DC Tech Breaks Out: Why Community Support for Startups Builds Better Ecosystems for Growth

In the three years we’ve been building Engine, growth in entrepreneurism and startups has increased at a breakneck pace, with new opportunities for growth popping up in cities and towns all across America. That growth has also been a political focus point, with supporters across the political aisle lining up to support new technologies and innovations. In this political climate hungry for opportunity to promote success, it’s not surprising that we have seen rapid growth in tech entrepreneurship in our nation’s capital, Washington, DC.

With organizations like our friends at 1776 supporting the local ecosystem and a renewed focus on innovating right in the heart of government, DC has quickly become a hotbed of entrepreneurship, attracting local startups and as well as transplants, like the Austin-bred RideScout. The best way to sustain and increase this growth is through lasting connections made through a healthy entrepreneurial ecosystem.

Enter DC TechDay. A “science fair for startups,” TechDay started in New York and will have their first DC event on October 2 that will bring emerging, high growth companies together with sponsors to learn about what’s being built in their own community. More than 150 exhibitors will gather with over 3,000 attendees to talk about their products, growing their businesses, and why they’re building in DC.

It’s also a great opportunity, as we have done with our Startup Day on the Hill events, to bring together policymakers and entrepreneurs to talk about what’s driving success and what both sides do to turn connection into growth. But with DC TechDay, that opportunity is all the more powerful with these entrepreneurs working just blocks away from Congress, the White House and regulatory agencies.

We’re proud to support efforts like DC TechDay. Contact us if you’re a DC-based entrepreneur or a policymaker looking to learn more about growth happening in your community, and get more information at dctechday.com.

Dream Deferred: President Obama Delays Further Action on Immigration

As the 114th Congress hurtles toward the finish line of the November elections, we have watched--with great disappointment--the failure to fix the immigration issues plaguing our economy. Despite Congressional intransigence on the issue, it appeared earlier this summer that President Obama was planning to step into the void and take sweeping executive actions to address the growing crisis of our nation’s broken immigration system. Alas, we can now chalk up further inaction as, best case, another election year casualty; worst case, failure at all levels of government to fix a broken immigration system.

Earlier this week, the Obama Administration quietly deferred further action until after the November elections, apparently in an attempt to shore up politically vulnerable members of their party in hotly-contested seats. In so doing, they have left the millions of families already ravaged by government inaction in further limbo. Once again, they lessened our ability to remain competitive in a global marketplace by still failing to keep the gifted immigrant thinkers and doers--trained in our schools--here building companies.

It would be easy to write this off cynically given the electoral climate for the President and his party, but we must make this an opportunity to ask the Administration to do more, to live up to its commitments and to not sit idly by while families struggle with their status and businesses flounder without talent to drive their goals. Simply put, we can’t wait and wonder when inaction will turn to action, and we must resolve to send a message in this election season that delay won’t cut it.

As candidates return home this month and engage in their reelection campaigns in earnest, find them at the town hall, in the supermarket, when they visit your startup, wherever it may be, and ask them: how much longer we have to wait for them and the Administration to lead? Because we have waited too long already, and it is time for this President and this Congress to put people and opportunity ahead of politics and party and pass common sense immigration reform now.

Thanks, President Obama: President Speaks Out Against Slow Lanes

The latest politician to add his voice to the growing coalition supporting Title II reclassification and strong net neutrality rules is none other than U.S. President Barack Obama. The President, in remarks given at this week’s U.S.-Africa Summit in Washington, made a strong statement in favor of real net neutrality, saying, “I personally, the position of my administration, as well as a lot of the companies here, is that you don’t want to start getting a differentiation in how accessible the Internet is to different users. You want to leave it open so the next Google and the next Facebook can succeed.”

Here’s the thing: the only way to ensure there is no “differentiation in how accessible the Internet is to different users” is to reclassify the Internet as a “common carrier” under Title II. The crux of the current debate surrounds under what legal authority the FCC can protect an open Internet, one without paid prioritization and fast lanes. The FCC Chairman, in public statements, has signaled his intent to work under the current legal structure--called Section 706--but, simply, the law will not allow that.

The D.C. Appellate Court has made it abundantly clear that the FCC must reclassify broadband as a “telecommunications service” under Title II if it wants to ban the type of behavior President Obama spoke out against.  According to that Court, the FCC’s prior rules preventing ISPs from discriminating against or blocking access to disfavored companies were “per se common carrier obligations,” and only services subject to Title II can be treated as common carriers. Quite simple, in fact.

