Obama’s $2 Billion Early Innovation Fund - And What it Really Means for Startups

The Obama Administration recently
committed $2 billion

for small business growth as part of Startup America, a new initiative to encourage investment in startups.  The funding includes $1 billion in public funds to be put towards early stage investment by matching the investments of VC firms into small business startups.  The
Startup America Partnership

, led by Steve Case,
also announced over $1 billion in the form of services and resources for startups coming from private companies, including free legal and consulting services.  

On paper, this appears to be a positive boon for startups - but what are the real implications for the innovation economy? We’ve taken a closer look at some of the commitments:

• Regulation A “miniofferings:”  
  Regulation A currently stipulates that offerings

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  of investment capital can be made under an SEC simplified registration process if they are $5 million or less – a number that was arrived at in 1992.  This legislation would change the dollar threshold for exempt offerings to $50 million.  The Administration is touting this as a way to assist small companies in raising capital at a crucial stage in their growth.
  A
  Kauffman study
  
  revealed that new companies are responsible for
  all
  the job growth in the US since 1977, so it makes sense to make it easier for startups to raise funds early on to go public – the point in a company’s life span during which Case says 90% of new jobs are added.  There are those in the tech community that say
  government regulation and the startup community are always going to be at odds
  
  but given that this provision simply updates the existing regulation, it seems the least controversial way of moving the needle on this issue.
  

• Crowdfunding:
  The most controversial of the Partnership’s provisions is the bill to legalize Crowdfunding –
  small-dollar investments that use online fundraising and social media platforms to solicit investors.  The point of giving startups access to crowdfunding as a fundraising tool is to provide them with more opportunities to raise capital and thus create jobs.  This one comes with its own set of regulations to protect investors, including limits on contributions and
  measures against fraudulent companies
  
  soliciting capital.  Crowdfunding sites for startups, like
  IndieGoGo
  
  and
  Kickstarter
  
  , already exist, but until this bill is signed into law, companies that raise funds from investors that are not registered broker dealers are
  at risk of being in violation of federal and state securities laws
  
  .

• Investment in an Innovation Economy:
  Obama’s Early Stage Innovation Fund, coupled with the Startup America Partnership’s commitments from private-sector companies, are both steps on the road to an economy that is predicated on entrepreneurship and production rather than consumption.  
  The provisions basically make it easier for individual investors to fund startups and to offer more capital.  While this arguably increases inherent risk for investors, no one is forcing any individual to invest.  It’s an

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  individual decision, and one that happens to have the added bonus of growing our economy and job market. It’s not just monetary investment, though.  The Department of Education, as part of Obama’s commitment to the innovation economy, will launch a
  National Education Startup Challenge
  
  , for which students will create a business plan for a new company - encouraging entrepreneurship by getting them in at the ground floor, so to speak.

Critics on Capitol Hill
dismiss
the announcement as little more than a White House PR stunt

, and while the immediate and tangible impact for startups is not completely apparent, it is at least a nod of support from the government and a commitment to the promotion of innovation and entrepreneurship.  Bottom line?  It’s more than a nice gesture, it could be a significant resource for startups. To truly create an economy based on innovation, education and growing government support are key.  These measures are, if nothing else, a positive indication of a turning tide of governmental support for entrepreneurship and the creation of a solid production based economy.

House Intelligence Committee Releases Discussion Draft of CISPA

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.

Changing Immigration, One Step at a Time

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.

Luis Arbulu is a Founder and Partner at Hattery, and an Entrepreneur in Residence with USCIS.

Rebuild America: Halt the Brain Drain

We’ve been looking into skilled immigration and its benefits to the American economy. See I through our eyes with this infographic.

Joining the Conversation

Marci Harris is cofounder and CEO of PopVox.

As a former Congressional staffer-turned-startup-entrepreneur, I am excited to see the discussion on the Engine blog address what it means to join the policymaking "conversation" in Washington.

That conversation doesn't have a very good reputation right now.  Congressional Job Approval (according to Gallup ) is at a flat 12%.  In an April 2011 poll, Americans said 71% of lobbyists had "too much power", ranking them on this scale above "major corporations" (67%), "banks and financial institutions" (67%), and "the federal government in Washington" (58%). The legacy networks of grassroots  organizations have been examining their own "Tragedy of Political Advocacy". This was the case even before "The Internet" pulled off the epic blackout of January 18 in opposition to the SOPA.

