Vets Who Tech: Carly's Story

Throughout the week, we're posting stories from veterans who’ve made strides in the technology industry on our blog and on Medium. You can also find them all here and follow the conversation about how to support more veterans in this growing industry at #VetsWhoTech.

As a communications officer in the Army, Carly DaCosta was integral to making sure the military stayed connected in the field and in homeland. She set up the technology necessary at bases in Alaska that enabled units to talk to one another: computers, landlines, networks, and cell phones. Though a nuclear engineer by training, with a longtime interest in technology, she wasn’t certain what was next for her after leaving the military.

She chose to pursue an MBA, a move she thought would help her transition to civilian life. Following graduation, she began working in the financial industry as an account manager. In her new role, she learned what it means to build a business, how to network, and started to recognize the power of technology in new ways: she knew she wanted to move into the tech industry.

Carly evaluated the jobs that she could pursue in the tech industry and thought skills in computer programming would set her up for success and at least get her foot in the door. As she considered how to get there, she realized coding bootcamps offered her that shorter term investment that a four-year degree didn’t. Her research led her to a 90-day program, an all-women course at Hackbright in San Francisco, where she learned Python, one of the most widely-used high-level programming languages. She found a culture of camaraderie among women who were also new to programming, where participants worked together and had each other’s backs, that provided the environment she needed to succeed.  

The bootcamp style allowed Carly to find a program that suited her desired skill set and personal needs. She did not have four years to go unpaid and provide for a husband and a toddler. She “was interested in learning the practical side of engineering first and, after speaking with people who had gone through bootcamps versus the four-year [computer science] degree, it seemed the bootcamp was the way to go. Instructors at the bootcamp are in-industry and their curriculum changes with what’s hot.” It was clear that a university experience wouldn’t give her the entirely hands-on approach she needed to jumpstart a skillset and a career change. And instead of four years of study without pay, she sacrificed only six months of pay—three months of learning and three months of job searching.

As Carly puts it, bootcamps provide an important option for those wanting to jumpstart their career in the tech industry, including veterans transitioning into civilian life. For Carly, this jumpstart meant finding the ideal business operations role that valued both her engineering experience as well as relationship management expertise from her time in finance and the military. She now works at the Director of Operations as a database startup, Fauna DB.

The Good and the Bad in the SEC's New Crowdfunding Rules

It’s been almost a week since the SEC released its long-awaited rules implementing the investment crowdfunding framework established under the JOBS Act more than three years ago. Now that everyone has had a chance to digest the nearly 700 page document, we can begin to evaluate the merits of the SEC’s rulemaking. While the mere fact that investment crowdfunding is legal in the U.S. is an historic accomplishment that startups everywhere should take time to celebrate, there is more work to be done to ensure the crowdfunding market achieves its full potential.

At a high level, the rules the SEC released last Friday are a definite improvement on the proposed rules from 2013. The final rulemaking clarifies a number of the proposed rules’ ambiguities and inconsistencies and corrects a few important deficiencies. The most important change is probably the SEC’s decision to permit funding portals—the sites that host crowdfunding campaigns—to selectively curate which issuers may list on their sites. Because funding portals are barred from providing “investment advice,” the SEC originally planned on barring portals from applying subjective criteria to decide which issuers to list, as this curation could have been perceived as an implicit recommendation that the listed issuers were better investments than those the portal rejected. As we’ve written previously, so long as portals provide clear disclaimers about the inherent risk in investing in any startup, weeding out obviously bad companies would only serve to improve investor safety. Failing to permit funding portals to take on this important investor protection function could have spelled disaster for the nascent crowdfunding industry.

The SEC also made the wise decision to permit crowdfunding portals to take equity stakes as compensation from the issuers they list. For cash-strapped startups, awarding stock in lieu of cash is a common practice for employee retention and even third party vendor compensation. Allowing portals to take equity helps lower upfront costs for startups seeking funds through the crowd and helps align portals’ incentives with those of issuers and investors. Similarly, the SEC made incremental steps to help lower certain reporting costs for crowdfunding issuers. The Commission removed the requirement for issuers to file audited financials in annual reports and permitted first-time issuers seeking higher crowdfunded raises to submit reviewed—rather than fully audited—financial statements prior to launching a campaign.

Any rule change that lowers the cost of raising capital for crowdfunding issuers will help make crowdfunding more attractive to startups. This in turn, will make crowdfunding safer for investors, as an unduly high cost of capital will mean that only the riskiest of companies will use crowdfunding to satisfy capital needs. However, the SEC failed to go far enough in addressing the high cost of capital, particularly for deals at the lower end of the market. Despite small changes to the disclosure requirements, the cost of submitting pre-campaign financial statements and filing annual reports in perpetuity will likely make crowdfunding too expensive for issuers seeking less than $100,000. Considering the small startups that would most benefit from using crowdfunding as a source of initial seed capital will not have any financial history to report in formal financial statements, requiring such companies to expend scarce resources preparing such useless documents seems foolhardy. The cost to small issuers is compounded by the SEC’s failure to include a “testing the waters” provision that would allow startups to informally gauge investor interest before committing the time and money to launching a campaign. Considering around two-thirds of crowdfunding campaigns fail, incurring high upfront disclosure costs is an even riskier proposition for young companies.

The startup community should be thrilled that the SEC finally acted to make investment crowdfunding a reality and that in doing so, it addressed some of the concerns that entrepreneurs and investors raised with the original proposed rules. But, unless and until policymakers take steps to lower the cost of raising seed capital through crowdfunding, the impact of investment crowdfunding on the startup market will likely be modest. Nonetheless, a slow start to investment crowdfunding in the U.S. shouldn’t be taken as a sign that the promise of crowdfunding was overstated; rather, it should serve as a reminder that more work needs to be done to realize crowdfunding’s full potential. We’ll be watching closely.

Vets Who Tech: Nick's Story

Throughout the week, we're posting stories from veterans who’ve made strides in the technology industry on our blog and on Medium. You can also find them all here and follow the conversation about how to support more veterans in this growing industry at #VetsWhoTech.

When Nick Mastronardi transitioned out of the Air Force in 2014, he knew he wanted to start a company. Even though he was able to serve in senior positions in the Pentagon and White House, there was one assignment that forged his desire to build a business. “I was an Economics professor at the Air Force Academy, and from teaching knew small businesses and startups were the engine to and an indispensable component of our economy.”

“I wanted to make sure military members were implementing representative and crowd-sourced public policies.” Out of this idea came POLCO, a political participation platform that allows citizens to find, learn about, and participate in their public policies. “I wanted to create a platform where the best minds in our country could wrestle the day’s most important policy debates in front of citizens to win their favor.”

Having already earned a PhD in Economics while serving, Nick knew he really needed private sector experience to make his dream a reality. Additionally, with two young children, Nick knew he couldn’t be as cavalier as someone with greater financial flexibility. After some exposure to the community through TechStars Patriot Boot Camp, an intensive three-day program that provides veterans with entrepreneurial education and mentorship, and a year at Amazon, Nick was accepted to the Seed Sumo tech accelerator in Bryan, TX. He decided he was ready to take the leap and left Amazon to move to Texas and start POLCO in the spring of 2015.  Since then, POLCO’s website has launched and the company is making progress.

