Startup Act 3.0 Understands the Importance of Skilled Labor -- American or Foreign-born.

Recently, Senators Mark Warner (Democrat) of Virginia, Chris Coons (Democrat) of Delaware and Jerry Moran (Republican) of Kansas introduced Startup Act 3.0 to the Senate. An updated version of Startup Act 2.0, the new bill’s central goal is both to attract top talent and to keep high-skilled workers and talented entrepreneurs inside the U.S.

The bill proposes the creation of 75,000 visas for immigrant entrepreneurs who can raise $100,000 or more in investment capital to start a company, 50,000 new visas for STEM students, providing them with a path to citizenship, and removing to cap on visas for high skilled H-1B workers. (Check out this infographic for more details.)

Research continues to corroborate the positive impact of skilled immigrants on job creation and innovation in the United States. A 2012 report by the Information Technology Industry Council, the Partnership for a New American Economy and the U.S. Chamber of Commerce found that “every foreign-born student who graduates from a U.S. university with an advanced degree and stays to work in STEM has been shown to create on average 2.62 jobs for American workers—often because they help lead in innovation, research, and development.” And in 2011, a report by the Partnership for a New American Economy revealed that immigrants were founders of 18 percent of all Fortune 500 companies, many of which are high tech companies with an estimate that as of 2010, these companies generated $1.7 trillion in annual revenue and employed 3.6 million workers globally.

Most recently, a February 2013 report by the Kauffman foundation estimates that offering startup visas has the potential to add, conservatively, between 500,000 and 1.6 million new jobs in the United States over the next ten years. The impact this could have on the U.S. economy cannot be overemphasized. By some estimates, this range of jobs represents 0.5 to 1.6 percent of GDP or about $70 billion to $224 billion in economic gain.

Comprehensive immigration reform that addresses the needs of foreign born startup entrepreneurs and highly skilled workers is crucial for the advancement of the U.S. innovation economy. Despite having the world’s best higher education system, the U.S. continues to lag significantly in its openness to high skilled immigration at a time when other countries around the world are opening their borders to talented STEM founders.

We have previously highlighted efforts that countries like Canada, Singapore and Chile are making to attract the world’s best and brightest to start high growth businesses on their soil. In today’s knowledge economy, a protectionist labor market for technology talent can significantly hurt innovation, slowing down job growth and economic progress.

Startup Acts 1.0 and 2.0 unfortunately never made it past the Senate floor. It is crucial that Startup Act 3.0 be given a chance this time. Despite the odds, more than 44% of companies started in Silicon Valley since 2006 were started by immigrants. Imagine the flood of innovation that could be unleashed if this bill is signed into law.

So show your support for entrepreneurship and American innovation by joining the positive momentum behind Startup Act 3.0.

Photo courtesy of Senator Mark Warner. 

What You Need to Know About Immigration Reform

In the past few weeks, immigration reform has come back into the limelight on Capitol Hill. The post election climate is such that immigration is a priority for both Republicans and Democrats. President Obama made it clear last week during his State of the Union address that he expected a comprehensive bill on his desk in just a few months, not in a year or two. Though there is no comprehensive reform bill as yet, lawmakers have started drawing the battle lines around issues such as border protection and the path to legal residency for the thousands of undocumented immigrants who already live in this country.

A few lawmakers, however, are looking at another side of the issue as well. As the President outlined in both his immigration reform proposal and the State of the Union address, comprehensive reform must include high skilled workers, many of whom work at startups. Take for example the stories of Fabien Beckers and Rutul Dave highlighted in the Wall Street Journal last week. Beckers, who co-founded Morpheus Medical, a company that creates 3D models of soft tissue from MRI readings, struggled to find funding for his startup because he could not get an H-1B visa (the visa category for temporary workers). As a co-founder, he was not technically employed by the company, therefore he did not qualify for the employer-tied H-1B visa. Rutul Dave, co-founder of Bright Funds, was sponsored by Cisco and unable to start his own company until his green card came through.

Among startup founders, stories like these are not unusual. According to a recent study, immigrants are almost twice as likely to start a company than American workers. In fact, nearly a quarter of the engineering and technology companies founded in the U.S. between 2006 and 2012 had at least one key founder who was foreign-born. In 2012, these companies employed roughly 560,000 workers and generated $63 billion in sales. However, immigration laws are such that we are still sending U.S. educated STEM (Science, Technology, Engineering, and Mathematics) graduates back to their native countries because of visa caps.