The Silicon Valley culture, which until recently served as a proxy for all "startups", historically has been happy to be detached from the conversation. Nigel Cameron describes (as only he can) the Silicon Valley/DC divide as "the Continental Divide," in which it can seem that the two most distant points in the universe are the Rayburn cafeteria and the Starbucks on Sand Hill Road.

Civic engagement, powered by game-changing technology, provides a vehicle for increasing trust and broadening the Conversation. Here are some things to keep in mind for all groups — including those in the startup community — that wish to engage and participate:

1. Relationships. Bridging the Continental coffee shop divide is an important first step. Invite a staffer for coffee and get to know them. (They will have to pay for their own coffee.) Which leads to the next point:
2. Staff are people too. A meeting with a staffer is frequently just as good (and sometimes better) than a meeting with a Member. You will probably get more time and speak with someone who can dig into the minutiae with you in a way that a busy Member of Congress just can’t.  Yes, that is still true if they look eighteen, happen to be answering the office phone, and even sometimes if their title is “intern.”
3. Congress really wants to hear from constituents (but not everyone else). Unless a Member of Congress represents your district, they don’t technically work for you. If you want to convince them of something, convince their constituents.
4. Big change (usually) takes a while. There is no hard and fast rule - BUT, you will usually have better luck with incremental steps over several years than attempting to push through a large proposal.
5. Small things matter. There is value in baby legislative steps to demonstrate support — Naming a “day”, commissioning a study, “recognizing the goals of..." are all opportunities to explain your position and have a legitimate “ask” (i.e.“co-sponsor this bill”), to produce a list of allies on the record for your cause.
6. Capitol Hill is the ultimate "Just In Time" fulfillment. Staff are busy and issues come quickly; if information is not available when needed, they will probably not go looking for you. It's helpful to keep tabs on the agenda, and (shameless plug) make sure your positions on bills are easy to find on a platform like POPVOX, which is designed to answer a staffer’s “need information about this bill NOW” need.
7. Don't assume they know the details. Your letter or one-pager should summarize and re-explain the issue, even if you think that EVERYONE should know the background and what the acronyms mean. (Really, a ONE-pager is important.)
8. 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.

Where We Are On Skilled Immigration

Despite being championed by President Obama in this year’s State of the Union and quickly seconded by all candidates in the Republican primary debates — we wrote about it here — proposed reforms of the immigration process for skilled individuals have been stalled in the lawmaking process. Skilled immigration is touted as a no-brainer: it has — supposed — bipartisan support, and there is plenty of evidence to show that bringing in skilled workers from other countries actually creates American jobs by complementing our existing skill-sets and creating more opportunities in fields like computer science and high-tech engineering. Growing demand for visas only highlights the inefficiency of the current system, with H1B applications in the first week of the visa round more than double last year’s. Sadly, for all the rousing rhetoric of bringing in the best and brightest to keep this country great and at the front of the pack, there has been limited advancement on the legislative front.

There are a couple of different avenues being discussed right now with regard to high skilled immigration:

1. Awarding a green card to advanced graduates in STEM fields (science, technology, engineering, mathematics) from US universities — straight from the mouths of Republican presidential hopefuls Newt Gingrich and Mitt Romney. STAPLE Act and Startup Act are the relevant bills for this one, and BRAIN Act follows the same principle but grants a five-year stay in the US to work in a STEM field instead of permanent residency.
2. Creating a new visa for foreign-born entrepreneurs who want to start businesses in the U.S. Startup Visa would allow foreign-born entrepreneurs who receive funding for their businesses and employ non-family members to be granted an employment based visa.
3. Eliminating the per-country cap on H1B visas; maintaining the same number of total visas but changing the distribution to solve the problem of excessively long wait times for high-skilled workers from countries like India and China. The Fairness for High Skilled Immigrants Act and AGREE Act deal with per-country caps.

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.

JOBS Act Becomes Law

I was honored to represent the startup community across America this afternoon as a guest of President Obama in the White House Rose Garden as he signed JOBS Act into law. This bi-partisan bill will do great things for our community; through increased ability for companies to go public, raise money through crowdfunding or scale their products and businesses into the marketplace with greater ease.

The President, along with House Republican Leader Eric Cantor who introduced the bill in February, Sens. Jeff Merkley and Scott Brown who worked tirelessly on the crowdfunding issues, and many others in both parties and both Houses of Congress are to be thanked for making sure this legislation passed with the support and speed that it did. With Engine, I look forward to helping many new startups benefit from this law, and continuing to work with the Congress and the President to pass further legislation aimed at helping startups continue to drive the Engine of the American economy.