Nick would like to be able to put some of his GI benefits towards POLCO, but the rules around GI benefits don’t allow for this. “I have over $100,000 of GI benefits going unused right now. Money that I earned and want to use in an impactful way,” he says. “The current GI Bill blanket policy is not adequately flexible to support veterans seeking entrepreneurship instead of school, even though they are arguably of comparable value.”

In a time of less financial certainty for his young company, Nick would use his benefits towards a VA home loan, which would provide more stability for his family. Even though Nick has good savings, great credit, and a history of private-sector earning potential, it’s very tough to get a VA or any type of home loan until he has a two-year track record of self employment. “One thing I was really looking forward to for my family following my active duty time was growing some roots in a community.”

Military experience uniquely prepares veterans for entrepreneurship and roles in the tech economy—but financial constraints for transitioning service members disincentivize veteran participation in the startup economy. Because of this unique preparation, Nick is committed to hiring veterans at POLCO. In fact, his entire team is composed of veterans.

As Nick puts it, “I think one of the most valuable lessons from the military is learning how to deal with adversity, face challenges, and ultimately expand your frustration tolerances. As a startup founder or employee, you are directly responsible for the fate of your company, which is exhilarating with growth and frustrating with plateaus. During these periods you rely on your ability to deal with those ups and downs. Military adversaries don’t slow down for you out of sympathy and neither does the market so you always have to keep charging.”

Cities Support Immigrants as Congress Refuses to Act

Earlier this week, newly elected Speaker of the House Paul Ryan confirmed a suspicion most immigration reform advocates have sensed for years now: that the House will once again refuse to consider comprehensive immigration reform legislation. “I do not believe we should advance comprehensive immigration legislation with a president who’s proven himself untrustworthy on this issue,” Speaker Ryan announced emphatically on “Meet the Press.”

The pronouncement was disappointing, but not surprising. Comprehensive immigration reform—which includes considering amnesty for the country’s 11.5 million undocumented immigrants, funding border security measures, as well as updating the nation’s high-skilled visa system to reflect changing economic demands—has long been a contentious political issue. Yet while comprehensive reform remains a pipedream until at least 2017, immigration reform advocates can look beyond Congress for incremental signs of progress.

The Partnership for a New American Economy, for instance, is highlighting the work being done in cities across the United States to welcome and support immigrants for their noteworthy contributions to these metropolitan areas. Two recent reports highlight immigrants’ impact on the local economies in Cincinnati and Denver. In addition to contributing billions of dollars in spending power, the immigrant community is particularly important to these cities’ tech industries. In Cincinnati, foreign-born workers represent more than 10 percent of local STEM workers, 6.8 percent of the high-tech workforce, and 11.3 percent of all information technology workers. In Denver, more than one in four professional, scientific, or technical service workers are foreign-born.

Other municipal leaders and business communities have recognized these positive results. In late September, the Greater Des Moines Partnership, a central Iowa business alliance, announced efforts to develop a plan to attract more immigrants to the region in order to boost the area's workforce. In Tennessee, where cities like Nashville have seen the foreign-born population double since 2000, a non-profit called Welcoming Tennessee was established in 2005 to highlight immigrants’ contributions to the local economy. The Atlantic reports on how  Welcoming Tennessee spurred a wider movement: “Welcoming America” is now a national network of organizations that help immigrants navigate their new homes and identify resources to help with everything from filing taxes to starting a business.

Earlier this year, we also wrote about several innovative models that support foreign-born entrepreneurs building their companies here in the U.S. The Entrepreneur in Residence program, pioneered in Massachusetts, has recently expanded to Colorado. A new startup fund called Unshackled enables immigrant entrepreneurs to focus on their new ventures by sponsoring their visas.

Finally, some of the President’s executive actions, (the purported reason Speaker Ryan refuses to move forward with comprehensive reform), announced about a year ago, could soon be implemented, making slight improvements to the pathways for immigrant entrepreneurs. United States Citizenship and Immigration Services (USCIS) heard from entrepreneurs, investors, and startup advisors earlier this year when considering new guidelines for granting work visas. We hope to see these guidelines officially adopted soon to create more room for immigrants to start new companies and create new jobs here in the U.S.

As the White House initially stated in its announcement, “there is no substitute for legislation to fix our broken immigration system,” but while we wait for 2017, local policymakers and forward-thinking business leaders shouldn’t be deterred from finding ways to support immigrants and recognize the undeniable contributions they make to this country, particularly as innovators and entrepreneurs.

Taking on Patent Trolls in the States

We are pleased to announce the latest paper from students at the Juelsgaard Intellectual Property and Innovation Clinic at Stanford Law School: “How States Can Fight Patent Trolls.”

Some context: the patent troll problem has gotten so bad that states are trying to come up with their own legislative fixes that fall within their jurisdiction.

This paper, by Marta Belcher, John Casey, Madeleine Laupheimer, and Brian Weissenberg, takes a comprehensive look across legislation passed by states to target patent trolls. They compare the provisions, the type of behavior the bills try to limit, modes of enforcement, as well as remedies and exemptions. The paper then goes on to analyze lawsuits brought by various state attorneys general under consumer protection laws and based on the outcomes, makes recommendations for lawsuits going forward.

These efforts at the state level highlight the need to address the patent troll problem, but state legislation can only do so much. The authors conclude, “Because bad faith must be asserted in order to avoid a state law cause of action being preempted by federal law, states can only really fight the egregious trolls that explicitly lie in their letters. In order to fully address the patent troll problem—a multidimensional problem of which frivolous demand letters make up only part—Congress must act.”

“Vets Diversifying Tech”: Bringing the Conversation to Washington

In January, Engine launched the Diversifying Tech Caucus, a bicameral, bipartisan Caucus that’s now grown to over 30 members committed to increasing the number of women, minorities, veterans, and other underrepresented groups in the tech sector. Since then, Engine has hosted briefings on the Hill that further this conversation. This week, in light of Veterans Day, we hosted a briefing to highlight the work of veterans in the industry and how Congress can better support them. Moderated by Engine’s Executive Director, Julie Samuels, the panel included Todd Bowers (Director UberMILITARY, Uber), Nicole Isaac (Head of Economic Graph Policy Partnerships, LinkedIn), Steve Weiner (Co-Founder, VetTechTrek), Andrew Kemendo (Founder & CEO, Pair Inc.), and Rob Polston (Recruiter, Amazon Web Services).

The conversation among this group of veterans and tech industry leaders demonstrated the huge potential of the veteran community to succeed in this sector . As Andrew Kemendo put it: “We need strong executors starting companies—and I see no better people for this than veterans.” It also highlighted the ways our policies for veterans fall short. Here’s what we and the audience of over 60 Hill staffers and friends from the veteran community heard:

• We must give veterans a running start BEFORE exiting the military to make them competitive candidates for tech industry jobs. The one week Transition Assistance Program is not enough for transitioning service members; currently, the Department of Labor’s employment workshop is a one-size-fits-all program that still leaves a lot of guesswork for newly transitioned veterans trying to get into the tech industry. Beyond simply accessing more information about appropriate job opportunities in the tech industry, service members should be encouraged to take up additional training or internships before they leave the military and be provided with the support to evaluate career options (and the skills they require) before they transition. For example, Amazon Web Services is partnering with Microsoft to hire some of the graduates of their Microsoft Software & Systems Academy—a 16 week development initiative focused on developing tech-ready, active-duty service members.