Here’s a look at the various proposals circulating right now that are aiming to address these issues:

The White House proposal:

The only comprehensive proposal in consideration right now has come from the White House. There is no legislative text, but rather, an outline that lays out the Administration’s goals.

The President’s proposal specifically creates a new visa category for entrepreneurs who are financed by U.S. investors or U.S. customers. If the company grows, this startup visa allows them to stay in the U.S. permanently. For those who receive advanced STEM degrees in the U.S., the President’s outline calls to “staple” a green card to their diploma once they find employment. Though these masters and doctoral students will undoubtedly contribute to the American economy, this plan may not help startups hire talent who choose to enter the job market after completing a bachelors degree.

The Senate’s solutions - Startup Act 3.0 and I-Squared Act:

In addition to the President’s proposal, friends of the startup community have introduced legislation to fill the void, including the Startup Act 3.0 and the Innovation Immigration Act (I-Squared Act).

The Startup Act 3.0, introduced by Senators Moran, Warner, Coons, and Blunt, creates a new visa category for startups. The bill creates 75,000 entrepreneur visas for entrepreneurs who secure $100,000 in VC funding and already have an employer-based H1-B visa or any student F-1 visa. The Startup Act also introduces a new visa category for STEM masters and PhD graduates by creating 50,000 new STEM visas. For the Entrepreneur visa, the individual must have completed college, but the Entrepreneur visa does not require a masters in a STEM field. Though skilled founders will have to find some way to get here before qualifying for this entrepreneur visa, their educational background will not be limiting, as it was in the previous version of this bill.

The key takeaway here for startups is that a foreign founder cannot move to the U.S. just to start a business. For someone like Fabien, who graduated from an American university, the Entrepreneur visa would have made his immigration process easier. But the act doesn’t grant a visa to an entrepreneur who wants to move to the U.S. to start a business that employs Americans -- and who has already received VC funding -- simply because she is currently outside the states.

The I-Squared Act, which was introduced by Senators Coons, Hatch, Klobucher, and Rubio, handles the backlog of visa requests a little differently. Instead of creating a new visa category to address the needs of startups and high-skilled workers, it increases the cap for employer-based H-1B visas from 65,000 to 115,000. It goes even further in reducing the backlog by tying the number of available visas to market demand. This system is less limiting -- H-1B visas are reserved for college graduates in any field, as long as they can prove that their skills are needed by an employer.

In terms of startup founders, the I-Squared Act relies heavily on changes to green card policy. It exempts STEM masters and PhD. graduates from the green card caps, allowing highly educated STEM workers to pursue their own startup dreams. For example, this could have made it easier for Rutul to start his company years ago, rather than having to wait for his green card.

Both the I-Squared Act and the Startup Act 3.0 eliminate the per country-cap on employment based visas, making it easier to recruit top talent from any country. The key difference with the I-Squared Act is that when the technology economy is booming, as it is now, and the demand for technical talent is high, more visas would be allocated.

What does it all mean?

None of the proposals do enough on their own to champion the needs of startups, though all have components that are key. There are two key needs that should be addressed by any high-skilled immigration proposal: First, we must make it easier for entrepreneurs who want to come to this country to start a business and create new jobs. The Startup Act 3.0 addresses this problem by creating a new visa category, but requires that recipients already have another employment or student visa. The second need is the ability to hire the best and the brightest talent, no matter where they are from. Increasing the H1-B visa cap is the best way to do just that, and the I-Squared Act addresses this need through it’s market-based approach.

However a few questions remain: What of those founders whose first venture fails? Take for example Twitter, which started as a taxi dispatch service. In a culture that values and forgives failure, where ‘pivoting’ a business venture is the norm, and where second opportunities are part of our founding ethos, entrepreneurs need time as much as they need money-- a need that none of the bills or proposals addresses. If a brilliant computer scientist gets a visa to start a company that isn’t successful, she isn’t provided a chance to innovate and try again--and we lose another talented inventor. Both of these bills and the President's proposal attempt to quell the demand for technical talent, relying heavily on masters and doctoral students to fill the ranks at startups. But when was the last time you met a software engineer at a startup with a Ph.D.?

Let’s face it, startups want smart people - it doesn’t matter if they have a STEM degree, where they were educated, or what their nationality is -- as long as they are passionate about the business, and have the talent to help an enterprise grow.

