The Big Story: EU content rules take effect for big platforms; startups on the clock
Europe’s content moderation rulebook is taking effect today for the largest online platforms, underscoring preparations startups must undertake for when the law applies to them in February. The new rules create several new obligations for (nearly) all Internet companies and special heightened obligations for certain “Very Large Online Platforms.” The rules kicking in today serve as a reminder of the impending changes as startups serving EU users endeavor to set up several costly new mechanisms required by the law.
Adopted late last summer, the Digital Services Act (DSA) covers an array of digital services, especially those that host or encounter user content—for example, podcasting sites, e-commerce services, websites with comment sections, and Internet infrastructure providers—and is primarily focused on content moderation. The law introduces transparency requirements and several new mechanisms that startups must create for users and others to alert them to potential problematic content. These provisions apply to most U.S. startups because startups large enough to be serving EU users tend to have over 50 employees and €10 million in revenue—the small and micro category that receives exemptions. Given the broad scope of applicability, one estimate puts the number of companies subject to the DSA in the hundreds of thousands.
The DSA will have competitive effects on U.S. startups and other small platforms. First, startups already spend disproportionately more per user on content moderation than larger companies. Second, many of the DSA’s provisions mean startups have to undertake processes much earlier in their stage of development than today’s incumbent firms. For example, Meta—which today has 1000 people working on DSA implementation—first released transparency reports and facilitated appeals when the company was worth hundreds of billions, and had thousands of employees, something startups will need to do with orders of magnitude less in people and resources. The DSA increases costs and hinders access to the European market. The heightened barriers to serving EU users will have the likely effect of deterring or delaying U.S. startups from entering what would otherwise be an attractive market for global expansion.
Policy Roundup:
New rules for private fund advisers could impact startup funding. This week, the Securities and Exchanges Commission (SEC) adopted new rules that will reshape the private fund industry and will have an impact on the venture capital ecosystem. The changes include new disclosure requirements for SEC-registered private fund advisers regarding performance, fees, and expenses, as well as bans and limits on certain activities. The rules will most significantly impact small and emerging managers who may have fewer resources to adapt and could affect the diversity of the investor pool. Engine has long stated that diversity amongst investors is crucial for achieving equity in the startup ecosystem, so that more diverse startups receive funding.
New guidance available for disadvantaged business program. The Small Business Administration has released guidance regarding its 8(a) Business Development government contracting program for disadvantaged populations. The program temporarily paused accepting new applicants for its disadvantaged business program following a suit in the Federal District Court of the Eastern District of Tennessee challenging the rebuttal presumption of social disadvantage, under which applicants of certain races or ethnicities are presumed to be socially disadvantaged. The new guidance requires applicants to certify they are socially disadvantaged by submitting a written narrative. Underrepresented founders face more barriers across the U.S. innovation ecosystem, including in the federal contracting space. It’s important agencies—and policymakers alike—don’t make it more difficult for underrepresented founders to access government programs.
Key senator calls for broad AI training. At a forum this week on AI, Senate Commerce Committee Chair Maria Cantwell (D-Wash.) called for a bill to provide job training resources to help Americans prepare for the “jobs of the future” and equip them to use AI to tackle pressing societal challenges. As the U.S. and governments around the world explore policy responses to AI, Engine has repeatedly highlighted the need for workforce development, upskilling, and reskilling, both in and out of traditional educational settings. Part of that effort includes building the conceived National AI Research Resource, by passing the CREATE AI Act which stands to bolster AI talent in addition to providing resources for startups.
AI copyright ruling confirms computers can’t own property. In a recent ruling, a district court declared that AI cannot be listed as the author of a work because human authorship is a requirement to issue a valid copyright. A computer scientist had sued the Copyright Office seeking to have his AI system recognized as the creator of art, insisting that it created the work autonomously.
Report highlights foreign-born talent as crucial for rural expansion. A report out this week by FWD.us revealed that increased immigration could reverse population loss in rural areas of the U.S. and could provide a solution for unfilled jobs in these areas. The report highlights that “nearly two-thirds of rural counties nationwide would see larger working-age populations in 2040 than in 2000 if just 100 new immigrants settled in their county each year.” Engine has long-explained how crucial immigrants and foreign-born talent are to the U.S. economy—in particular, the innovation ecosystem and STEM fields. Policymakers should ensure that there are pathways for immigrant workers to remain in the U.S., so entrepreneurs, especially those in rural areas, can access the talent necessary to expand.
Startup Roundup:
#StartupsEverywhere: Washington, D.C. Marcus Bullock knows firsthand the impact a strong familial support system has on the lives of incarcerated people. As founder & CEO of Flikshop, he’s set out to make sure that families have accessible communication to facilities across the country. He spoke with Engine about reentry resources for incarcerated people interested in entrepreneurship, what policymakers should know around efforts to reduce recidivism, and his goals for Flikshop moving forward.