• Veteran entrepreneurs need a better network and access to capital. When members transition out of the military, they have little money in the bank and have a far smaller network of potential funders and co-founders than potential entrepreneurs who graduated from Stanford or worked at Google. This puts veteran entrepreneurs at a disadvantage. In order to make the connections they need to build funding opportunities, they need access to mentors and people with experience. The VET Act, introduced by Senators Moran and Tester, allows veterans to use GI benefits towards starting a business, but these entrepreneurs also need experienced funders and advisors that have started businesses and can provide connections to bigger networks, improving access to capital.

• GI benefits aren’t currently supporting the veteran tech talent pipeline. For example, “skills academies” (such as coding bootcamps and hackschools) are not clearly covered by the GI Bill, though these programs are well recognized by the tech sector and would improve the bridge between military resumes and tech company job descriptions. In addition to being a resource for brushing up on valuable technical or business skills in pursuit of landing a job in the tech industry, skills academies also provide a hiring partner network that enables an easier transition from student to employee. VetTechTrek organizes high-impact trips for veterans to leading tech companies and expose veterans to opportunities for training that can jumpstart their career in the tech industry— and skills academies, as they put it, provide “an environment very similar to a military qualification process: a focus on prerequisites and only the essential skills to complete the task.”

Veterans have notoriously been an underrepresented community in the tech sector. But this panel (as well as the veterans featured in our latest booklet “Supporting Vets Who Tech”) demonstrated that there is room for the government to proactively make changes, working in conjunction with industry players, to improve veterans’ access to jobs in the tech industry. We look forward to working with members of Congress on policy efforts aimed at strengthening the veteran tech talent pipeline.

Vets Who Tech: Isaac's Story

Throughout the week, we're posting stories from veterans who’ve made strides in the technology industry on our blog and on Medium. You can also find them all here and follow the conversation about how to support more veterans in this growing industry at #VetsWhoTech.

After five years on active duty with deployments to both Iraq and Afghanistan, Isaac Elias left the U.S. Army in 2009. As he transitioned out of the military, he found that a large portion of existing career development resources were available through formal partnerships with traditional industry, like manufacturing or logistics. “Those roles just didn’t make sense for me,” says Isaac, who realized during his deployment to Iraq as a human intelligence coordinator that he thrived in small, agile teams.

So Isaac decided to use his GI benefits to attend college. He was able to finish a degree in business administration at California State University in just three years, and in 2012 he began looking for a job. During school, Isaac had started teaching himself programming and coding skills. He had been inspired by professors who extolled how technological advances were dramatically changing business. However, from November 2012 to April 2013, Isaac tried to find a job and couldn’t get any traction. “I had a business degree, but I wasn’t getting anywhere with that. Then I had these self-taught technical skills that I was passionate about, but no formal training.”

In the spring of 2013, Isaac learned about General Assembly (GA), an educational institution that offers a variety of technology-focused classes. He applied and was accepted into their 12-week full-time Web Development Immersive (WDI) program—an opportunity to receive that formal technical training he lacked. With three young children at home, Isaac knew the program would be a commitment, in terms of both time and money.

Isaac accumulated $25,000 in debt on four separate credit cards to pay for the program and his family’s living expenses while he was in school—a debt that Isaac is still repaying two years later. “It was a big commitment, and I wasn't sure that I could manage the whole thing. But it was absolutely worth it.”

Following graduation from the GA program, Isaac was hired as a full-stack developer at a Pleasanton, CA based startup, Milyoni, which builds tools to make video watching and sharing more social. Since then, he has held positions at two other companies, moving into higher-paying, more advanced roles each time. His current job as a software engineer for True Link Financial pays almost three times what he could have made when he was looking for a job with just his business degree. And on top of that, he is frequently contacted by recruiters.

Isaac is proud of how far he’s come. He should be. But he noted how he felt like he had to fight and break down barriers to achieve these goals. “People who have been in war zones have skills that are applicable to startup world: we are dedicated, disciplined, entrepreneurial. We know how to build and manage teams. We take assignments and commitments seriously. We know how to deal with less-than-ideal surroundings, fatigue, hunger, and stress. We just need the right training and the relationships to get into that world. It shouldn’t be that hard.”

Vets Who Tech: Aaron's Story

Throughout the week, we're posting stories from veterans who’ve made strides in the technology industry on our blog and on Medium. You can also find them all here and follow the conversation about how to support more veterans in this growing industry at #VetsWhoTech.

When Aaron Saari applied to West Point in 2002, he was well aware that in a post-9/11 world a military deployment would immediately follow his graduation. “Our whole class knew what was coming after graduation,” he says. Indeed, Aaron did end up deploying twice after graduating from West Point in 2007. He spent 15 months in Iraq and another six months in Afghanistan as an officer. It was these experiences, leading a team of soldiers halfway across the world, that inspired him to become an entrepreneur.

“I’m less than a year out of college and at 23, I’m given 30 people—some older than me, some younger than me, some men, some women—and $15-20 million worth of equipment, and I’m told to do all these things I’ve never done before…if that’s not being an entrepreneur, I’m not sure what is.” His experience in the field also taught him risk analysis, leadership, how to be nimble, and how to pivot quickly in life-threatening situations.

Upon returning stateside, Aaron recognized a further career in the military wouldn’t entail the same kinds of responsibilities he had been afforded as an officer on the battlefield—it looked a lot more like a desk job. Growth opportunities seemed riddled with layers of bureaucracy and hierarchy, a stark contrast to the relatively flat and merit-based culture of technology entrepreneurship.

All the while, Aaron had been following and studying startups and successful entrepreneurs. While still in the military, Aaron read Tim Ferris’s The 4-Hour Workweek. “It was a paradigm-shifting book,” Aaron explains, “It gives you a glimpse into the future of work and how the global economy operates.” He picked up other ideas and skills from books on entrepreneurship, the lean startup model, and Internet marketing, teaching himself what it would take to eventually start his own business.

“When I got out, I started building the business,” Aaron says.

To pursue a career change from a military officer to a technology and marketing entrepreneur, Aaron first considered some of the resources the GI Bill provided. He could earn an MBA or take advantage of business education programs offered by Veterans Affairs and the Small Business Administration. But ultimately, he didn’t want to spend two valuable years sitting in a classroom gaining a graduate degree, and the other resources available to veterans just seemed outdated. “The concepts that they’re teaching are not the way the world works any more.”

In addition to the books he had read, Aaron also came across online resources covering the latest trends in digital marketing, data analysis, and usability testing. He sought out informal, online communities of veterans who had started their own businesses or worked at fast-growing technology companies. “I found people that were doing things, doing things well, doing things quickly... [who] created their own networks.” Aaron found these resources were relevant and easily available to prepare him to launch his own business and take a lead role at a growing startup.

Today, he runs Base of Fire, a growth and marketing consultancy for small businesses, but that’s not all. After focusing on Base of Fire for nine months, Aaron attended a startup event in San Francisco where he met the founder of a new company called Remoov—an online platform that helps people declutter their homes by integrating pickup, moving, and donation services. Soon, Remoov was recruiting him. Realizing that scaling operations at a young company would offer him even greater experience and exposure as a burgeoning tech entrepreneur, Aaron joined on as head of operations.