Entrepreneurship, Innovation and the Global War for Talent

Innovation – “the process by which individuals and organizations generate new ideas and put them into practice” – has over the past two centuries been the bedrock of the United States’ economic growth and national competitiveness. From the energy to the computer industries, America’s innovative sectors have been the key drivers of the economy, raising living standards and improving workforce productivity.

Last year, the Information Technology and Innovation Foundation and the Kauffman Foundation released the Global Innovation Policy Index and benchmarked the effectiveness of the innovation policies of 55 countries - including virtually all countries in the European Union, those in the Organization for Economic Co-operation and Development (OECD) and the BRIC economies (Brazil, Russia, India & China) among others. The Policy Index assessed nations based on seven core innovation policy areas: trade and foreign direct investment, science and R&D, domestic market competition, intellectual property rights, information technology, government procurement and high-skill immigration.

Based on the index, the United States placed in the top tier in every category except openness to high skill immigration.

As the competition for global innovation leadership intensifies, countries around the world are strengthening their innovation policy agenda to attract the world’s brightest and best. Just this month, Canada announced that it will roll out a startup visa that will encourage partnerships between foreign innovators and the Canadian investment community.

Singapore which has for long been ranked by the World Bank as the world’s easiest company to do business in has rapidly risen as a magnet for foreign entrepreneurs looking to establish their businesses attracted by provisions such as the EntrePass designed to facilitate the entry and stay of entrepreneurs.

Chile’s startup program, “Startup Chile” is well known for attracting early stage businesses to start their business in Chile with the ultimate goal of attracting world-class early stage entrepreneurs to start their businesses in Chile and converting Chile into a global innovation hub.

Staying competitive in the global economy will be determined by a myriad of factors; key of which is the global competition for talent. As the market for talent becomes more and more diffuse, smart policy should focus on attracting the world’s best to innovate and create the next game changing businesses.

Congress: Pass Bipartisan STEM Visa Legislation This Year

Earlier today, Engine Advocacy released a letter to Members of both Houses of Congress, strongly advocating for legislation this year to increase access to visas for qualified, highly-skilled, foreign-born graduates of Science, Technology, Engineering and Mathematics disciplines from U.S. universities.

The letter can be read here, and we urge you to contact your Members of Congress as well, and tell them to move on important legislation this year.

Senators Call for Startup Hearing

Yesterday, members of the Senate Committee on Small Business and Entrepreneurship called for a hearing on the state of entrepreneurship in America, citing the need to support U.S. job creators at a period in time when new startup formation is slowing.

New firm establishments are the driving force in the U.S. economy, responsible for virtually all net new jobs created in the past three decades. Senators Jerry Moran from Kansas, Scott Brown from Massachusetts, and Marco Rubio from Florida requested the hearing in a letter to Chairwoman Mary Landrieu, citing America’s significant decline in international rankings of startup friendliness. “Once in the top five, the United States has dropped nine places in international rankings...in just four years,” the Senators wrote.

How are the Senators suggesting we regain our edge? With startup-friendly policies to encourage entrepreneurship and new firm foundation. Specifically, with Startup Act 2.0, a bipartisan bill introduced in both houses of Congress earlier this year, and co-sponsored by Senator Moran.

Startup Act 2.0 contains provisions to ease the way for foreign-born entrepreneurs to remain in the country after graduating from U.S. universities, so they can start their businesses on U.S. soil and create local jobs. It provides incentives to get R&D from our universities on the market. And it provides tax incentives that could encourage investment in startups to create new jobs, boosting startups in driving economic growth and employment. Engine has been a strong supporter of the policy measures proposed in Startup Act 2.0, with information and a tool for action here. 

We encourage Chairwoman Landrieu to convene this hearing on entrepreneurship in America. Congress needs to hear from the founders and innovators driving the economy and creating the products that will keep America globally competitive.

Engine @DNC Day 3: Education Takes Center Stage

A rainy Tuesday at the Democratic National Convention saw speeches from candidates, elected officials, and celebrities with a particular focus on the importance of education to the economy. Engine has pursued greater support for education in the United States and the speeches last night in Charlotte drove home the importance of this resource to American ingenuity.

Keynote speaker Julian Castro, mayor of San Antonio, put a sharp point on the issue, saying “you can’t be pro-business if you’re not pro-education.” First Lady Michelle Obama, Massachusetts Governor Deval Patrick, and actor and former White House liaison Kal Penn each made calls for continued support and reform of the education system from pre-K to Pell Grants.

