Startup News Digest: 12/4/2015

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

Trade Secrets Bill Resurfaces. On Wednesday, the Senate Judiciary Committee held a hearing on the Defend Trade Secrets Act (DTSA), a bill purportedly meant to help curb international trade secret theft by creating a federal cause of action for trade secret appropriation. However, like most intellectual property laws, trade secret litigation is rife with abuse as companies regularly use trade secret claims to stifle competitors and hinder employee movement. The proposed legislation would exacerbate these problems by creating an ex parte seizure procedure whereby a party can—without detailed factual inquiry and without a presentation of both sides of the case—ask a judge to seize a defendant’s property. In this regard, the DTSA goes well beyond what state trade secret law provides, making it a potent tool for incumbents to use the courts to unfairly hinder legitimate competition. And, international trade secret thieves will be able to avoid this federal law as they have avoided prior state laws by simply being outside of the US, it’s hard to see how this bill would actually address the problem it claims to address.

Net Neutrality Hearing. The DC Circuit Court of Appeals heard oral arguments today in the challenge to the FCC’s net neutrality rules. A group of telecom companies filed suit against the FCC shortly after the Commission issued its net neutrality rules this spring, arguing that the decision to reclassify violated administrative rules and exceeded the FCC’s delegated authority. While most net neutrality supporters believe that the Commission’s rulemaking is likely to withstand legal challenge, the DC Circuit is notoriously unpredictable. The hearing itself was not broadcast due to the DC Circuit’s strict rules on recording proceedings, so we’ll have to wait for reports from those in the room to get a read on how the judges received each side’s arguments. We’ll be tracking closely.

Starting Up the Broadband Economy. In an op-ed in re/code, Engine Policy Director Evan Engstrom elaborates on why policies that encourage a competitive broadband market are essential to the continued success of the startup economy. Increasing competition ensures America’s entrepreneurs can use their limited funds to build their businesses, rather than lining the pockets of a few huge incumbent providers. There is still a long way to go towards a robust, healthy Internet ecosystem. But we are working to ensure that startup voices are heard and that real reform happens now.

Trouble for ECPA Reform? The broadly supported Email Privacy Act ran into opposition from law enforcement authorities at a House Judiciary Committee hearing on Tuesday. Calls for an emergency exception and a carve out for civil agencies are nothing new, but they are preventing the committee’s chairman, Rep. Bob Goodlatte, from backing the legislation. Despite being one of the most popular bills in Congress with over 300 bipartisan cosponsors, it won’t move until Rep. Goodlatte gives the go-ahead. We’re tracking.

Add “Lobbying” to List of Startup CEO Responsibilities. Engaging with lawmakers is just another part of being a startup leader now, reports the New York Times. “In addition to knowing the language of computer code, founders are speaking the language of Washington, keenly aware of the potential regulatory battles that could be on the horizon.” In a shift from the historical status quo, startups are no longer eschewing politics, but increasingly embracing a dialogue with D.C. instead.

Patent Lawsuits Filed Set New Record. On November 30, 257 new patent litigation cases were filed—a new one day record. Furthermore, 196 of these cases were filed in the Eastern District of Texas, a notoriously plaintiff (and troll) friendly court. This is clear proof of forum shopping and further evidence that patent reform legislation should also address venue abuse. The mass amount of filings are likely tied to the fact that December 1 marks the effective date of significant changes in the Federal Rules of Civil Procedure for patent cases—i.e. going forward, plaintiffs may be required to provide more information in their initial claims.

Women in STEM. Michelle Lee, the Director of the US Patent Office, authored an op ed in which she cites a study that found that only 15% of all inventors are women. She writes, “The lack of gender parity is not just a social issue, it is an economic imperative.” In response, the Patent Office has launched, in partnership with Invent Now, an “All in STEM” initiative to get more girls interested in STEM and more women in flourishing STEM careers. Meanwhile, the latest diversity numbers from tech companies demonstrate the continuing need: women employed globally by Microsoft decreased from 29% to 26.8%.

Cities and Innovation Ecosystems. It takes years for cities to build up a “critical mass” of tech companies and workers to the likes of the Bay Area. But in some of the nation’s smaller cities, the environment has proven conducive to small companies and large companies cooperating in a way that has become engrained in the DNA of Silicon Valley—where startups are built off the API of large companies and interoperability is part of the culture. A recent report by the World Bank discusses what factors affect the growth of entrepreneurship ecosystems across different cities.

Conversations Around Capital Access. Before taking a break for Thanksgiving, Engine attended a forum hosted by the SEC on capital access issues for startups. Participants honed in on the JOBS Act rules: how they’re playing out in practice and whether there are policy modifications that could facilitate their success. Read Emma’s run-down of the discussions here.