Which is why the President’s statements are so important. It’s now clear that the President must support reclassification. And those comments came at a particularly important time. As you likely know, the FCC, and its Chairman, Tom Wheeler, are currently evaluating a number of proposals dedicated to protecting the Internet, and keeping it free for innovation.

In making his comments, President Obama joins with hundreds of our country’s leading startup companies, Fortune 500 corporations, technologists, advocacy organizations, Internet users and supporters across the world in calling for the Internet to be reclassified under Title II. We look forward to continuing our work with the Administration to protect and “leave open” the Internet to ensure that all startups, especially the “next Google and the next Facebook can succeed.”

Memphis Soul Boosts Startup Economy

Last month, the Engine production team took a trip down South to experience for ourselves the vibrant local startup economy we’d been hearing about in Memphis, Tennessee. We had the opportunity to meet a number of local entrepreneurs, some based full-time in Memphis and some just in town for the summer, participating in an accelerator program at StartCo. Across the board, we found a group of extremely dedicated tech entrepreneurs, many working seven days a week, more than 12 hours a day, to ready their companies for launch -- and a community taking shape that is passionate about building a better future for the city.

Some founders were lifelong Memphians who had chosen to keep their companies there, aiming to bring jobs, vitality, and a new phase of entrepreneurship to their hometown. These founders spoke of Memphis’s rich business history and entrepreneurial spirit. St. Jude, FedEx, and Autozone are among the companies that call Memphis home, and many founders spoke about these companies with an excitement that seemed to inspire their own hard work and dedication. Within the community, we met logistics startups, saw innovation in the healthcare space, and heard about medical device accelerators in the area. These were companies obviously attracted to Memphis for the resources already built into the local economy.

We also found teams from all over the country who had come to reside in the center of downtown Memphis and take advantage of the startup ecosystem that has taken shape there within the last few years. Teams from places such as NYC and Silicon Valley had come to Memphis to focus on building their businesses, looking for a different pace and a less saturated market. They described their year-round homes as having a lot of noise, and they had come to Memphis for the summer to focus on building their product -- finding real benefit living in a place where they could find a little more calm. They were astounded by the abundance of resources at their disposal: talented mentors, investors, and other startup founders -- all ready and willing to help.  

This is not to say that Memphis is lacking a noise of its own -- we were able to meet with entrepreneurs in a variety of backdrops -- from their offices, to blues clubs on Beale Street, to the tops of their tents at BBQ Fest alongside the Mississippi River. The StartCo accelerator uses Memphis in May, an international festival showcasing arts, food, and music, as a networking opportunity for its companies. As one entrepreneur put it, “What better way to build relationships than over beer and barbeque?” By the end of our visit, we had to agree. There was a liveliness and enthusiasm -- at the festival on the river, as well as in the office, that was contagious.

As with the barbeque, startup founders have taken notice, and taken advantage, of the Southern hospitality they have encountered in Memphis. A very common theme in the interviews we conducted was the sense of community, kindness, and the willingness of anyone and everyone to help out. We spoke with the founders of eDivv from NYC, who told us “the best thing about Memphis is everyone knows each other, and everyone is willing to help. They want to see Memphis succeed. It’s a small community within a big city.” Layla Tabatabaie of BarterSugar agrees: “Of all the meetings I’ve had with local residents, professors, and others in the area, they’re all willing to help and they’re all very kind. I think that is something that is sometimes harder to find in places like New York.”

As a Memphian for the vast majority of my life, it was no surprise to hear about the close-knit community as well as the kindness of complete strangers. What I was surprised to hear, though, was how these ingredients of a place I lived for 18 years are fueling a new phase of growth in the local economy. I left for San Francisco without any knowledge of a startup community in Memphis, and it was not until I spent a couple of years involved in the community here that I began to take notice of the activity in my own hometown. It was very exciting to return to Memphis and discover such a vibrant community there -- one so diverse and different than that of Silicon Valley, and one that had not existed in the Memphis I knew.

Whether a lifelong Memphian, or a founder just in town for the summer, everyone we met had a personal interest in boosting the local economy. They hoped to create jobs and bring growth to local businesses, with a heartfelt interest in improving the community they had become a part of. Though the concept of technology startups reviving the local economy may be a fairly new one for Memphis, the passion and dedication of Memphians to make Memphis a better place is not. When we asked locals to sum up Memphis in one word, one we heard quite often was “soul”. It’s easy to see how the history and soul of Memphis are finding their way into a new chapter.  