Our recent work with the Bay Area Council Economic Institute highlights the critical role technology jobs play across the country. We can’t continue to fill these jobs without qualified workers graduating from U.S. schools. The strength of our economy is dependent on the quality of the students we graduate, particularly in the science, technology, engineering, and mathematics disciplines.

Engine is excited to hear more about plans to boost education and will be continuing our conversation with elected officials and delegates throughout the convention season. Stay tuned here for updates from Charlotte and don’t forget to look through our primer on issues that matter to startups. 

Mars Rover Brings Curiosity Back to Earth

 A week and a half ago, NASA landed its Curiosity rover on Mars, opening a new stage of exploration on our neighboring planet. The mission opens doors for the next generation of Americans to experience the boundaries pushed by NASA as images of the Martian landscape are posted across the web.

Carl Sagan’s Emmy and Peabody award-winning 1980 series Cosmos highlighted the power of astronomy, cosmology, and exploration and inspired a generation. Sagan has again become popular on the internet, on YouTube and in memes lately, alongside Richard Fenyman and Neil deGrasse Tyson. Users are attempting to recapture the spirit of Cosmos and evangelize science and technology anew. While I have many favorite moments in the series, one video that sticks with me is Sagan teaching children in a Brooklyn classroom about the universe. I would easily trade all of my schooling to be in that classroom on that day.

You may be wondering why all of this matters to startups. It’s

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hard for me to look at individuals like Bobak Ferdowski, Flight Director for the mission, or Sagan, Feynman, or deGrasse Tyson without dwelling on the importance of education to the future of innovation and technology in the United States. Despite a revival of enthusiasm for these scientific public figures, fewer students are graduating with high tech degrees. According to the Department of Commerce, fewer than forty percent of students entering college pursuing degrees in science, technology, engineering, and mathematics leave with a degree in one of these fields.

The U.S. needs STEM graduates to build more than Mars rovers. One stereotypical image associated with startups is of enterprising college dropouts building businesses in garages, but the fact is that STEM graduates are needed to build the next generation of American businesses. Recent debate over immigration reform for high skilled workers demonstrates the need for more students ready to take on the technical challenges posed by businesses that harness technology -- whether computer science-based or in fields such as health and energy -- to create a new class of disruptive products.

The discussion of education and U.S. schools’ priorities have lagged behind the debate about NASA’s funding in a time when the economy dominates U.S. politics. Lawmakers need to make a stronger connection between education, scientific achievement, and the progress of the economy as a whole. Startups and high tech firms help drive job growth beyond STEM degree holders. Research has shown that startups that survive and become successful companies create millions of jobs, most of which include administrators, accountants, and executives.

Though its easy to focus on our differences in an election year, the success of NASA serves as a reminder of our commonly held values and the importance of pushing boundaries, exploring, and innovating. We need more than the space program to inspire students to reach for the stars. Lawmakers need to make sure this generation of American students have the resources, encouragement, and opportunity to launch the economy of tomorrow.

Image via NASA.gov

EIR Program Works on Immigration Policy

For the past 3 months, I have been working on improving the state of our immigration system with a group of entrepreneurs, investors, and other experts as part of the Entrepreneur in Residence program held by the U.S. Citizenship and Immigration Services.

This Monday, we discussed some of our findings and recommendations for improving the immigration process for entrepreneurs at an event at Georgia Tech. The event was attended by faculty, students, immigration professionals, and others interested in the issue.

The EIR program is designed to bring together experts to find pathways to optimize the current immigration system for foreign-born immigrants who want to start or grow their businesses in the United States. These entrepreneurs represent a key factor in the growth of the U.S. economy, building successful businesses that generate revenue as well as creating American jobs. In a global economy, it is vital that this country retain the top worldwide talent and businesses in order to compete. I wrote more about the program at the beginning of my residency. 

Key areas that we have specifically looked into are the process include the confusing multitude of visa options, training of immigration officers, and policy.

One of the most confusing decisions for an entrepreneur is deciding which of the many visas they should petition for; there is H-1, L, O, OPT for recent grads, etc. We will be launching soon a web resource for entrepreneurs to understand what the requirements for each of those classifications are and what evidence to provide for support.

We also see the training of immigration workers to be a key area where we can implement change: we’ve designed and rolled out training for visa adjudicators on issues such as startup structures, financing, documentation, and operations.