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.

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.

Startup News Digest 10/2/15

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

Rise of the Rest Tour. Engine spent the week traveling with Steve Case on the Rise of the Rest road trip to celebrate entrepreneurship, in all its forms, across America. Check out our posts on our visits to Baltimore, Philadelphia, and Buffalo.

#Visagate2015. An unexpected, last-minute policy change by the Department of State blindsided thousands of highly skilled immigrants seeking green cards, leaving them ineligible to apply and frustrated by yet another delay in the unreasonably tedious application process towards permanent residence. So frustrated, in fact, that a number of them have sued the State Department. This is not the first time immigrants have had their green card hopes dashed by an agency about-face—there was a similar fiasco in July 2007.  And as Emma writes, this represents “yet another indication of how our broken immigration system is plaguing the entrepreneurial ecosystem.”

A Fireside Chat with CTO Megan Smith. On Thursday night, U.S. Chief Technology Officer Megan Smith sat down with Khan Academy founder Salman Khan at the Nourse Theater in San Francisco to talk about the intersection of technology and public policy. As a former Google executive and the founder of her own media company, Megan Smith has a unique understanding of how bringing TQ (or “technology intelligence,” as she has termed it) to the public sector can help build a better government. She touched on a number of issues, including the importance of connectivity, STEM education and even prison reform. We took special note when she called on the audience to work together to improve diversity in tech. “We should be bringing our neighbors’ kids to work,” she said, arguing that diversity should be in the top three priorities at a company, rather than the top 20.

Bringing the ‘Techies’ to Congress. CTO Megan Smith also touched on the need for the “techies in Silicon Valley” to do a “tour of duty” in the government. A new initiative led by the Open Technology Institute hopes to facilitate just that. Beginning in 2016, the Congressional Innovation Fellowship program will place technologists in Hill offices to help “inject greater technical expertise into the policymaking process.” This program represents just another way in which the federal government is trying to bridge the gap with tech and prove that policymakers can be innovators too.

T-Mobile Plans to Buy Enough Spectrum to Cover Entire U.S. T-Mobile CFO Braxton Carter reiterated some good news on Thursday—the company is aiming to purchase enough spectrum in next year’s incentive auction to cover the the entire U.S. We’ve talked before about why competition in the wireless market matters to startups, and we even wrote a letter to the FCC earlier this year advocating for safeguards that would improve the ability of competitive bidders like T-Mobile to play in this historic auction. With Sprint’s announcement last weekend that it plans to sit out the upcoming auction, we are thrilled that T-Mobile is still planning for robust participation.

The Federal Government Wants in on Crowdsourcing. In an op-ed published in Wired earlier this week, Senator Chris Coons (D-DE) revealed the Crowdsourcing and Citizen Science Act, which would give federal agencies the explicit authority to use crowdsourcing. According to Coons, the federal government is not prohibited from collaborating with the public to solve problems, but a lack of explicit authorization deters many agencies from taking full advantage of this option. He notes that “many of our nation’s challenging problems and questions can most effectively be solved and answered with the public’s help if they are given the chance.” We couldn’t agree more, and are happy to see legislation that would encourage these sorts of creative and inclusive approaches to policymaking.

Michael Petricone has “the best job in DC.” A Morning Consult write-up gave Engine Board Member and CEA’s SVP of Government Affairs, Michael Petricone, some much deserved recognition for his efforts to get Washington and tech companies on the same page. It’s a tough job, but somebody’s got to do it! And nobody tells tech’s story better than Michael.

Buffalo's Renaissance, Powered by Innovation

This week Engine is traveling with Steve Case on the Rise of the Rest road trip to celebrate entrepreneurship, in all its forms, across America. Every day we’ll post dispatches from the cities we’ve seen. For more updates follow #RiseofRest on Twitter.

As the Rise of the Rest tour rolled into Buffalo, New York, we celebrated the long history of innovation in the city—beyond the uniquely-spicy chicken wing. In fact, in 1950, Buffalo was the eighth largest city in America. Home of Cheerios (the first ready-to-eat cereal), architectural masterpieces (several by Frank Lloyd Wright), and the Erie Canal (the main track of America’s commercial development), Buffalo has a long history of disrupting the status quo in search of better efficiency and a more united America. It remained a booming center of industry until the Saint Lawrence Seaway was built in 1959 and dramatically decreased commercial traffic through Buffalo, marking the start of decades of decline. But as we saw, Buffalo is in the midst of a renaissance.

CEOs, local government organizations, academics, and creatives are coming together to restore Buffalo to its former status  as a hub for new business and strong community. These efforts are supported by private funds and Governor Andrew Cuomo’s Buffalo Billion initiative, which is funding leading industries and emerging startups to expand innovation and economic opportunity in Western New York.