Watch our Startup Cities, Memphis video here:

ECPA Reform Bill Attracts Majority Support in House

This morning, Congress has taken a significant step towards defining privacy for the digital age in a way that will benefit startup companies and their users. The Email Privacy Act -- a common-sense piece of legislation that would bring ECPA (the Electronic Communications Privacy Act of 1986) better in line with how the Internet actually works -- is supported by a majority of the House of Representatives. This kind of support, before a bill even comes to a vote, is an important sign that policymakers and their constituents understand that something must be done.

The Email Privacy Act gives online documents the same privacy protections granted to physical documents. Specifically, the bill would require government agencies to obtain warrants from a judge in order to force service providers to disclose private emails and documents they store online for their customers.

Since data play an increasingly important role for many startups, any uncertainty over compliance increases the burden of time and resources needed to handle the issue. The current status quo also disenfranchises businesses and consumers, and places an added strain on user trust. Under the current law, a complex legal request from law enforcement would force businesses to chose between facing fines and legal action while protecting their users, or complying with the government at the cost of alienating users.

The Email Privacy Act clarifies existing law, and provides a much-needed update to bring regulations in line with the digital age. We thank Reps. Yoder and Polis for their leadership on this important issue, and with majority support we look now to House leadership to move this bill, and we hope they act swiftly to pass this common sense reform.

New Bill To Ban Paid Internet Fast Lanes

This morning, Rep. Matsui and Sen. Leahy introduced a bill that would direct the FCC to ban paid prioritization deals on what’s known as “the last mile" - the final distance web content travels to reach a consumer. The draft “Online Competition and Consumer Choice Act” would ban preferential treatment on the Internet, upholding the principle of net neutrality.

Paid prioritization deals, as we have already argued, are inherently anti-competitive and violate the principles of a truly free Internet ecosystem. So this bill should be applauded for promoting the interests of startups, content creators, and Internet users; we support this effort and hope it sends the FCC a strong message that paid fast lanes should not become a new Internet standard. They should instead be banned.

"A free and open Internet is essential for consumers," said Matsui. "Our country cannot afford ‘pay-for-play’ schemes that divide our Internet into tiers based on who has the deepest pockets."

But, it's worth noting here that there is no way to achieve these aims without first reclassifying broadband Internet under Title II.

This year’s Verizon v FCC decision makes relying on section 706 legally impossible. In that case, the DC circuit court actually went so far as to say that under Section 706 the FCC would have to permit exclusive access arrangements, e.g., paid prioritization, among edge providers and ISPs, and that it could even charge similarly situated edge providers very different prices for the same level of access.

Only under Title II can the FCC can eliminate certain classes of fees and discrimination, including banning paid prioritization (or “fast lanes”) on the Internet altogether. We applaud Rep. Matsui’s and Sen. Leahy’s efforts to ensure an open Internet, and we hope the FCC follows suit.

Open Letter for Patent Reform

Julie Samuels, Engine's Executive Director, penned a letter to Senator Leahy and the Senate Judiciary Committee to express why startups need patent reform, and how the delay is already impacting businesses and the economy.

Engine to Wheeler: We Look Forward to Continued Discussion

In response to this morning's FCC hearing on preserving an open Internet, we offer the following statement:

We are again encouraged by Chairman Wheeler’s commitment to protecting the open and free exchange of information on the Internet, and to inviting comment on various paths to preserve an open Internet. We agree that network neutrality is essential for consumers, startups, and economic growth, and that “squeezing out smaller voices [and new ideas] is unacceptable”.

While we can echo the Chairman’s sentiments, he has not explained how the authority of Section 706 will achieve the lofty goals as outlined. Based on the Verizon v FCC decision, we believe that the Chairman’s proposal to rely on the Commission’s secondary authority cannot lead to rules that can both be upheld in Court and preserve the open Internet to give startups the certainty they need.

We look forward to discussing specific approaches to reaching the goal of an open Internet, and will continue to advise that Title II reclassification is the only route to preventing paid prioritization and an Internet of haves and have-nots.

Large and Small Internet Companies call for the FCC to Keep the Internet Open - Join Them

On May 15th, the Federal Communications Commission (FCC) will officially propose rules regarding the Open Internet. The proposal would authorize phone and cable ISPs to create two-tiered internet “fast lanes” for those who can pay, and slow lanes for everyone else, destroying the current level playing field and threatening innovation and entrepreneurship.

