The Big Story: Over 65 startups call for uniform federal privacy law
This week, startups are calling on Congress to pass a federal privacy law that takes the startup ecosystem into account. A coalition of startups and support organizations across 26 states sent a letter to Congress urging lawmakers to pass a law that creates uniformity, promotes clarity, limits bad faith litigation, accounts for the resources of startups, and recognizes the interconnectedness of the startup ecosystem. The letter comes as states continue to enact their own unique data privacy laws, and as a Congressional committee explored the problems posed by a sectoral federal privacy landscape in a hearing this week.
The current data privacy landscape doesn’t work for startups. The growing patchwork of state privacy laws is costly for startups—costing some $300,000+ and an additional $60,000+ per new state added to the patchwork—and confusing for their users. Additionally, the sectoral approach to privacy at the federal level is confusing for consumers. A uniform, comprehensive federal privacy framework is needed to solve these issues and create certainty and clarity for startups. And these concerns were on display at a House subcommittee hearing Thursday, with members and witnesses alike underscoring the need for strong preemption of unique state laws to create a truly uniform federal privacy framework.
This week’s data privacy hearing marks the sixth this Congress has held on the topic and demonstrates the sustained interest in a national privacy standard. As the organizations expressed in the letter, Congress must keep up the momentum toward a much-needed federal privacy law “while keeping in mind the needs of startups.”
Policy Roundup:
Startups tell Congress to expand accredited investor definition. Ahead of a Wednesday markup, 100 startups and startup support organizations sent a letter to the House Financial Services Committee urging Congress to expand the current definition of “accredited investor.” The current definition limits would-be investors who don’t meet the arbitrarily high net worth threshold—in particular, investors from marginalized communities who historically face funding barriers—from investing in private offerings. As we stated in our letter, expanding the accredited investor definition would represent a huge step in bringing more investors from different communities into the startup ecosystem, giving them access to private capital markets and enabling them to build lasting generational wealth.
Intellectual property provisions need balance to ensure talent availability. In a new blog post this week, we explore the ways provisions in employment agreements covering intellectual property can hinder startup talent availability—similar to the impacts of non-compete agreements we told policymakers about last week. IP provisions of employment contracts need balance to ensure that inventions using company resources are owned by the company without hindering an employee's ability to start or work for a startup on their own time.
House considering tax benefits that could help startups. House Republicans are considering tax breaks for businesses as part of an economic growth package, including certain benefits set to phase out as part of 2017’s Tax Cuts and Jobs Act. One such provision would bring a return to immediate expensing of certain R&D costs. Companies are now required to amortize these expenses over five to fifteen years, which is leading to hefty tax bills for startups. Republicans are also considering providing relief for digital entrepreneurs from a new tax reporting threshold that requires individuals who earn at least $600 from online platforms to file 1099-K income tax forms. The new threshold is a dramatic change that risks capturing everyday users of common online platforms, including small sellers and other digital entrepreneurs.
Senators propose age verification, social media and algorithm ban for kids. A group of Senators this week unveiled a bill that would bar children under the age of 13 from creating their own social media accounts, require age verification and parental consent, and prohibit the use of algorithms to sort content for young users. The effort is similar to recently-passed laws in Utah and Arkansas requiring age verification law. As Engine has stated in the past, those laws carry huge risks for privacy and expression online as they effectively require more data collection and effectively end anonymity online.
Concerns over spy program impacting data flows dominate House hearing. A House Judiciary subcommittee held a hearing this week where lawmakers discussed Section 702 of the Foreign Intelligence Surveillance Act. The controversial surveillance program is up for reauthorization this year ahead of its expiration in December and has contributed to the downfall of previous data transfer pacts with the European Union like Privacy Shield, which was overwhelmingly relied upon by startups.
Startup Roundup:
#StartupsEverywhere: Flint, Mich. With an academic and entrepreneurial background in the sciences, Utopic Ventures Founder and General Partner Neil Thanedar seeks to provide pre-seed capital to an underserved segment of the innovation ecosystem: scientist-run startups. We spoke with Neil about his passion for scientific and deep-tech companies, the impact of the accredited investor definition on the investing world, and his desire to make Michigan the next tech hub.