There is still more work to be done in this initiative, particularly on the policy side, so we’ve decided to extend the program for an additional 9 months to continue on this effort. You can follow what we’re doing at USCIS, and stay up to date with other measures to reform immigration, like Startup Act, here on Engine.is.

Innovation Depends on Visa Reform

Foreign-born “computer professionals” represent the largest share of H-1B visa applicants, according to a study released this week from the Brookings Institution. The study explores the demand for the H-1B class of highly skilled professional visas across different U.S. metropolitan areas, assessing which geographical and professional areas rely most heavily on foreign-born talent.

The findings show that science, technology, engineering, and mathematics (STEM) occupations accounted for more than half of all H-1B requests in 92 of the 106 metropolitan areas studied, pointing to the disparity of United States STEM graduates and advanced STEM occupations needing to be filled. The Obama administration estimated in February 2012 that less than half of U.S. students pursuing a degree in STEM fields ultimately earn a degree in a STEM discipline. 

The H-1B visa system also plays a major role for small companies and startups which rely on these highly skilled workers to develop products and services. “Our study shows that private firms account for the vast majority, 90 percent, of requests,” Neil Ruiz, a co-author of the study, said in an email to Engine. The top 100 H-1B employers make up only 20 percent of these visas requests. “I would not be surprised if some of them [the remaining employers] are smaller companies or startups,” Ruiz said. For more from Ruiz, see his video. 

The study also noted that specialized skills tend to cluster in certain regions of the world. For example, 56 percent of the world’s engineering degrees are awarded to students studying in Asia, compared to the United States, which graduates just 4 percent of these degrees.

Clustering effects aren’t limited to skill set distribution. Innovation centers in the United States are situated near universities, metropolitan areas endowed with venture capital, and research and development hubs. These areas, from the tech hub of Silicon Valley to the Research Triangle Park in Durham, North Carolina, rely on the H-1B visa program to stock the talent pool for startups in need of highly skilled workers.

The H-1B visa is an essential tool for growing technology centers and the economic benefits they provide. The study’s recommendations include forming a non-governmental, non-political commission to assess the needs of metropolitan areas and assign H-1B caps accordingly.

Legislation proposed this year, including measures such as Startup Act 2.0, seeks to eliminate per-country visa caps, along with other measures designed to allow tech businesses easier access to the foreign-born talent they need in order to grow and thrive in a globally competitive market.

It has become more and more clear that domestic demand for highly skilled labor is outpacing supply. This gap must be addressed by policymakers before the lack of STEM-educated professionals dampens innovation, growth, and entrepreneurship in the U.S. economy. We support measures introduced by lawmakers to end the cap system that arbitrarily prevents talented individuals working for U.S. companies. Policymakers should also consider reforms of the immigration system that would make it easier for entrepreneurs to enter the U.S., start businesses, and create American jobs.

Image from the Brookings Institute.

Entrepreneurs Need Startup Act 2.0

Earlier this week, the office of Senator Jerry Moran, a leading co-sponsor in the Senate of Startup Act 2.0, released a short video detailing the need for reform of the immigration processes for entrepreneurs as would be enabled by Startup Act. 

In the video, Morpheus Medical Co-Founder and Engine member Fabien Beckers, a French citizen by birth, tells his story, and outlines why, despite receiving his education in the U.S. and founding a company here, he and his employees may be forced to close up shop because of his visa situation. 

Check out the video at Sen. Moran's YouTube page here, and remember to call your member of Congress today at http://engine.is/startupact and ask them to co-sponsor and champion Startup Act 2.0 in the House and Senate. With your voice, we can help make this law a reality for founders like Fabien all across the U.S. and keep startups thriving here at home.

High Skilled Immigrants Driving U.S. Innovation

Immigration reforms similar to those proposed in Startup Act 2.0 would help the United States retain foreign students that are driving innovative patents in the domestic economy, according to a report released June 26. The report, conducted by the Partnership for a New American Economy, found that 76 percent of patents issued in 2011 to the top 10 patent-producing universities had at least one foreign-born inventor.

The partnership’s reviewed 1,466 patents awarded to the top 10 schools and highlighted the endowment of foreign-born inventors on patents in “cutting-edge fields.” These inventors were observed to contribute to as many as 87 percent of patents issued in fields which include semiconductor device manufacturing, information technology, pulse or digital communications, pharmaceutical drugs or drug compounds, and optics.

