would actually address the problem it claims to address.
Net Neutrality Hearing. The DC Circuit Court of Appeals heard oral arguments today in the challenge to the FCC’s net neutrality rules. A group of telecom companies filed suit against the FCC shortly after the Commission issued its net neutrality rules this spring, arguing that the decision to reclassify violated administrative rules and exceeded the FCC’s delegated authority. While most net neutrality supporters believe that the Commission’s rulemaking is likely to withstand legal challenge, the DC Circuit is notoriously unpredictable. The hearing itself was not broadcast due to the DC Circuit’s strict rules on recording proceedings, so we’ll have to wait for reports from those in the room to get a read on how the judges received each side’s arguments. We’ll be tracking closely.
Starting Up the Broadband Economy. In an op-ed in re/code, Engine Policy Director Evan Engstrom elaborates on why policies that encourage a competitive broadband market are essential to the continued success of the startup economy. Increasing competition ensures America’s entrepreneurs can use their limited funds to build their businesses, rather than lining the pockets of a few huge incumbent providers. There is still a long way to go towards a robust, healthy Internet ecosystem. But we are working to ensure that startup voices are heard and that real reform happens now.
Trouble for ECPA Reform? The broadly supported Email Privacy Act ran into opposition from law enforcement authorities at a House Judiciary Committee hearing on Tuesday. Calls for an emergency exception and a carve out for civil agencies are nothing new, but they are preventing the committee’s chairman, Rep. Bob Goodlatte, from backing the legislation. Despite being one of the most popular bills in Congress with over 300 bipartisan cosponsors, it won’t move until Rep. Goodlatte gives the go-ahead. We’re tracking.
Add “Lobbying” to List of Startup CEO Responsibilities. Engaging with lawmakers is just another part of being a startup leader now, reports the New York Times. “In addition to knowing the language of computer code, founders are speaking the language of Washington, keenly aware of the potential regulatory battles that could be on the horizon.” In a shift from the historical status quo, startups are no longer eschewing politics, but increasingly embracing a dialogue with D.C. instead.
Patent Lawsuits Filed Set New Record. On November 30, 257 new patent litigation cases were filed—a new one day record. Furthermore, 196 of these cases were filed in the Eastern District of Texas, a notoriously plaintiff (and troll) friendly court. This is clear proof of forum shopping and further evidence that patent reform legislation should also address venue abuse. The mass amount of filings are likely tied to the fact that December 1 marks the effective date of significant changes in the Federal Rules of Civil Procedure for patent cases—i.e. going forward, plaintiffs may be required to provide more information in their initial claims.
Women in STEM. Michelle Lee, the Director of the US Patent Office, authored an op ed in which she cites a study that found that only 15% of all inventors are women. She writes, “The lack of gender parity is not just a social issue, it is an economic imperative.” In response, the Patent Office has launched, in partnership with Invent Now, an “All in STEM” initiative to get more girls interested in STEM and more women in flourishing STEM careers. Meanwhile, the latest diversity numbers from tech companies demonstrate the continuing need: women employed globally by Microsoft decreased from 29% to 26.8%.
Cities and Innovation Ecosystems. It takes years for cities to build up a “critical mass” of tech companies and workers to the likes of the Bay Area. But in some of the nation’s smaller cities, the environment has proven conducive to small companies and large companies cooperating in a way that has become engrained in the DNA of Silicon Valley—where startups are built off the API of large companies and interoperability is part of the culture. A recent report by the World Bank discusses what factors affect the growth of entrepreneurship ecosystems across different cities.
Conversations Around Capital Access. Before taking a break for Thanksgiving, Engine attended a forum hosted by the SEC on capital access issues for startups. Participants honed in on the JOBS Act rules: how they’re playing out in practice and whether there are policy modifications that could facilitate their success. Read Emma’s run-down of the discussions here.