Yesterday, Engine and The Open Technology Institute at the New America Foundation filed a letter, signed by over 100 internet companies, calling for the FCC to rethink these proposed rules and instead recommit to protecting and preserving an open, equal internet.

From our statement, “the signers -- a diverse group including tiny start­ups, household names, and industry giants -- called for Open Internet Rules that afford companies and entrepreneurs strong protections against online discrimination and individualized bargaining.”

Today, over one hundred leading Venture Capitalists from across the country joined us in asking the FCC to reconsider. As Nick Grossman from Union Square Ventures writes, “it’s undeniably clear that the Internet has been an insanely fertile platform for innovation and investment over the past ten years...so today’s letter states our hope that the FCC will weigh all available options when considering how to maintain the most competitive, vibrant market possible for internet applications.”

If you still want to sign-on to our company letter, email your name, your job title, and your company name to eva@engine.is

AND, if you want to take part in our Startups Speak video series to show your support, email dan@engine.is for more information

Letter From Startups to FCC on Net Neutrality

Yesterday, Engine and The Open Technology Institute at the New America Foundation filed this letter, signed by over 150 Internet companies, calling for the FCC to rethink the proposed rules and instead recommit to protecting and preserving an open, equal internet.

SCOTUS Decision in Octane Fitness: A Good Step But Fee Shifting Legislation Still Needed

With today’s decision in Octane Fitness v. Icon, and a companion case, the Supreme Court became the latest branch of government to state unanimously that abusive patent litigation and patent trolling needs to be curtailed. The White House and a large bipartisan majority in the House of Representatives have also been unequivocal on this point. Patent litigation abuse is a complex problem requiring a multi-pronged solution that must include legislation as well as administrative and judicial action.

The Supreme Court’s unanimous decision recognized the burden that abusive patent litigation places on productive U.S. companies and the need to address the problem. It also took an important step in articulating what advocates of reform have been saying all along: the litigation playing field is tilted in favor of plaintiffs and has enabled patent litigation abuse.

The Court’s decision will make it easier to shift fees to the loser in “exceptional” cases, but that is only one part of the solution. Courts must have the discretion to fee shift not only in “exceptional “ cases, but also in cases where the Court determines the conduct or position of the non-prevailing party was objectively unreasonable. Legislation to this effect is essential if we are to discourage abusive litigation in any meaningful way.

The Innovation Act passed by the House establishes a rebuttable presumption of fee shifting in favor of the non-prevailing party whose conduct or behavior was found to be unreasonable. Now the Senate must act too. The heavily negotiated Schumer-Cornyn compromise is a balanced bill after years of discussion about how to address the patent troll problem. It strikes the right balance on fee shifting. It’s time for a markup of this bill.

Every day that goes by without legislation hurts innovation and costs the economy millions of dollars, as evidenced by the news reports of trolls launching a flurry of suits last week in anticipation of legislation.

The Court is to be commended for lowering the very high bar that previously existed for awarding fees in exceptional cases, and for recognizing the important role that fee shifting must play in deterring patent litigation abuse. The Senate must act to empower the Courts to fee shift in all cases where the non-prevailing party’s conduct or position was unreasonable – not only in “exceptional cases” which is all that the current law allows.

Comments to the FCC on Net Neutrality

In response to proposed rules for the open Internet released by Chairman Wheeler, we provided these comments.

New FCC Proposal on Net Neutrality is Disastrous for Startups, Consumers and the Economy

“According to recent news reports, the Commission is considering adopting a rule that authorizes discrimination by ISPs and permits them to charge terminating access fees to technology companies. We believe such a rule, if adopted, would crush startups,and therefore undermine American technology entrepreneurship, innovation, and job creation.”

This is the first paragraph of comments we filed with the FCC today. The FCC’s widely reported net neutrality proposal authorizes web-content discrimination by enabling companies to pay Internet Service Providers for access to a faster lane, whole relegating those without the ability to pay to the slow lane.

This proposal marks a significant departure from the principle of Net Neutrality, which grants all content providers the equal ability to provide their offerings to consumers, and gives Internet users the equal ability to see any content they choose.

This proposal would place an incredible burden on small, high-growth companies. In so many ways, the deck is already stacked in favor or larger, well-funded business, and this is yet another barrier to entry. This framework will unequivocally empower the companies that can pay, at the expense of the next generation of disrupters.