Today, people are excited about Buffalo and this feeling resonated throughout the day. Native Buffalonians and Buffalo-educated innovators are returning to the affordable city, enticed by the growing number of available jobs or state incentives to start a new business.

In downtown Buffalo is the Innovation Center, which houses co-working space D!G, and incubators Z80 Labs and 43North. 43North boasts the world’s largest idea competition, which provides winners, (who hail from everywhere from New York City to Taipei,) with free space and mentoring in their Buffalo-based incubator. Steve Case spoke to the next wave of innovation that seems to be taking ahold of the city: inventions that reimagine health, education, and energy.

Several startups are reinventing the dominant trades from Buffalo’s past and bringing them into the 21st century. Bak USA, started by Danish immigrants early this year, is bringing tablet manufacturing from assembly lines in China to unique, made-to-order craftsmanship in Western New York. SolarCity’s efforts to expand their own solar panel construction has led to the acquisition of local startups and the development of a solar panel factory, taking the city from a steel town to a solar center. And the Rise of the Rest pitch competition winners are providing new solutions to energy harvesting (Energy Intelligence) and next-generation cancer treatment (POP Biotechnologies).

This boom in startups seems natural for the city that has long been a hub for American innovation. The scene is seeing vibrant growth alongside developments to enhance the city’s community spaces. There is no denying that Buffalo is on the rise, and back on the map. Reenergized manufacturing, design, and community is ensuring that products made in Buffalo are now finding their ways into homes across America.

The City of Startup Love

This week Engine is traveling with Steve Case on the Rise of the Rest road trip to celebrate entrepreneurship, in all its forms, across America. Every day we’ll post dispatches from the cities we’ve seen. For more updates follow #RiseofRest on Twitter.

The city of Philadelphia is steeped in American history. The first American flag was sewn here, the Constitution was written here, and Benjamin Franklin started some of the country’s most important institutions here, such as public libraries and universities. That history certainly isn’t lost on Philadelphia, but on our startup tour of this city, we saw a more modern side—a place where new technological innovations are emerging from the city’s many universities and where more young professionals than ever are calling it home.

Universities play a pivotal role in Philadelphia’s rise as a hub for startup development. We visited the ExCITe Center at Drexel University where students are actively building apps, robots, and wearable technologies. At the University of Pennsylvania, student entrepreneurs showcased a diverse range of ventures and the university’s business school, Wharton is considered one of the best in the nation. This student community—over 400,000 including area universities outside the city—also serves as a massive talent pool for area employers. We heard from Philadelphia’s mayor, Michael Nutter, that nearly 50 percent of graduates from Philly area universities are now staying local after graduation, a significant increase from previous years.

Mayor Nutter joined the travelling crew around his hometown for most of the day, and he explained the ways in which local government has supported new startup activity. Startup PHL, for instance, leverages public and private funding to seed early-stage Philadelphia based companies. The city’s “gateway” program incentivizes companies with headquarters in Philadelphia suburbs to open a satellite office downtown. And the city has always been welcoming to immigrants, Mayor Nutter explained, acknowledging the important role immigrants play in starting new businesses.

Some of the city’s most promising young companies shared their business plans at the afternoon’s pitch competition held at Philadelphia’s National Constitution Center. One trend among the pitchers was clear: a commitment to social good, in addition to business opportunity. A number of health-oriented companies including Life.io and and SmartPlate combines technology, data and health sciences. Focus Food wants to bring urban aquaponics to the roofs of grocery stores in Philadelphia and across the country. The winning pitch, Scholly, helps students navigate and find scholarships to fund their educations.

We also witnessed how closely interconnected the entrepreneurial community is in Philadelphia. We met the support organizations bringing entrepreneurs together, such as Philly Startup Leaders, and the many local venture capitalists, such as Ben Franklin Technology Partners, dedicated to expanding early-stage funding in the region. Throughout the day we heard stories of how accessible the ecosystem is for mentorship and advice—perhaps that’s not so surprising in this city of Brotherly Love.

Entrepreneurs are Building a Better Baltimore

This week Engine is traveling with Steve Case on the Rise of the Rest road trip to celebrate entrepreneurship, in all its forms, across America. Every day we’ll post dispatches from the cities we’ve seen. For more updates follow #RiseofRest on Twitter.

This week marks the fourth Rise of the Rest road trip, and our first stop was Baltimore, Maryland. While we often hear about the challenges facing Baltimore, during our full day tour we saw another Baltimore story—a story about opportunity, innovation and economic development. Baltimore is one of the busiest ports in the United States and has a thriving healthcare sector, in large part driven by Johns Hopkins University’s hospitals and world class research facilities. Baltimore has 11 more universities and it’s just miles away from from major federal agencies like the National Institutes of Health and the National Security Agency which draws technology security talent to the region.