Aaron continues to tap into networks of veterans in the tech and startup world as he seeks out advice in growing and expanding his latest ventures. As a business leader, he also wants to hire veterans. However, he worries many veterans transitioning to the civilian workforce aren’t getting the education they need, noting that many of the officially accredited programs haven’t kept up with the pace of technological and business changes.

One thing is certain though—the veteran community is a unique workforce because more than anyone, they know how to “adapt and overcome,” Aaron says. “We’re a community of problem solvers. We’re going to find a way to get things done.”

It’s Time We Expand Veterans Benefits for the 21st Century Economy

You can also read this post on Medium.

Each day, nearly 550 military veterans transition to civilian life looking for jobs. Meanwhile, the technology industry is growing fast, driving up the demand for hardworking individuals who can take on roles in well-paid and understaffed tech fields. Technology itself is also lowering the barriers to entry for entrepreneurs to launch their own businesses, which in turn create new jobs.

Not only is there increasing demand for workers in the technology industry, military veterans are also uniquely positioned for roles in this field. Trained as leaders and decision makers in complex situations, many veterans have the fundamentals to quickly learn or adapt problem-solving skills as an entrepreneur launching a startup or an engineer at a fast-paced tech company.

Unfortunately, many veterans who choose to enter the tech industry—either as an employee or a founder—face major obstacles. One obstacle is the limitation on benefits that cover relevant training, education, and programming.

Federal funding guidelines make it particularly difficult for veterans to access non-traditional, skill-based education programs that are relatively new to the education landscape, but are already producing success stories. These programs provide crucial resources for making tech training accessible to people of all backgrounds, especially those new to the civilian workforce. Not only can these programs provide skills that bridge military experience with roles in the tech sector, but they also provide the tech vocabulary and network that enable veterans to land the job.

Similarly, federal funding guidelines make it hard for veterans to use the benefits they have earned through their service towards building a business. Twenty-five percent of active duty service members report that they would like to start their own company. Many veterans are empowered to create their own jobs and jobs for others. Unfortunately, restrictions around the use of GI benefits preclude them from putting that money toward a startup or un-accredited alternative entrepreneurial education programs that help bring their ideas to reality.

Congress should develop policies that help veterans transition into roles in the tech sector. Growing the diversity of the tech sector and expanding innovation in America depends on it.

Throughout the week, we’ll be posting stories from veterans from around the country who’ve pursued careers in the technology sector following their military service. Each of their stories is unique: some built on tech skills that they had already acquired during their services, others sought to build an entirely new skill base, and several of the veterans profiled here have started their own companies.

Together, these men and women showcase the enormous potential within the veteran community to serve and lead in our country’s most rapidly growing job sector. Yet to accelerate these successes and enable more veterans to enter into this industry, we must do more.

Watch this space for stories from veterans who’ve made strides in the technology industry or find them all here. You can also follow the conversation about how to support more veterans in this growing industry at #VetsWhoTech.

Startup News Digest 10/30/2015

Our weekly take on some of the biggest stories in startup and tech policy.

SEC Finalizes Crowdfunding Rules. At today’s SEC open meeting, the Commission voted to adopt Title III crowdfunding rules, finalizing the last and most highly-anticipated provision of the 2012 JOBS Act. Once the rules go into effect, (180 days after they’re enter in the Federal Register,) any investor can buy equity shares from companies raising capital online, marking a new era of financing for startups and investors alike. As Engine and industry experts have commented, the rules aren’t perfect, but their long-delayed release is the first critical phase in working with policymakers to improving and expanding the crowdfunding ecosystem.

Cybersecurity Bill Passes Senate. On Tuesday, lawmakers voted 74-21 to pass the Cybersecurity Information Sharing Act (CISA). The bill has been largely opposed by the tech community over concerns that the bill’s core information-sharing mechanism would compromise user privacy. Amendments aimed at providing additional privacy protections  didn't garner sufficient support, leaving industry stakeholders and civil liberties advocates frustrated. But the debate will not end here—there is a chance these issues will come up again as the Senate’s bill goes to conference with the House.  We’re tracking.

EU Passes (Bad) Net Neutrality Rules: The tech world's focus shifted to the EU this week, as the European Parliament voted on net neutrality rules that have caused consternation amongst open Internet advocates worldwide. Though the new European-wide rules look similar to rules the FCC passed earlier this year, the EU's regime contains many vague definitions that will allow ISPs to create and exploit loopholes that could render the EU's nominal ban on so-called "fast lanes" ineffective. For example, the rules create an exception allowing ISPs to prioritize "specialized services," but define that exception so broadly that ISPs could effectively create the types of fast lanes that the rules nominally ban. Similarly, while the U.S. rules allow the FCC to evaluate the legitimacy of zero-rating plans on a case-by-case basis, the new EU protocols allow zero-rating. While there may still be opportunities to correct these loopholes going forward, the future of an open Internet in Europe looks uncertain.

EU and US Close on New Safe Harbor: After the European Court of Justice’s rejection of the “safe harbor” that allowed U.S. companies to easily import EU customer data to the U.S., the tech world was left in a state of confusion as to what exactly was supposed to happen next. While the EU and U.S. had been hammering out a new safe harbor framework even before the old one was rejected, news this week that negotiators agreed in principle upon a new frameworks came as a pleasant surprise. Whether the new framework satisfies the ECJ’s concerns and what companies should do in the meantime remain open questions.

New Copyright Exemptions. In what has become a triennial reminder that it's impossible for the law to properly keep up to date with changing technology, the Librarian of Congress this week granted a number of exemptions to a rule in the DMCA that outlaws "circumventing" certain digital locks. This year's exemptions include rules allowing the public to tinker with car software and to jailbreak devices in order to run third party software. Of course, the exemption for security research on cars came way too late to prevent the VW emissions scandal, and the jailbreaking rule was perhaps most notable for fixing an absurd distinction between jailbreaking phones (already legal) and tablets (now legal). It's great that there is a mechanism for updating the law to reflect technological realities, but a system in which you have to wait three years before finding out whether it's legal to install third party software on your tablet needs an overhaul rather than a triennial tweak.

Can Tech Help Copyright? In an op-ed this week, Mike Masnick explores the potential for technology to solve the entertainment industry’s copyright woes. Take Sweden, for instance, where not long ago, piracy was rampant. But with the rise of forward-looking services like Spotify, which calls Sweden home, piracy rates have steadily declined. Policy lessons from other countries, detailed in a recent report, demonstrate that “attempts to reduce piracy by passing strict anti-piracy laws...had little long-term impact on piracy rates.” Instead, policymakers should embrace and support innovative ways to support the creative industry through new technologies.

Amazon Faces Worker Classification Suit. Four former Amazon Prime Now delivery drivers have sued the company, arguing that they were misclassified as contract workers instead of employees with full benefits. The suit is the latest in a long list of ongoing legal battles between on-demand workers and their employers (see Uber & Lyft, Grubhub & others, Postmates & others). As the debate continues around how to best support this growing class of workers, these cases have the potential to completely reshape the 1099 economy and the companies that operate within it.

Campaigns to Talk Tech in Iowa. Engine joins the Cedar Rapids Gazette and the Technology Association of Iowa in inviting Democrat and Republican Presidential contenders to the Iowa Presidential Tech Town Hall in Cedar Rapids this December. Candidates will share their agendas for supporting the innovation economy and take questions from a panel of tech policy leaders and local entrepreneurs. Potential topics include technology innovation, STEM education, broadband access, and entrepreneurship. More information and tickets to this event at PresTechTownHall.org.