As Fred Wilson pointed out back in January, in this new world order “telcos will pick their preferred partners, subsidize the data costs for those apps, and make it much harder for new entrants to compete with the incumbents.”

The innovation ecosystem -- so essential to job creation and economic growth -- benefits from low costs of innovation, not an environment where multiple ISPs can impose above-cost, unconstrained access fees on startups. Entrepreneurs rely on an open internet to build their companies, and investors rely on the certainty of an open internet to invest billions of dollars in edge providers to power the innovation ecosystem.

Startups rely on not being blocked, discriminated against, or subject to fees for access and preference. If some or all ISPs block a startup, the startup would be unable to reach a portion of users in the market. This is a particular problem for startups whose products rely on network effects -- those that become more valuable with more users -- such as social networks, e-commerce platforms connecting buyers and sellers (or drivers and riders), sites for user-generated content (including reviews, photos, or micro-blogs), and payment networks. If blocked by some ISPs, these companies will be less likely to win in the market, even if consumers would otherwise prefer their services.

Any arguments that suggest startups welcome the “right” to negotiate to pay fees for access or outbid giant incumbent edge providers for special preferences are divorced from the reality of entrepreneurship

For the last decade, the largest cable and phone companies have argued that network neutrality is “a solution in search of a problem.” That assertion is false.

We know that net neutrality solves a real problem. In countries without net neutrality, including several European nations, there has been widespread discrimination and blocking for many years. And even in the US, where the FCC has to this point supported net neutrality in principle, there have been violations. These include:

• Comcast interfering with peer-to-peer technologies, including some of the most popular technologies online;
• Apple blocking the application Skype on the iPhone, which was subject to a contract with AT&T, a carrier that competes with Skype;
• Verizon, AT&T, and T-Mobile blocking Google Wallet, while all three companies are part of a competing mobile payments joint venture called Isis; and
• Comcast’s disputes with Level 3 and Netflix over termination fees and congested transit.

We cannot overstate how devastating this pay-to-play model will be for startups, the innovation economy, the open internet, and for consumers.

In our comments to the FCC, we support the Chairman’s previously stated desire to adopt strong rules on disclosure, blocking, and discrimination, but we believe the Chairman cannot adopt such rules under the jurisdictional theory he favors: Section 706 of the Telecommunications Act that grants the FCC jurisdiction over “deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans.”

We now know the obvious: he cannot pursue real nondiscrimination rules under Section 706.

Rather than permit widespread discrimination and fees that would crush entrepreneurship, he should choose a different jurisdictional theory known to legal eagles as Title II. Title II would reclassify Internet service as a public utility much like phone lines. Reclassification must be remain on the table and be seriously considered.

We are following this issue closely, so sign-up for our newsletter (it’s just below the fold!), and follow us on Twitter and Facebook to stay up to date. And if you want to take action now, visit Free Press for how to make your voice heard.

Startup Investors for Patent Reform

To aid the movement of comprehensive patent reform, we organized a letter to Congress signed by forty prominent venture capitalists and angel investors. 

Keep APIs Open

Last week, Engine joined software innovators, startups, and investors as a signatory on an amicus brief in Oracle v. Google -- a case centered on how far copyright should be extended with regards to Application Programming Interfaces (APIs). We are in favor of limiting copyright on APIs in order to protect innovation and investment.

In 2012, district courts ruled in favor of Google, concluding that Java APIs used by Android are not subject to copyright. The Federal Circuit is now reviewing the case on appeal.

We are proud to put our name on the brief because we recognize the need for software startups to innovate and the drive economy forward. Startup innovation requires interoperability (ie. open exchange of information) between systems and programs, and this is fostered by APIs.

Our interest is in “preserving the deliberate balance Congress and the courts have established for software copyright.” This balance is integral to maintaining a competitive marketplace and investment landscape. Should copyright restrictions on API’s be tightened, the real-world implications could be significant -- could decrease competition in software innovation and chill investment.

We’d like to recognize Engine member startups who also signed this brief, including: Bright Funds, Hattery, Hipiti, and Vessel. We are also thankful that prominent investors and technology industry veterans lent their voices, including Engine Advisory Board Member Brad Feld, and his partner at Foundry Group, Jason Mendelson. You can find a full list of signatories here.

We encourage you to check out the abstract and full brief.

Related articles:

• Computer Scientists Urge Court to Block Copyright Claims in Oracle v. Google

  API Fight