On our visit to Baltimore, we caught a glimpse of how entrepreneurs are capitalizing on the city’s leading industries. In the security space, we stopped by ZeroFox, a young, but fast-growing company with a cloud-based security platform that blocks malicious content from social applications. TechCrunch called its team “a who’s-who of some of the best and brightest security technologists.” We visited Fast Forward, an accelerator at Johns Hopkins that advances and commercializes technologies developed at the university. Many of the companies at yesterday’s culminating pitch competition also focused on new technologies in the health sector. ShapeU is a data-driven application digitizing the personal trainer, Sonavex offers a platform to detect blood clots, and Edessa is an automated hand washing system. The winner of the $100,000 investment from Steve Case was Sisu Global Health, a medical device company with an innovative blood transfusion product for healthcare providers in emerging markets.

We also saw some signs of entrepreneurial success in Baltimore, first and foremost at Under Armour headquarters. Under Armour has called Baltimore home since its inception. The company now has over over 1,000 employees, making it one of the city’s biggest employers. Their campus spans the Baltimore harbour and, unsurprisingly, includes a state-of-the-art fitness center complete with Under Armour’s newest wearable technology and health-tracking devices. Though Under Armour is no longer a startup, Baltimore entrepreneurs commented on how supportive the fitness-wear company has been of the ecosystem. The last startup tour of the day was at OrderUp, a food delivery platform acquired this summer by the Chicago-based Groupon—a sign to many of Baltimore’s competitive consumer technology sector.

We also sensed the broader commitment to fostering greater and more inclusive economic prosperity in Baltimore. The cries for justice after the killing of Freddie Gray this summer resonated deeply with the community and local leaders here, and many entrepreneurs are thinking about how to create new economic opportunity that’s accessible to more of Baltimore’s residents. One promising sign is the opening of Baltimore’s own Impact Hub—a local outpost for social business leaders that will open its doors within months. During a sneak peek of the space we heard from one young company making it easier for the formerly incarcerated to find jobs, as well as from a new local ice cream maker employing some of Baltimore’s youth.

Overall, we sensed great optimism in Baltimore about the potential to build on the city’s existing talent pool and create new solutions where challenges remain. From here, we’re traveling up the Northeast corridor to Philadelphia. Stay tuned for more dispatches from the road.

Northeast Startups, Here We Come!

The Engine team is getting back on the road to visit startups across the country. Next Monday, we’ll kick off our fourth Rise of the Rest tour with Steve Case, co-founder of AOL and CEO of Revolution, along with a busload of startup investors, startup community leaders, and startup advocates like ourselves. Together we’ll be highlighting the promise and growth of entrepreneurship far beyond the more familiar ecosystems like Silicon Valley. Our first stop is Baltimore, MD, then it’s on to Philadelphia, PA, Buffalo, NY, Manchester, NH and finally Portland, ME. In each city, we’ll be talking to entrepreneurs as well as business and community leaders. And at the end of each day, Steve Case will commit to investing $100,000 in the winner of a local startup pitch competition.

If you live in or around Baltimore, Philadelphia, Buffalo, Manchester, or Portland, come join us by RSVP’ing at the links below. Along the way, we’ll post dispatches from the cities we’ve seen. For updates, follow #RiseofRest on Twitter.

Baltimore: Monday, Sept. 28

Pitch Competition RSVP link

Celebration RSVP link

Philadelphia: Tuesday, Sept. 29

Pitch Competition RSVP link

Celebration RSVP link

Buffalo: Wednesday, Sept. 30

Pitch Competition RSVP link

Celebration RSVP link

Manchester: Thursday, Oct. 1

Pitch Competition RSVP link

Celebration RSVP link

Portland: Friday, Oct. 2

Pitch Competition RSVP link

Celebration RSVP link

Startup News Digest 9/18/15

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

Tech and 2016. In case you missed it, check out Julie talking about tech and the 2016 election on KCRW’s Press Play with Madeleine Brand.

FCC Opens Up Business Broadband Data to New Eyes. On Thursday, the Federal Communications Commission (FCC) announced that it will release data on the little-understood special access market. While most consumers have never heard of special access lines, you probably unknowingly use them every day. They are the high capacity business broadband lines that allow ATMs to connect directly to your bank or cell phone towers to connect back to the network. Competition in this industry is sorely lacking, with just two providers covering most of the U.S. and jacking up prices for the startups, universities, hospitals, and other businesses that use them. While the data will only be accessible to analysts approved by the FCC, its release represents a step in the right direction towards more transparency, increased competition, and lower broadband prices.