Startups on the Hill for Patent Reform. Engine and the Consumer Electronics Association hosted a Capitol Hill fly-in Thursday where we were joined by four startups that have battled patent trolls first-hand. Together, we spoke with eleven Senate offices, including directly with Senators Heinrich (R- NM) and Peters (D-MI), about our support for the Senate’s PATENT Act. We also delivered the letter signed by nearly 200 startups in support of the Innovation Act (House bill) and PATENT Act (Senate bill). These bills would help disincentivize bad actors in the patent system and give startups tools to defend themselves against frivolous patent litigation.

Better Broadband Competition. Startups depend on internet connectivity and benefit from greater competition among providers. Over the next few weeks, we will be highlighting a number of policies that would improve competition in the broadband market and better encourage entrepreneurial activity. Read our first post outlining the series here and stay tuned for more.

SEC Passes Historic Investment Crowdfunding Rules

After more than three years of delay, the SEC has finally passed rules making investment crowdfunding a reality. Considering it’s been so long since Congress passed the legislation authorizing investment crowdfunding, it’s easy to forget how significant of an achievement today’s news represents. For the first time, entrepreneurs can raise capital from everyday investors over the Internet, opening up a vast new pool of funding for startups throughout the country. For the 20% of entrepreneurs who have identified a lack of adequate capital as one of the three biggest challenges they face, the SEC’s passage of final rules couldn’t have come at a better time.

Grand pronouncements about investment crowdfunding’s potential shouldn’t be dismissed as mere hyperbole. Simply put, investment crowdfunding has the potential to revolutionize startup financing and enable new groups of entrepreneurs to participate in the startup ecosystem. The success of rewards-based crowdfunding platforms like Kickstarter and Indiegogo suggests that investment crowdfunding will make it far easier for startups outside of traditional tech hubs in New York and California to raise funds. Consider this: the average venture capital investor resides within 70 miles of his or her portfolio companies, while the average crowdfunding backer resides, on average, 3,000 miles away from the companies they support. With traditional venture funding concentrated on the coasts (75% of all VC funds go to companies based in California, New York, or Massachusetts), investment crowdfunding will enable more capital to flow to emerging startup hubs throughout the country. Similarly, investment crowdfunding has the potential to help fix the tech sector’s troubling lack of diversity. While women entrepreneurs have been excluded from traditional venture funding (female-owned companies are 18.7 percent less likely to raise a successful venture round than male peers), they have found far greater success through rewards-based crowdfunding platforms.

While investment crowdfunding has great promise, much work remains to be done for crowdfunding to reach its full potential. As outlined more fully in the white paper we released earlier this month, a few key changes to the investment crowdfunding regime could go a long way towards making crowdfunding a viable option for smaller companies and the investors supporting them. For example, the current rules impose significant disclosure obligations on issuing companies that may increase the cost of raising crowdfunded capital to a point where all but the riskiest companies will turn to other forms of financing for low-volume raises. As demonstrated by the success of the investment crowdfunding market that developed in the U.K. as the U.S. market waited on the SEC to pass final rules, these additional requirements are unnecessary for investor protection and may unduly inhibit the growth of the crowdfunding sector. Though the SEC’s final rules improve on the disclosure rules in earlier drafts, there’s still more work to be done.

Hopefully, today’s announcement is just the first step towards perfecting the U.S. investment crowdfunding market. For cash-starved entrepreneurs and everyday investors eager to join in the innovation economy, today is a seminal moment. For advocates and policymakers working to ensure that investment crowdfunding fulfills the ultimate promise of the JOBS Act, today is just the beginning. We look forward to working with Congress and the SEC in the future on this important issue.

Engine Broadband Deep Dive: Policies to Promote Broadband Competition

We all know how it feels to have a terrible internet connection, or worse, no connection at all. We’ve experienced the intense frustration of “no service.” The agony of waiting for a video to buffer or a web page to load. The disappointment of paying an outrageous sum for crappy service.

In September—the same week that President’s Broadband Opportunity Council (“the Council”) published a report that included 36 actions that federal agencies will take to better facilitate broadband deployment across the nation—Akamai published its “State of the Internet” report, ranking the U.S. 20th worldwide in terms of broadband connectivity.

While the proximity in timing is pure coincidence, the release of Akamai’s report highlights why it is so important that the government take steps to expand broadband access. The U.S. has a broadband problem. Everywhere you look there is a new data point highlighting deficiencies in the market. Almost 55 million Americans still lack access to advanced broadband and more than 25% of American households do not subscribe to broadband at home.

Beyond this lack of access, there is also a lack of competition.  As the Council notes in their report, “nearly 40% of American households either do not have the option of purchasing a wired 10 Mbps connection or they must buy it from a single provider.” The state of competition in the mobile market is similarly disappointing, with just two dominant wireless companies controlling nearly 75% of the low-band spectrum in the country—the type of spectrum most valuable for mobile Internet use.

This is problematic, since competition is what makes access more meaningful. Competition brings lower prices, higher speeds, and more incentives for companies to build out better networks. Startups depend on this sort of a healthy and competitive broadband market. We’ve elaborated on why competition matters to startups in previous posts, but in short, improved access and competition mean more customers, lower operating costs, and an enhanced ecosystem for innovation.

So what can government actually do to solve this problem?

The Council’s September report and resulting cost-neutral actions represent a step in the right direction. For example, a number of agencies plan to expand existing program support to cover broadband projects, allowing for increased funding for entities building out broadband in un- or under-served areas. Additionally, the report recommends extending the Department of Transportation’s “dig-once” policy to other agencies’ infrastructure projects. Dig-once policies encourage the laying of one tube, through which any provider can later route their fiber or cables. The Federal Highway Administration has reported that these policies can reduce broadband deployment costs by as much as 90%.

However, there is still more that Congress, the FCC (which was not included in the Council because of its status as an independent agency), and specific states or localities can be doing to improve the broadband ecosystem.

Over the next few weeks, we will be highlighting a number of policy actions that could be taken to improve competition in the broadband market and better encourage entrepreneurial activity. We will look at everything from special access services to federal spectrum to municipal broadband and much more, so stay tuned!

Inviting Presidential Candidates to Talk Tech in Iowa

On December 7, Engine is partnering with the Technology Association of Iowa (TAI) and the Cedar Rapids Gazette to host the Iowa Presidential Tech Town Hall in Cedar Rapids, Iowa. This first of its kind event offers candidates a platform to articulate their vision for supporting the innovation economy. Candidates will discuss issues including technology innovation, STEM education, broadband access, the sharing economy, and the promise of entrepreneurship.

The Presidential Tech Town Hall will also connect candidates to the Iowa technology and startup community. From Cedar Rapids to Des Moines to Iowa City, Iowa’s tech and startup community includes more than 76,000 workers from across the state and accounts for 9% of the state’s GDP. (Read more about Des Moines startups in our dispatch from Rise of the Rest last year.)

