Startup News Digest 8/5/2016

Our Weekly Take on Some of the Biggest Stories in Startup and Tech Policy.

Startups Want Congress to Fix Crowdfunding. Back in May, regulation crowdfunding went into effect, allowing anyone to invest in a startup through an online platform for the first time ever. But, as Engine has previously explained, we’re skeptical about the extent to which this market will truly take off given the current regulatory framework. We welcomed the House’s passage of Rep. Patrick McHenry’s Fix Crowdfunding Act (H.R. 4855) last month, which makes a couple of fixes from the startup community’s wish list like permitting special purpose vehicles. But the bill was heavily amended before passage, and as Evan argues in Bloomberg this week, it is missing a number of the startup community’s desired changes. Reforms like raising investor and issuer caps and allowing companies to “test the waters” would go a long way towards making crowdfunding a more viable fundraising option for startups, and we’ll be pushing the Senate to include some of these fixes if and when it considers the bill this fall.

Another Successful Startup Day. On August 4th, members of Congress participated in events around the country with entrepreneurs, incubators, and accelerators to celebrate the ingenuity and innovation taking place in their own backyards. Rep. Jared Polis, who conceived of the bicameral, bipartisan Startup Day Across America almost four years ago with Rep. Darrell Issa, writes in an op-ed that the day “is about recognizing the importance of startups, and the effects legislatures have on fostering a healthy and supportive economic environment for newly started companies.” As we know well at Engine, lawmakers have the power to craft and champion policies that support startups. One these supportive policy solutions highlighted on Startup Day was immigration reform. In an op-ed featured in both The Huffington Post and Recode, the founding partners of Unshackled Ventures and Rep. Joaquin Castro make the case for building an immigration system that encourages immigrant entrepreneurs to participate in America’s innovation economy. They write, “Allowing immigrants’ entrepreneurial energy to take flight isn’t just the American way, it’s in our nation’s best economic interests.” We couldn’t agree more.

Startup Activity on the Rise. The Kauffman Foundation released its annual Index of Startup Activity this week. The main takeaway? Startup activity is on the rebound, increasing for the second year in a row—a mere two years after plunging to its lowest level in two decades. The report also finds that the rate of new entrepreneurs has increased by 15% as compared to 2014 levels, with approximately 330 out of 100,000 adults becoming entrepreneurs each month over the past year. This increase was driven in a large part by a growth in the number of female entrepreneurs, according to the authors of the study. And a final piece of good news: the share of entrepreneurs who are pursuing entrepreneurship as an opportunity, rather than a necessity, increased over the past year. We’re looking forward to seeing Kauffman’s state and metro rankings and profiles when they’re released later this month.

SF “Tech Tax” Dies in Committee Last month we wrote about a proposed tax in San Francisco that would have imposed a 1.5% payroll tax on tech companies to pay for affordable housing and homeless services. Sponsored by the progressive faction of the Board of Supervisors, the proposal would have submitted the tax as a ballot measure for this November’s election. However, the board’s Budget Committee voted 2-1 not to advance the proposal, arguing that the tax was needlessly discriminatory. They also cited a report released by the city’s chief economist that predicted the tax would damage the local economy. Nevertheless, the tax’s supporters are now pushing to get enough signatures to put the measure on the ballot without the approval of the board.

Apple’s Diversifying Workforce. Apple released its diversity numbers for 2016 this week, showing an uptick in the number of minority employees hired by the tech giant. Since 2014 when Apple started to release a racial and gender breakdown of its workforce, the company has made a concerted effort to hire more women and underrepresented minorities. This year, 37 percent of new hires were women and 27 percent were underrepresented minorities, up 6 percentage points for both groups since 2014. As a result, 32 percent of Apple’s global workforce is now female, while its U.S. workforce is 9 percent Black and 12 percent Hispanic (up from 30 percent women, 7 percent Black, and 11 percent Hispanic in 2014). Apple also conducted a thorough examination of the company’s pay practices to ensure pay equity for women and minorities for “similar roles and performance.” While the gains may seem small, Apple’s numbers compare favorably to those posted by other tech companies such as Google and Facebook, whose diversity numbers seem to be barely budging.

Privacy Shield Is Live and Accepting Submissions. Less than a year after the European Court of Justice (ECJ) threw out the the so-called EU-U.S. “Safe Harbor” agreement, its replacement, known as “Privacy Shield,” is live and ready for companies to sign up for. Under Privacy Shield, companies can submit relatively simple self-certification agreements that establish compliance with EU data protection laws, thereby allowing U.S. companies to legally import EU user data. The rejection of the Safe Harbor cast uncertainty over the business practices of thousands of US startups that were importing EU user data pursuant to the agreement. But with Privacy Shield now in effect, startups can continue operating in Europe with a little more comfort, at least for a while. Many experts believe that the new Privacy Shield may suffer a fate similar to what Safe Harbor experienced before the ECJ. Fortunately, the wheels of justice move slowly, so any such decision is likely years away. If you’re a startup planning to sign up for Privacy Shield, we want to hear from you! Reach out to Emma at