The Big Story: New Senate bill would improve startups’ access to capital
A sweeping legislative package introduced by the Senate Banking Committee's top Republican Tim Scott (R-S.C.) and his colleagues this week would expand capital access for startup founders. The Empowering Main Street in America Act (EMSAA) aims to expand access to capital for entrepreneurs, increase investment and ownership opportunities, and strengthen the SEC’s rulemaking process by increasing oversight and transparency. The bill follows a House-passed effort—H.R. 2799, the Expanding Access to Capital Act—a measure that would increase funding options for startups through a more diverse pool of investors. Policymakers should move quickly on capital formation legislation so founders can continue to drive U.S. competitiveness, foster innovation, and access pathways to entrepreneurship, especially for underrepresented communities.
U.S. startups, especially those operated by underrepresented founders, often confront additional barriers accessing all funding streams, from friends-and-family rounds, to loans, to early-stage investors, to venture capital. Earlier this year, Engine brought underrepresented founders—including founders of color, women founders, and immigrant founders—to Capitol Hill for conversations with policymakers to discuss the challenges they’ve faced launching and growing their companies, especially around access to capital.
The EMSAA would drive capital to emerging ecosystems, including by identifying challenges faced by rural small businesses, and would improve capital access opportunities for women founders and founders of color. Critically, the bill would expand the definition of accredited investor, which will ensure investment opportunities are not limited to the wealthy and will lead to a more diverse pool of funded startups. Engine and other advocates for the startup ecosystem sent a letter applauding the effort as startups and small businesses continue to face economic headwinds and global competition increase. Startups are encouraged by the bill’s introduction, and lawmakers should prioritize passing the measure.
Policy Roundup:
Broadband program faces criticism on the Hill, in courts. A federal program aimed at increasing broadband deployment is under fire as critics express concern over the slow progress in implementing the $42 billion Broadband Equity, Access, and Deployment (BEAD) Program, which aims to close gaps in Internet access nationwide. In remarks on Tuesday criticizing Vice President Kamala Harris, Senate Minority Whip John Thune (R-S.D.) said, “not a single dollar has been spent” and “not a single person has been connected to broadband service” as part of BEAD. Meanwhile, a lawsuit has been filed against a Rhode Island agency, alleging that the state's plan for distributing its $108 million in BEAD funding does not actually benefit low-income areas. Policymakers should prioritize broadband support quickly to aid in the success of innovators nationwide and ensure startups have equal access to reliable, affordable Internet services.
California ‘addictive social media’ bill signed into law. Gov. Gavin Newsom (D) signed legislation last Friday aimed at regulating Internet services that use algorithms to display content—including startups. The bill—which was written with the largest social media platforms in mind but applies much more broadly—would create new requirements for how companies that host, sort, and display content from their users, depending on the users’ age. We’ve seen several states consider mandates that require age verification in practice, which is unworkable for startups and can create risks to privacy, security, and expression for all Internet users.
Commerce Department efforts aim to amplify digital trade. Late last week, the International Trade Administration announced several digital trade initiatives to help improve U.S. small businesses’ global competitiveness and reduce trade barriers. Countries around the world have been erecting digital trade barriers restricting U.S. startups opportunities for success, and startup leaders recently explained how they need strong trade leadership from U.S. policymakers to address them.
Policymakers examine online sales tax burden for small businesses. Members of Congress are reviving attempts to find a solution to the problem of remote sales tax compliance for small businesses. At a Senate hearing this week, lawmakers heard about how ecommerce companies, including startups, have to navigate a costly and complex patchwork of thousands of state and local sales tax jurisdictions following the Supreme Court’s decision in South Dakota v. Wayfair, in 2018. Engine has highlighted the challenges faced by startups, many of whom have been forced to change their business models and face increased costs remitting tax in multiple, often distant locations. Policymakers should consider a legislative solution that will reduce the burdensome state-by-state patchwork and reduce costs for startups.
Startup Roundup:
#StartupsEverywhere: Johnson City, Tennessee. ZenHammer's journey from a contractor-homeowner matchmaking platform to a cutting-edge construction data tracking tool is a story of resilience and innovation. Initially, on the brink of closure, the team pivoted in response to contractors' feedback and has since worked tirelessly to refine their product. We sat down with the founder, Edwin Williams, to discuss their challenges in raising capital and finding talent, as well as their strategic plans for ZenHammer’s upcoming launch, national expansion, and industry impact.