Senate Committee Considers ECPA Updates. The Senate Judiciary Committee held a hearing on reforming the Electronic Communications Privacy Act (ECPA) on Wednesday morning. As we’ve covered in past digests, it's still legal for law enforcement to access your emails and other digital data without a warrant. Last week, the California legislature passed a bill to modernize these outdated digital privacy laws at the state level. Still, a federal overhaul of ECPA would be an even better fix, bringing these laws out of the digital dark ages.  Sens. Lee (R-UT) and Leahy (D-VT) have proposed a bill in the Senate, and there is similar legislation in the House. We’ll be tracking reform efforts.  

Dancing Baby Wins Victory For Copyright Fairness. The courts ruled this week in Lenz v. Universal, the famous “dancing baby” case. As Evan writes, “The Lenz ruling is important for a few reasons. First, it should make it much harder for content owners to abuse the takedown process. […] Second, the decision should serve as a loud reminder that the tech world needs to get to work rebalancing our copyright laws to ensure that they’re actually promoting creativity and expression.”  Read the whole post here.

$81M for CS in NYC. On Wednesday, New York City Mayor Bill de Blasio announced an $81 million public private partnership to make computer science education available to every student in city public schools by 2025. Substantial contributions have come from the Wilson family foundation, the AOL Charitable Foundation, and the Robin Hood Foundation. New York joins Chicago and San Francisco in terms of large cities that have made similar commitments, and we hope to see other cities, states, and the federal government continue to build on such efforts to prepare students for jobs in the growing innovation economy.

The Fight Is On Over Chicago’s Streaming Tax.  A group of Chicago residents have sued the city over its controversial application of the 9% Amusement Tax to online streaming services like Netflix, Hulu, and Spotify.  The Amusement Tax, which applies to events like concerts and sporting games, has been in existence for a while, but was only recently expanded to cover streaming services. And Chicagoans’ bills are already increasing.  As Ars Technica reports, one reader’s Spotify bill went from $7.99 to $8.71 this month. We’ll be watching, as the outcome of this case could have a national impact on the power of cities and states to tax the internet economy.

“Cool clock, Ahmed”. When a Texas middle-schooler’s homemade invention was mistaken for a bomb this week, prompting an outlandish response by his school and local law enforcement, it caught the tech world’s - and the President’s - attention. As a New Yorker writer points out, “His arrest comes at a moment when some of the world’s most influential people...have argued that there aren’t enough U.S. students gaining the math and science skills that will get them jobs in the tech sector."

A Different Kind of Tech Event. We were impressed and encouraged by the conversation at last week’s Tech Inclusion conference in San Francisco, which brought together leaders in Silicon Valley and the national tech community to discuss the challenge of making the tech industry more diverse. Read our take on why this wasn’t your typical tech event and what we took away.

Chile’s $40M Bet to Lure Global Startups: Lessons for Policymakers

Five years ago, the Chilean government launched Start-up Chile, a bold initiative to draw global entrepreneurial talent to its capital city. This new focus on innovation has since earned Santiago the nickname “Chilecon Valley.” Earlier this week, the Wall Street Journal reported that over 1,000 companies from 77 countries have so far been accepted into Start-up Chile, which provides early-stage startups with $40,000 in equity-free funding and residency visas for their employees, in exchange for locating their business in the country for at least six months.

The creators of Start-up Chile hope the influx of technology companies will ultimately help diversify the national economy, which has long been heavily dependant on the copper mining industry. (By some estimates, this single industry makes up 20 percent of Chile’s GDP and 60 percent of its exports.) Chile has now dedicated over $40 million to the program and its neighbors in Brazil, Colombia, and Peru have already launched similar efforts.

So is Chile on its way to becoming the next Silicon Valley, or at least the startup hub of South America? Well, as the Journal explains, the results are mixed. Most of the foreign startups that relocate to Santiago don’t extend their stays after the six-month program: over 80 percent leave Chile to scale their ventures elsewhere. As the article points out, this trend underscores some significant obstacles to innovating in Chile, in light of a regulatory environment that’s long favored established industries. One former government official noted that Chile can’t just provide public grants for startups, it must also create regulatory conditions that enable startups to challenge entrenched competitors. This is where the outcomes of the Start-up Chile program may offer some important lessons for policymakers around the globe hoping to cultivate tech ecosystems in their own cities, states, or countries.

Depending on who you ask, the tenets of the ideal tech ecosystem vary, but most analyses agree on several key pieces: a strong talent pool; access to financing; a dense network of ideas, mentors, and supporters; and a conducive regulatory environment. (We’ve previously written about some of these essential ingredients here). The concept continues to evolve as successful new ecosystems—from Los Angeles to Berlin—emerge. And seeing the positive economic results startups are generating, more and more governments are looking for ways to grow thriving entrepreneurial communities.