Alan Simpson Talks Tech Safety for Kids

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.

Child Protection in the Digital Age

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.

JOBS Act Passed, With Additional Investor Protections

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.

Policy Update: JOBS & Startup

Last night, we sent out the following email to our friends and members to inform them of current legislation aimed at easing the way for startups. We want to share the update with you now, as a resource for understanding key provisions of JOBS Act and Startup Act, and to hear your thoughts on these bills. If you want to sign up for email updates like this in the future, subscribe to our mailing list here.

Dear Friend,

Engine has been tracking recent legislative efforts to foster entrepreneurship and small business. Today, the Senate begins debate on the JOBS Act, which passed the House last week. Startup Act is next on the legislative agenda and responds to a number of key startup needs.

JOBS Act

The JOBS Act is a legislative package designed to lower barriers to entry for entrepreneurs by reducing limitations on fundraising and decreasing crippling bureaucratic overhead currently required by existing regulatory legislation. While there’s good and bad contained within it, it is heartening to see Congress prioritizing legislative issues that affect startups. You can read about the provisions we like in the JOBS Act.

• Ease of raising capital through crowdfunding and ease SEC regulations on offerings from $5 million to $50 million, making it easier for startups to raise capital.
• Create IPO onramp for class of emerging growth companies with annual revenue of less than $1 Billion.
• Emerging growth companies are subject to fewer SEC regulations when filing for IPO

But JOBS is just the beginning.

Startup Act

It’s time to move forward on Startup Act. We have only a few weeks left to effect change in Congress this session, and Startup Act represents another clear step toward passing legislation that benefits entrepreneurs and creates jobs -- this year. We also took a look at some of the key provisions in Startup, here’s a quick summary, with more detail available on our blog.

• Promote job growth by making the capital gains tax exemption for startups permanent.
• Reform the process by which qualified STEM graduates and foreign born entrepreneurs are able to stay and start businesses in the United States
• Spur innovation by providing incentives for universities to turn federally funded research into tangible jobs and businesses.

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

The Future of Music: is Entrepreneurship

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?

Advocating for the Intersection of Policy and Technology at SXSW

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.

IPO On-Ramp For Emerging Growth Companies

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.

Beyond SOPA/PIPA at SXSW

We're pleased to announce an upcoming panel we're hosting at this year's South by Southwest Interactive Conference in Austin, and we hope that you can join us for a lively discussion. We've put together a great collection of people from the intersection of tech and politics who will take a look at the next phase in advocacy for the tech community on the whole, what we learned from SOPA and PIPA, and how we can keep people engaged to take a more active stance on tech policy and legislation going forward to help guide that debate and work with legislators and regulators to make better choices when it comes to tech and government.

Joining us for the discussion are:

Michael McGeary, Co-Founder/Director, Engine Advocacy

Andrew Rasiej, Founder, Personal Democracy Media

Mark Stanley, New Media, Center for Democracy and Technology

Laurent Crenshaw, Legislative Director, Office of Rep. Darrell Issa (R-CA)

Boonsri Dickinson, Reporter, Business Insider

EVENT DETAILS:

Beyond SOPA/PIPA: Moving Forward with Tech Advocacy

5:00pm CST, Saturday, March 10

AT&T Conference Hotel, Salon C

Note: As this is an official SXSW event, a badge must be presented to join us.

We hope to see you there!

User/Entrepreneur

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.

Spectrum: Solved? Not Quite.

A week ago, H.R.3630 passed the Senate, ending the spectrum stalemate that had been ongoing between mobile broadband operators, cable companies, and innovators to gain access to a dwindling supply of spectrum licenses. We wrote a longer piece examining the issues behind the stalemate and tentatively hoping the legislation could help us avoid a spectrum crunch.

Larry Downes wrote a really informative post on CNET this week warning that this may not be the case, for the following reasons:

• The FCC said that mobile users will need an additional 300MHz of spectrum by 2015, and an additional 500 MHz by 2020. Problem is, legislation or no legislation, there isn’t that much usable spectrum to go around. Nowhere near enough, according to Downes.
• There is spectrum which is not being used(including swathes of warehoused government spectrum), or not being used to its full capacity, but the nature of the FCC’s “increasingly outdated licensing system” makes it extremely difficult to re-purpose this spectrum to be more effectively used with today’s technologies. The new legislation takes steps to fix this, but we won’t see results of this for probably 10 years -- seven years too late for the aforementioned 2015 deadline.

All of which sounds pretty sinister.