“The Technology Association of Iowa is excited to partner with Engine and The Gazette to deliver the Iowa Presidential Tech Town Hall. Iowa has a long history of creating technology solutions and investing in the future by supporting entrepreneurship,” said TAI President Brian Waller. “TAI members and Iowans are eager to hear from our presidential candidates on the topic of Technology and Entrepreneurship”

The Tech Town Hall will give candidates an opportunity to communicate directly with hundreds of caucus-goers, and well as many more watching the event via livestream around Iowa and across the country. In addition, The New Hampshire High Tech Council plans to host a live viewing event for their members and other primary voters in New Hampshire.

“It’s critical for the startup community to make its voice heard in this election cycle, and drive the conversation about tech and entrepreneurship,” said Engine Executive Director Julie Samuels. “The positions our next president takes will have far reaching impact, and will help determine whether even more Americans can launch and grow a startup and create good jobs - here in Iowa, and in communities all over the country. Engine is excited to engage in a thoughtful discussion with 2016 candidates, and we’re grateful to TAI and the Cedar Rapids Gazette for partnering with us on this event.”

For more information and to register to attend, visit www.PresTechTownHall.org. Join the conversation at #IowaTech2016.

DOE Pilot Improves Student Access to Tech Bootcamps

Last week, the Department of Education announced a pilot program that will allow federal financial aid to be used toward coding bootcamps and similar “nontraditional” educational programs. The EQUIP (Educational Quality Through Innovative Partnerships) program will make it easier for students who rely on federal aid to access these in-demand educational programs. It will also provide an opportunity for the Department to evaluate the effectiveness of these programs and explore how to best monitor their quality.   

In recent years, the prevalence and popularity of coding bootcamps and other nontraditional education programs have skyrocketed. According to the Education Department, coding bootcamps will graduate 240 percent more students in 2015 than they did in 2014, up from 6,740 to over 16,000 graduates.

This growth is not surprising—as the 21st century economy requires an increasing number of skilled workers, these institutions have risen to meet demand. The courses they offer help to alleviate current pipeline problems by channeling talented individuals into open, high-paying positions. General Assembly, one of the largest and most established bootcamps, reports a 99 percent placement rate in the field of study. And overall, 75 percent of coding bootcamp graduates are finding employment in their field of study and see a 44 percent increase in income according to a 2014 study.

However, there is still a significant roadblock in place: students of most of these nontraditional programs do not qualify for federal financial aid.

Imagine this: you’re a single parent working in an entry-level programming position. You’re looking to advance your career and have read about the emerging field of data science. You don’t have the resources—time or money—to attain a four-year degree in data science, but you find an interesting immersive “bootcamp” program that will train you in data science in just twelve weeks.

Even though this specialized program will train you at a fraction of the cost and duration of a traditional degree, in most cases you would not be able to obtain a federal student loan to help pay for it.

There are two main reasons for this: First, in order for an institution to be eligible for federal aid, it must be accredited. The accreditation process is complicated and ill-equipped to assess these sorts of innovative programs whose courses are constantly evolving based on market demand. As we’ve written before, nearly all modern coding bootcamps and schools lack accreditation.

Compounding the problem is a restriction on accredited colleges that limits the types of partnerships they can have with nontraditional education groups. For example, colleges offering federal aid cannot outsource more than 50 percent of any given program to third party institutions. So, if a resource-deprived community college wants to partner with an outside institution to offer a new program in an emerging field like data analytics, they can only do so if the outside institution offers less than 50 percent of the curriculum, assessment, or faculty.

These limited partnerships have been successfully attempted by several educational companies—General Assembly with Boca Raton's Lynn University; edX with Arizona State University; Galvanize with the the University of New Haven—but there is still huge untapped potential being stifled by overly-restrictive and outdated rules.

The EQUIP program aims to change this by loosening restrictions on schools that want to do innovative work with an alternative education provider. The program waives the existing 50 percent outsourcing prohibition for selected institutions under two conditions: a third party “Quality Assurance Entity” evaluates the outside partner and the college’s accreditor approves it.

While the scope of the pilot will be relatively small, this balanced step will allow the Department to evaluate a model that could later be expanded to cover any partnership between an accredited institution and a nontraditional program.  

Right now the innovation economy desperately needs skilled individuals. Creative initiatives like the EQUIP program are a sensible way for the federal government to rise to meet this challenge and we hope to see more efforts like this one in the future.

Startup News Digest 10/23/2015

Our weekly take on some of the biggest stories in startup and tech policy.

Judicial Redress Act Heads to Senate. On Tuesday, the House passed the Judicial Redress Act, which would extend rights to judicial redress to citizens of the EU and other designated countries. The bill has broad support within the tech community, where it is seen as both a sensible next step in surveillance reform and essential to advancing an updated safe harbor agreement between the U.S. and the EU. The bill was slated for Senate consideration as an amendment to the Cyber Information Sharing Act (CISA), but was pulled on Thursday for procedural reasons. The bill’s sponsors are working with Senate leadership to schedule a vote and we will continue to track. Meanwhile, the White House chose to endorse CISA, but also criticized it for allowing companies to share data with any agency, rather than having a centralized clearinghouse.

A National Drone Registry: Recreational drone users will soon be required to register their unmanned aircrafts, federal agencies announced this week. The decision comes amidst national airspace safety concerns from the Federal Aviation Administration and the Transportation Security Administration as reports from piloted aircrafts of drone sightings of or close calls with rogue drones have mounted in the past year. The details of the registration system are still being worked out and the FAA is currently seeking input from the public. Hobbyists and drone users can submit their comments here until November 20.

Bitcoin Teams up with the Feds. A new technology-government alliance is bringing together Bitcoin experts and advocates with government officials. The Block Chain Alliance was established to help federal authorities better understand the complexities of bitcoin transactions, and to change the perception of bitcoin as a "currency for criminals". The alliance will also offer digital currency companies an opportunity to demonstrate power and potential of these new technologies, especially for law enforcement agencies. The Justice Department and Secret Service and are already exploring how to use Bitcoin to more securely track the flow of digital currency across borders.

‘Dig Once’ Bill Introduced in House. On Thursday, Reps. Walden and Eshoo introduced the Broadband Conduit Deployment Act of 2015, which would mandate installing broadband conduit pipes during federal road construction. This would allow service providers to easily install fiber lines years down the road without having to excavate the road to re-dig a channel. The Federal Highway Administration has reported that ‘dig once’ policies like these can reduce broadband deployment costs by as much as 90%.

Code.org letter on CS education. Code.org and several major tech industry players sent a letter to the legislators leading education reform efforts this week. The letter urges lawmakers to include provisions that promote computer science education in any revision of the Elementary and Secondary Education Act (ESEA). Among their requests: maintain computer science as a “core academic subject” and retain resources that would improve teaching and learning in STEM subjects. You can read the full letter here.

Coding Behind Bars. This week Vice reported on the first and only coding bootcamp behind bars. Non-profit The Last Mile, runs Code.3730, a six-month coding course for inmates at San Quentin prison. The curriculum - Java Script, HTML, CSS, and Python - is similar to other code academies, but it’s taught on on dry-erase boards, without Internet. In January, students in the program will be eligible to get paid for entry-level front-end coding work for companies on the outside.

Data Security for Startups. As startups generate, collect, and use data at an increasing rate, state and federal regulators expect them to have security protocols in place. On Tuesday, Engine co-hosted a data security panel at the Nasdaq Entrepreneurial Center in downtown San Francisco to dig into these security issues. Read our blog post recapping the event and unpacking existing resources, including the FTC’s “Startup with Security” guide, to help startups navigate data security regulation and ensure they are adequately prepared for a breach.