By luring companies with seed financing, Chile has taken at least one of these tenets seriously: access to capital. As the 2015 Global Startup Ecosystem Ranking from Compass points out, Santiago is among several cities, (in addition to Singapore and Tel Aviv,) whose focus on stimulating the financial foundation of its ecosystem has been successful, at least in the beginning stages of the ecosystem’s formation.

However, as the work we do at Engine reflects, government’s role in supporting technology entrepreneurship goes far beyond funding (though, we’d argue that the U.S. government could do more to open up new avenues to capital): every level of government must adapt to innovation-oriented policies. The Journal suggests Chile’s recent tax overhaul, which has been criticized by some for increasing the costs of doing business, could undermine the growth of its emerging startup sector. Regulations in other major national industries (with long, complicated histories), from banking to mining to energy, could further discourage innovation. Simply put, Chile’s greater economic priorities may not yet align with the needs of the nation’s budding entrepreneurs.

Chile’s program is still young and still evolving. The government is actively formulating new strategies to keep startups there longer, most recently with the launch of a $100,000 follow-up grant for select companies that agree to incorporate in Chile, stay for at least a year, and become mentors to local entrepreneurs, conditions meant to commit companies to expanding in Chile. And whether or not the program has generated major economic results, the influx of foreign entrepreneurs has created a valuable network in Chile for its own native entrepreneurs. In the first few rounds of applications, no Chilean companies were accepted. Now, 20 percent of the accepted companies have been Chilean.

Applicants and local entrepreneurs are also recognizing the benefits of capitalizing on existing economic strengths. The Journal points to one promising Start-up Chile company, BioFiltro, with a wastewater treatment technology—some of their first customers were Chilean vineyards that benefitted from BioFiltro’s cost-saving irrigation solution. This type of industry-focused model has already shown great promise in other cities all over the world. A public-private partnership in Des Moines, Iowa, for instance, created an insurance-focused startup accelerator to build upon Iowa’s long-standing insurance industry. In 2010, business leaders in finance joined forces to launch one of the first fintech accelerators in New York City and London, the world’s financial hubs. Startups built in Chile may find greater success by focusing on agriculture or even copper-mining. Chilean lawmakers could consider creating incentives that encourage innovation in these sectors.

What Chile has started to do is undoubtedly laudable, but Chile’s government and entrepreneurial community have more work to do if they’re going to produce leading technology companies and transform major sectors of their economy. As Chilean policymakers evaluate Start-up Chile’s early outcomes and forge a path forward, they should recognize that expanding and sustaining a strong tech ecosystem must go far beyond providing seed capital.

Celebrating Startup Day Across America 2015

The startup ecosystem is no longer exclusively a Silicon Valley, a New York City, or even a Boulder, Colorado phenomenon. Startups are flourishing in communities all across the country. We’ve seen entrepreneurs building new businesses in Des Moines, Detroit, and New Orleans on our Rise of the Rest tours and we’ve reported on some of the fastest growing startup ecosystems in the nation. On Wednesday, August 19, we’re working with Reps. Darrell Issa and Jared Polis, 1776, and dozens of startups and elected leaders  throughout the U.S. to celebrate Startup Day Across America—a national day bringing together members of Congress with startups in their districts.

This year, members of Congress will be making stops at startups, incubators, and co-working spaces in cities like Sacramento, Phoenix, and Charlotte for tours, demos and conversations with entrepreneurs.

Startup Day gives our representatives the opportunity to see firsthand how young and emerging companies are leveraging the power of technology to develop new products and services at an unprecedented rate, and also creating jobs in their districts. It provides entrepreneurs the chance to tell policymakers how and why supportive policy makes a difference: from patent reform to capital access, our lawmakers have the power to craft and champion legislation to support the new innovation economy.

We’ll be highlighting activities throughout the day. Follow #StartupDay on Twitter for updates - and if you’re hosting a member of Congress, make sure to let us know by posting with #StartupDay on your social media channels.

The Future of Transportation Innovation in NYC

New York City is considering legislation that would halt the growth of the for-hire-vehicle industry, including--and especially--startups that use technology to connect riders with rides. Local leaders have generally worked hard to support innovation, but policies like this have the potential to undermine those efforts. The following is an explanation of how the bill would work, and why Engine opposes it.

Of all the disruptive technologies to emerge in the last few years, it seems ridesharing and for-hire-vehicle (FHV) applications have been subject to some of the most heated policy debates in cities around the globe. We’ve seen this on display in New York City, where the Taxi and Limousine Commission (TLC) recently proposed rules that had troubling implications for application developers in almost any area of tech.