But Downes advocates for the following short to medium term solutions to help close the gap and keep us from mobile broadband disaster. While not negating the threat entirely, they might at least constitute better solutions than burying ones head in the sand and hoping against all hope that spectrum learns how to multiply itself organically.

• Let them merge. When mobile carriers merge, they tend to make better use of limited bandwidth.
• Build more cellphone towers. Local zoning authorities can make it difficult for cell phone companies to update and add to their core infrastructure, which is the next best option for these companies to optimize their services without additional spectrum.
• Let’s all get new phones. Newer technologies make better, more efficient use of spectrum, particularly in the 4G LTE band. If everyone switched over, and there was tiered pricing plans for data use, we could suck a little more spectrum toothpaste out of the tube.

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.

JOBS Act Announced. Let's Get to Work.

The Senate is stalling on actions taken by the House to grow job creation, and if they won’t take them up individually, House Majority Leader Eric Cantor (R-VA) hopes the Senate can consider the bills all at once. Cantor today announced House Republicans would bundle a number of entrepreneur-friendly bills focused on aiding startups in gaining better access to markets and capital, easing regulations to allow crowdfunding, and raising thresholds for compliance. Cantor detailed the plan, dubbed the Jumpstarting Our Business Startups (JOBS) Act, in a POLITICO op-ed published earlier today.

The package includes the following bills:

H.R.2940, - Access to Capital for Job Creators Act

Passed in the House, this bill would revise regulation D offerings to relax limitations for qualified investors to sell securities. Currently, regulation D allows some businesses to sell securities without registering them with the SEC. H.R.2940 would make it simpler for startups to raise capital through crowdfunding by removing the regulation D prohibition of general solicitation and general advertising for accredited investors.

H.R.1070, S.1544 - Small Company Capital Formation Act of 2011

This bill would amend the Securities Act of 1933 to exempt from SEC regulation a class of offerings between $5 million and $50 million, with a provision to review and increase this figure biennally. The Securities Act of 1933 capped exemption at $5 million and is long overdue for an update. Increasing the breadth of exemption would make it simpler for startups to raise capital and still be in compliance with SEC regulations.

H.R.1965, S.556, S.1941- To amend the securities laws to establish certain thresholds for shareholder registration, and for other purposes.

This bill would amend the Securities Exchange Act of 1934 to increase the threshold from $1 million to $10 million for shareholder registration for an issuer of securities. As with the Small Company Capital Formation Act of 2011, this would ease regulations and make it simpler for startups to gain access to capital and still be in compliance with the SEC.

These bills are no-brainers, and what’s more, many of these provisions appear in the President’s Startup America legislative agenda, released in late January. In our view, what’s good for startups is good for job creation and the overall economy. Now let’s get them through the Senate.

What else should legislators consider this year? Tell us over at Step2 and help define the Innovation Agenda.

Techdirt Hit by Phony DMCA Takedown

Another SOPA-in-practice moment: Our friends at TechDirt have had an anti-SOPA/PIPA post taken down in the name of the Digital Millenium Copyright Act (DMCA).

Only problem is, there’s no infringing content to be found anywhere near the post. Not in the post itself, not in any of the comments. Nowhere. Which, since the post has now been surreptitiously disappeared from search engine results, is more than a little worrying, as it gives substance to the fear that anti-copyright measures can be and are used to suppress free speech. The Techdirt team was given no notification of the takedown or opportunity to remove the so-called infringing content, either. They stumbled on it a month later doing a regular Google search.

And given that the post that was taken down was a primer on how to fight SOPA/PIPA copyright legislation, it all leaves a pretty bad taste in the mouth.

Read the Techdirt post here. We’ll be watching what happens.

What's Next?

We want to know what issues around technology and innovation are important to you. Our friends over at Techdirt have created a Q&A platform on which you can vote up the issues you care about most, and add your voice to the conversation about how to implement positive policy change.

In the fight against SOPA and PIPA, the internet community proved itself to be active, engaged, and capable of achieving real influence in Washington. A groundswell of action against these bills erupted all over the nation, and through this action, we as a community were able to directly influence the policy that affects us.

Even though we halted the beast, we still have a long way to go on making sure any future antipiracy policy is developed with reference to the needs of the internet community.

We need to get involved in these discussions sooner. We need to bring to the table what matters to us, and get involved in shaping policy that works for us so we’re not just reacting to bad legislation.

Let us know what matters to you most, and we will work with you to help implement policy that will work for you, your company, and your future.

Visit the Techdirt/Engine Innovation Agenda thread to let us know what matters to you.