Navigating Data Security Policy: a Primer for Startups

For most startups, it’s not a matter of whether you’ll have a data breach, it’s whether you’ll know about it and how well you’ve prepared for it. That’s been the main takeaway at two recent events highlighting the importance of data security protocols for startups. Last month, the Federal Trade Commission (FTC) held a “Start with Security” conference in San Francisco, the first in a series of events under the Commission’s new initiative aimed at providing businesses with resources for navigating the world of security (you can watch the full event here). And yesterday, Engine co-hosted a data security panel at the Nasdaq Entrepreneurial Center in downtown San Francisco. The conversation began with a presentation by Jim Dempsey of the Berkeley Center for Law & Technology, followed by a panel featuring several experts on how technology companies, especially new ones, should manage and protect their users’ data.

These conversations are particularly timely, as companies are generating, collecting, and using more data than ever—and regulators are taking notice. Every day, even a one-person startup can handle sensitive data from hundreds of thousands of users and is expected to have security protocols in place.

The principal federal body that oversees companies’ data practices is the FTC, which has the authority to police “unfair or deceptive practices” under section 5 of the FTC Act. At its recent conference, FTC Chairwoman Edith Ramirez remarked that “in the rush to innovate, privacy and security cannot be overlooked—even in the fast-paced startup environment.” Ignorance is no longer an excuse in the eyes of the Commission. Startups should take this admonition to heart because the FTC can—and will—bring lawsuits against companies that fail to meet cybersecurity standards. Just last month, this authority was cemented by a federal court in FTC v. Wyndham. While the FTC cannot create new industry security regulations without direction from Congress, it now has explicit authority to police companies’ cybersecurity practices using its consumer-protection mandate.

This presents a conundrum for startups. As Josephine Wolff unpacks in a recent post in Slate, even “experts disagree on which computer security practices are reasonable and which are unreasonable.”

So how should startups ensure they’re not upsetting the FTC? One option is to look to the agency itself for some guidance. Published in conjunction with its outreach initiative, the FTC’s “Start with Security” paper outlines ten data security principles they advise companies to adopt, from data encryption to password policies.

At Tuesday’s event, Dempsey expounded on this document, arguing that the overarching takeaway is security by design: companies should build security into their products at every stage of development. The panelists, including a privacy lawyer, agreed emphatically, suggesting that companies of all sizes develop several security and privacy guidelines, implement them, and most importantly, document them. These include an internal IT security policy, a privacy security policy that specifically addresses how users’ personal information is handled, and finally, an incident response plan to refer to if and when a data breach occurs.

But data security requirements don’t stop at the FTC. Any startup operating in a regulated industry such as finance, healthcare, or education is likely well aware that additional laws apply in managing sensitive financial, health, and student data respectively. And to further complicate the process, there are additional state laws regulating data issues. Dempsey explained at least 47 states have their own requirements for companies’ treatement and security of user data. California, for instance, is one of the many states that have breach notification-specific laws, requiring companies to notify residents whose unencrypted personal information was acquired in an attack.

While all these laws can create a compliance nightmare for startups who lack the internal capacity to decode these various guidelines, they’re not going away. Congress has debated questions around data security for years now. Should a data security bill include enumerated, prescriptive standards or take a more loose, industry-specific “best practices” approach? Should a bill include specific requirements or should those be left to the FTC to write? We’ve seen more than six federal data security proposals already in 2015, each of which takes a different approach to answering the above questions. While it is not yet clear which (if any) of these bills will become law, the increasing momentum behind passing something sends a clear message—startups can no longer defer addressing security issues until it is convenient.

The tech community should be engaging in more conversations like the one Engine hosted today. They provide clarity around best practices so that when Congress finally passes a data security law or when a breach eventually happens and the FTC comes knocking, startups already have security protocols in place that will pass muster. Further, as our technology improves, our privacy expectations evolve, and our lawmakers better understand the extent to which policy can dictate practices, startups voices should be heard in the debate around better policies that work for both companies and users around the world.

Statement on FCC "Lock Up" Investigation

Engine welcomes the Federal Communications Commission’s (FCC) announcement today that it plans to review the business practices of a number of dominant broadband companies that “lock up” demand in the high-capacity broadband market.

Startups depend on a healthy and competitive broadband ecosystem. Improved access and competition mean more customers, lower operating costs, and an enhanced ecosystem for innovation. Currently, the market for high-capacity broadband services is dominated by a few monopoly-like carriers who use their power to engage in anticompetitive “lock up” agreements that distort the market, jack up prices for all users, and restrain buildout by competitors. These anticompetitive practices represent a hidden tax on all startups—money that would be better spent hiring new employees, improving products, and driving growth.

The FCC’s decision to investigate these practices represents an important step towards a more competitive broadband market that encourages economic growth, innovation, and improved access for all.

Startup News Digest 10/16/15

Our weekly take on some of the biggest stories in startup and tech policy.

Federal Aid for Coding Bootcamps. On Wednesday, the U.S. Department of Education announced a new pilot program that will make it easier for a more diverse range of people to attend alternative education programs like coding bootcamps. Until now, students enrolled in “nontraditional” educational programs have not been eligible for federal financial aid.  The new EQUIP (Educational Quality Through Innovative Partnerships) program will waive existing restrictions to allow federal aid dollars to be used towards approved alternative programs. While the scope of the pilot will be relatively small, this initiative is a great move by the Dept. of Ed towards making these popular and essential programs more accessible to all.

White House Opts Against Legislating Back Door for Encryption. At the end of last week, the White House made a long awaited decision: they would not push for legislation that would mandate companies be able to decode messages at the request of law enforcement. At least, that’s what they’ve decided for now. Even if the White House’s decision maintains status quo, advocacy groups worry about the White House’s definition of “strong encryption” and whether the Administration will “weaken security through other methods.”

EU Safe Harbor Ruling. Ars technica takes a deeper look at the far-reaching consequences of the EU’s safe harbor ruling in an article published on Thursday. Evan covered the impact this ruling will have on startups in a blog post last week, noting that “while larger companies have quickly moved to establish new legal pathways for importing EU data or have secured data centers in the EU, smaller companies face a more daunting task in trying to comply with now unclear data protection rules.” Ars goes even further, arguing that this ruling will have a dramatic effect beyond short-term global commerce—it will likely impact future trade agreements between the U.S. and EU, as well as the UK’s surveillance practices.

Evidence of “Over-Removal” by Intermediaries. When intermediaries receive a take-down request, the easiest, least risky response is to take down the cited material - especially for small companies that don’t have the resources to hire a legal team to thoroughly evaluate each request. A literature review by Stanford revealed growing amounts of empirical evidence of “over-removal” by intermediaries (e.g. Google, Twitter, Facebook), further defining a problem that puts free-expression at risk.

Wyden Calls for Greater DMCA Exemptions. As the U.S. Copyright conducts its periodic review of requests for exemptions under the Digital Millennium Copyright Act (DMCA), the agency should consider the importance of these exemptions to the  continued expansion and improvement of American technologies, Sen. Ron Wyden explained in this week’s Wall Street Journal. Wyden expressed his concerns about the EPA and FDA’s pleas to limit exemptions for new software in cars and medical devices, thereby prohibiting such new technologies from being legally tinkered with under the DMCA. Sen. Wyden and Rep. Jared Polis (D-CO) have introduced the Breaking Down Barriers to Innovation Act, a bill that aims to streamline “the process to obtain exemptions to the DMCA to promote scientific research, innovation and the fair use of copyrighted works.”