Fortunately, after hearing concerns from startups and organizations like Engine, the TLC updated those rules in ways that protect both startups and riders. But fresh on the heels of that positive resolution, the New York City Council introduced legislation that could threaten the future of transportation innovation in the city.

New York City has a booming startup economy, and government officials have worked very hard to support innovation. It would be hard to argue that a single policy would spark a mass exodus of entrepreneurs from the five boroughs. But policies like these do send a message that reverberates through the larger startup community, a message about what kind of environment New York wants to create, and how much local leaders are willing to listen to our community’s voice. And it certainly sends a message to anyone who wants to innovate within regulated industries - not just transportation, but health care, finance, and education - about whether they can really start and grow and thrive in a city like New York.

New Legislation

Two connected bills have been introduced by the City Council. The first bill, Intro 847, would require the Mayor's office to produce a study on what impact, if any, a recent increase in the number of FHV licenses had on traffic and pollution in the city. While we question the presumption that any noted decrease in average vehicle speeds must be the result of an increase in FHVs, we certainly support the city doing a comprehensive study to inform future transportation policy decisions. And in fact, the TLC and Department of Transportation have already begun work on such a study prior to any legislative mandate.

But it's the second bill, Intro 842, that is the greater cause for concern in the startup community. This bill would essentially freeze the number of FHVs currently on the road by capping the number of vehicles that can be affiliated with TLC-licensed bases, which, among other things, would disproportionately harm the smallest startups. Here’s where it’s helpful to know a bit about the way FHVs are currently regulated in New York City.

How FHVs are Regulated

There are two main types of FHV licences issued by the TLC. The first is called a medallion, and it allows a vehicle to accept street hails. Yellow medallion cabs can pick up riders anywhere, but the vast majority tend to serve Manhattan south of 96th street where density and demand are highest. The relatively new green medallion cabs can pick up riders anywhere except for that central business district and the airports. The number of medallions available is capped by local law, and periodically (if it believes there is sufficient rider demand) the City will put additional medallions up for auction.

The second type of licence is issued to livery cabs, limousines, and black cars. These vehicles cannot accept street hails. Instead, they can offer pre-arranged trips (like a ride to the airport) or contract with businesses and individuals to provide private transportation (like a law firm that offers employees rides home). Any FHV operating in the city must be affiliated with a livery, limo, or black car base, and it is through that base that they are licensed by the TLC.

Unlike medallions, these licenses are not currently capped. They also do not dictate how many different drivers can drive an individual vehicle, nor do they require that a vehicle drive only for the business associated with its base. Startups like Uber, Lyft or Via own bases through their subsidiaries, as do traditional livery companies like Dial 7 and Carmel, along with hundreds of small community providers. But a driver that owns a vehicle licensed through an Uber base can drive for Lyft, a Lyft car can drive for Dial 7, a Dial 7 car can drive for Uber -- and many drivers take rides through multiple companies throughout the day.

How the Vehicle Cap Would Work

Intro 842 would cap the number of new vehicle licences issued to any livery, limo, or black car base, whether a traditional provider or a high-tech startup. The cap is determined by the number of vehicles affiliated with a base as of June 15, 2015. If a base has 500 or more affiliated vehicles, it can only increase its total number of licenses by one percent. If it has between 20 and 499 vehicles, it can grow by five percent. And if it has less than 20 vehicles, it can grow by 15 percent. The cap would remain in effect until August 31, 2016, or until the traffic study is complete, whichever came first.

This may seem like a structure that favors smaller operators - until you actually run the numbers. Under the cap as proposed, a base of 500 vehicles would be able to add just five more vehicles in the next year. A base of 50 vehicles would be able to add just three vehicles, and a base of ten could add just two. So across the board we’d see negligible growth among any single base operator and throughout the industry.

What This Means for Startups

New York City has every right to evaluate traffic and take steps to alleviate congestion. But while the proposal to cap the number of new FHVs is likely well-intentioned, we believe it is misguided and will create a number of adverse impacts.

Media coverage of Intro 842 has generally framed this as a battle between Uber and the City -- and understandably so, given Uber currently accounts for the majority of app-based FHV rides in the five boroughs. But while this would obviously have a negative impact on Uber’s ability to expand its bases, we’re concerned that it will have a disproportionately damaging effect on smaller companies, and make it all but impossible for new startups to enter the market in NYC. In fact, by forcing everyone to compete for a limited supply of fluid labor even as demand for rides continues to grow, it has the potential to create an even greater monopoly within New York’s FHV industry.

It will have a particularly negative effect on small, home-grown startups like Via, a NYC-based service that provides shared rides within the city’s central business district. And it also means anyone with a great idea that could become the next Via, or the next Lyft or Uber, can’t start that business in NYC - certainly not in the next year, and possibly not ever.

Intro 842 won’t just impact businesses; it will also impact riders and other residents. It will slow or stall the expansion of ridesharing services that are likely to reduce congestion and make rides more affordable. It will also slow the expansion of FHVs into communities that remain underserved by traditional services, especially in the outer boroughs.

The City has argued that it can’t produce an accurate traffic study unless it holds the number of FHVs constant, a claim that simply doesn’t hold up. Analysts of all kinds are constantly studying snapshots of systems in flux, and no one claims that their findings are invalid simply because those systems have continued to evolve. And the City’s traffic study wouldn’t hold other variables constant, such as increases in both tourism and city residents, changes in streetwork or construction, or growth in the number of bicycles on the road.

The City has previously demonstrated a willingness to work collaboratively with the startup community towards smart regulations, as evidenced in the TLC rulemaking process just a few weeks ago. And the goal of alleviating congestion and the resulting traffic and pollution is a noble one. But the City seems to be conflating correlation with causation.

A vehicle cap is a blunt policy instrument that will likely stall or kill the growth of ridesharing services, which could actually take vehicles off the road and reduce congestion in the long term. Policy makers should postpone any movement of Intro 842 and instead work with the startup community and all stakeholders towards a better solution.

What’s the most startup friendly city in the world? You may be surprised.

by Engine Policy Fellow, Aidan Ali-Sullivan

You can also read this post on Medium.

The rivalry between San Francisco and New York City heated up last week when New York City took top honors in a global analysis of leading cities supporting start-ups through municipal policy. The CITIE (city initiatives for technology, innovation and entrepreneurship) report -- a collaboration between UK based innovation charity Nesta, global consulting firm Accenture and urban idea accelerator Future Cities Catapult ranked global cities on their support for tech entrepreneurship and start-up facilitation. The report grades cities on their overall startup-friendly climate by comparing a variety of policy considerations - from traditional elements like physical infrastructure and regulatory environment, to modern considerations like smart city data analytics - and ranks startup-friendly climate.

While many cities with historical advantages persist in the top tier, the rankings highlight the fast pace of change in technology and the associated municipal policies needed to keep up. The top five cities were New York, London, Helsinki, Barcelona and Amsterdam, highlighting traditional market leaders (like San Francisco) are no longer the only innovative actors in this space and increasingly face global competition. The report asked the question of how cities around the world support innovation and entrepreneurship. By examining forty diverse global cities in the categories of Openness, Infrastructure, and Leadership, the authors identified what policies best support startup growth, and how cities are implementing them.

The first category, openness, is identified as a general willingness to support new ideas and businesses. At the city level, this manifests as favorable regulatory regimes, self promotion as an innovation hub, and efforts to be a customer for innovative local companies. The report cites Sao Paulo, where local startups receive preferential treatment in city contracts. Meanwhile, Amsterdam recently relaxed municipal lodging regulations to better allow shared housing, creating the status of ‘private rentals’ with policies outlining the rights and responsibilities of homeowners. In both these cases cities are directly and indirectly supporting, rather than hindering, innovation and growth.

Cities also need physical and digital infrastructure in place to ensure on the ground policy success. This includes fostering spaces for start-up companies to grow, facilitating digital and physical connectivity within city limits, and investing in the citizens driving innovation. NYC recently added coding classes to public school curriculum, an initiative other mega-cities are following. The skills learned in these classes will help students develop and grow their ideas within innovative workspaces like Paris based “1000 Start-Ups”—set to be the world's largest business incubator when it opens. Cities that build and support the foundations upon which startups grow will be uniquely positioned to reap the economic benefits.

Finally, cities need municipal leadership, and in particular a direct plan of action that engages citizens and utilizes smart data. The Greater London Authority did just this, by opening up 850 proprietary municipal datasets to residents, allowing them to build interpretative applications and businesses off the data. Cities must include innovation in their activities, and in particular use big data to solve problems and engage citizens.

So what should a city do to grow their entrepreneurial ecosystem, and how can cities with emerging tech sectors race to the front of the pack? While there's no single path to success, the report identifies three common traits of top cities. First, they share a willingness to open doors. All the answers are unlikely to be found within the corridors of city hall, so municipal governments need to be open to collaboration with outside experts. Second, people serving in disparate areas of policy communicate and work above departmental silos towards broader goals. As noted, “good policy in one area can be undermined by bad policy in another”. Third, they think like startups: top cities try new ideas and are not afraid to fail. Agility and risk may not come naturally to unwieldy bureaucracies, but if NYC can lead in this space, others certainly can follow a similar path.

For further information and analysis, the full report can be found here: http://citie.org.