Better Crowdfunding Policy. In anticipation of the SEC’s impending release of the Title III crowdfunding rules, Engine published a white paper this week, “Financing the New Innovation Economy: Making Investment Crowdfunding Work Better for Startups and Investors.” The paper analyzes trends in U.S. and U.K. crowdfunding markets, which offer important lessons for U.S. regulators and lawmakers as we move closer to launching investment crowdfunding for retail investors.

In Celebration of Ada Lovelace. On Tuesday we commemorated Ada Lovelace Day and celebrated the achievements of the first programmer and women in science and technology everywhere. News from Stanford emphasized progress: 214 women have enrolled as computer science majors, 30% of all enrolled computer science students.

Making Investment Crowdfunding Work Better for Startups and Investors

The Jumpstart Our Business Startups Act (JOBS Act) was signed in law over three years ago and in that time, it’s had a notable impact on the startup economy. The IPO “on-ramp” has made it easier for private companies to go public, general solicitation has allowed startups to openly solicit investment from high net-worth investors, and the new Reg A+ has revamped another channel for capital formation for expanding companies. But the JOBS Act’s most exciting and promising achievement—investment crowdfunding open to all Americans—has languished at the SEC, held up in the commission’s rulemaking process. This delay has been frustrating to the entrepreneurs, new crowdfunding platforms, and to everyday investors ready to participate in this exciting new market. We even echoed those frustrations ourselves earlier in fall when we gathered over 200 signatures urging the SEC to act. However, since then, we’ve also gathered additional intel on how similar forms of crowdfunding have flourished, and the regulatory frameworks that have facilitated their successes. Evidence from these ancillary markets suggest the proposed policy framework would benefit from a modified approach.

Our latest white paper, “Financing the New Innovation Economy: Making Investment Crowdfunding Work Better for Startups and Investors,” addresses these concerns. In the paper, we analyze activity from similar crowdfunding markets including rewards and donation-based crowdfunding; accredited investor crowdfunding under Title II of the JOBS Act; as well as investment crowdfunding in the United Kingdom, where everyday investors have been able to invest in emerging companies in exchange for equity since 2012. These crowdfunding markets have experienced exponential growth in the past few years, offering important lessons for regulators as we move closer to launching investment crowdfunding for retail investors in the U.S. One of the most salient takeaways is that fraud has been virtually non-existent, even though issuers are subject to few, if any, of the disclosure requirements that typically accompany public capital raises. Conversely, the current policy framework for investment crowdfunding under Title III includes substantial, onerous disclosure requirements that we believe could be detrimental to the long term growth and sustainability of investment crowdfunding.

Identifying lessons for policymakers from similar crowdfunding regimes, we propose several improvements to the current Title III regulatory framework. These changes will help ensure that investment crowdfunding for non-accredited investors is a successful, sustainable, and efficient market and most importantly, that it attracts quality companies without debilitating costs.

Enabling investment crowdfunding for all investors is critical for expanding capital access to emerging entrepreneurs and startups across the country. Raising capital is often the greatest challenge an entrepreneur faces when getting his or her business off the ground, and too many potential business leaders are left behind because they lack adequate personal finances or can’t tap into sources of angel financing or venture capital. Because investment crowdfunding will allow millions of new people to easily provide capital to startups, it has the unique potential to drive much-needed capital to underrepresented groups of entrepreneurs.

It’s with these entrepreneurs in mind that we believe more work remains to be done to perfect the investment crowdfunding regime. With the Securities and Exchange Commission rumored to finalize rules for Title III by the end of the year, we hope this paper spurs a productive dialogue with policymakers about how to continue improving upon the statute and the forthcoming rules, especially as we garner new insights from the impending U.S. crowdfunding market.

Startup News Digest 10/9/2015

Our weekly take on some of the biggest stories in startup and tech policy.

ECJ Invalidates Data Safe Harbor. On Tuesday, the European Court of Justice (ECJ) invalidated the European Commission’s “safe harbor” rules that permitted U.S. companies to self-certify compliance with European data protection rules in order to legally transfer EU customer data to the U.S. The court determined that U.S. legislation permitting the NSA to secretly collect and review consumer data was inconsistent with the EU’s Data Protection Directive. Consequently, the safe harbor framework was itself inconsistent with the Directive, as U.S. companies could not claim to have adequate data security protections in place. While larger companies have quickly moved to establish new legal pathways for importing EU data or have secured data centers in the EU, smaller companies face a more daunting task in trying to comply with now unclear data protection rules.

Governor Brown Signs CalECPA. In a huge victory for startups and digital privacy, Governor Jerry Brown signed the California Electronic Communications Privacy Act (SB178), now the nation’s best digital privacy law, on Thursday. This landmark bill (which we’ve covered in past digests) updates digital privacy laws by requiring law enforcement to obtain a warrant before accessing an individual’s electronic communications. We are hopeful that this action by California will prompt similar movement in other states or at the federal level.

Closing the Gender Gaps. California passed a (another) landmark piece of legislation that would require women to be paid the same as men for doing “substantially similar work.” Though the governor acknowledges that this bill won’t solve the problem, he expects it to “help accelerate [the] progress.” It’s an interesting development in light of the dialogue in Silicon Valley regarding the promotion and retainment of women in the tech industry. Meanwhile, on the federal level, Senators Maria Cantwell (D-WA), David Vitter (R-LA) and Jeanne Shaheen (D-NH) introduced a bill that would reauthorize and increase funding for the Women’s Business Center Program, which improves business training and counseling opportunities for women entrepreneurs.

Capital Formation Bills Pass in House. The House passed two bills earlier this week aimed at making raising capital just slightly easier for startups. H.R. 1525, the Disclosure Modernization and Simplification Act and H.R. 1839, the Reforming Access for Investments in Startup Enterprises Act, contain measures that simplify and codify some of the regulations that govern how growing private companies raise capital. It’s encouraging to see members of Congress seek out ways to support capital formation for our country’s emerging companies and we hope our senators follow suit.

Marco Rubio Addresses Tech in NYC. Civic Hall hosted Senator Marco Rubio this week to talk about the on-demand economy. He spoke to the advantages of working for on-demand services, (flexibility of hours, mobility of work,) and recognized the need for a middle ground status between W-2 employees and independent contractors. He also called out incumbents, such as the taxi and hotel industries, for hindering innovation. It is the role of the government, Rubio said, to help those displaced by the new economy access the new economy through education and other opportunities.

Regulating Drones. As the popularity and pervasiveness of drones, (or unmanned aerial systems, UAS,) increases, lawmakers are grappling with the best way to ensure safety and privacy without needlessly inhibiting innovation in this growing industry. On Wednesday, Representative John Garamendi (D-CA) and Senator Barbara Boxer (D-CA) introduced the SAFE DRONE Act of 2015, which prohibits drone flights within two miles of an airport or active fire. While some argue these sorts of rules should be left to the Federal Aviation Administration to craft, others are growing tired of waiting on the agency to act after it missed a Sep. 30 deadline to implement drone rules.