Patents are one measure of new and innovative products developed in the U.S. economy. The report doesn’t just present the statistics, it also shares some of the stories behind the people and projects these patents protect. Innovators from Cyprus, Malaysia, and India involved in patents for technologies behind seawater purification, enhanced digital photography, and strong-as-steel metal that can be molded like plastic.

Foreign-born innovators like these may blossom as domestic-entrepreneurs after emerging from academia. Engine recently featured one such immigrant entrepreneur Rutul Davè, co-founder of Bright Funds -- one of 18 startups that attended Startup Day on the Hill. Rutul earned a master’s degree in computer science before founding his growing startup.

Research and development spending at U.S. universities has increased five-fold over the past 25 years, growing from about $10 billion in 1985 to nearly $50 billion in 2007. Harnessing spillover benefits of this research is critical to the growth of high tech industries. With STEM job growth anticipated to continue through 2017 and less than half of U.S. college students completing the STEM degrees they start, more highly-skilled workers are needed for the U.S. to remain competitive.

Startup Act

2.0 tackles the issue of highly-educated immigration head-on, creating new visas for MA and PhD recipients in STEM fields and extending their ability to find and accept work with companies in the United States. You can learn more about the measure and contact your representative about immigration at www.engine.is/startupact.

Take Startup Act One Step Further, says Marvin Ammori

Startup Act should include a provision to encourage training in computer programming in the U.S., says Marvin Ammori in a piece for the Atlantic today.

The tech world is coming out in strong support of Startup Act 2.0, a bipartisan bill that eases the way for entrepreneurs to hire the foreign-born high-skilled workers they need to build and scale high-growth startup businesses without moving offshore.

While making changes to the skilled immigration process is an essential measure in getting startup talent in this country, Ammori writes that Startup 2.0 is “a great bill, but it could be better”. The gist of the article is that the key to unlocking success for future generations of startups is in setting up all Americans for success in innovative and technology based new businesses -- this means giving public schools funding and incentives to teach all kids how to code, just like all kids are taught basic math and grammar, Ammori says.

An entrepreneurial mentality will be key in navigating the requirements of today’s job market, and the current education system which encourages an obedient worker mentality is unsuited to an economy that increasingly relies on new startups and innovation. Further than encouraging entrepreneurship in our students, though, we should be equipping kids from an early age with programming skills that are fast becoming as ubiquitous a requirement as learning english or math.

Ammori suggests federal government involvement , suggesting that a new iteration of the bill, “Startup Act 3.0, could fund grants for expanding programming classes, beginning with small-scale pilot programs”.

Ammori’s views might not be revolutionary, but he is dead on the money when it comes to the need for a multilateral approach to the dearth of high-tech graduates coming out of U.S. universities. The short term solution is fixing the skilled immigration system, as Startup 2.0 does. The longer term solution is catching the U.S. education system up to the economy of today and the future. We as a country need to set a course on both of these goals, and we can’t afford to wait.

Click here to learn more about Startup Act 2.0 and connect with your representative to let him or her know that it’s important to you.

Sen. Jerry Moran on Startup Act 2.0

With the House of Representatives introducing parallel legislation to the previously-introduced Senate bill, Startup Act 2.0, this morning, we took the opportunity to sit down with Kansas Senator Jerry Moran to talk about the bill and its prospects. Moran, one of the original sponsors of the Senate bill, and a formidable advocate for entrepreneurship and startups in the Senate, spoke about his views on the bill, the issues, the chances of passing the bill and more.

Tell us a little bit about the Startup Act 2.0. How does it compare to the original Startup Act and what’s new and better about this version?

Startup Act 2.0 is a bipartisan jobs bill written to spur economic growth by targeting policies toward the young companies that are responsible for creating almost all of the net new jobs in America. It contains many of the provisions of the original Startup Act but also adds two new job-creating ideas.

Startup Act 2.0 incorporates language from the Coons-Rubio AGREE Act to eliminate the per-country cap for employment-based immigrant visas, which has been a major factor in causing the backlogs that currently hamstring our legal immigration system.

In addition to eliminating the per-country caps, Startup Act 2.0 creates a targeted research and development (R&D) tax credit for startups less than five years old with less than $5 million in annual receipts. Because the current R&D credit can only be used against income taxes a company pays, startups without taxable profits cannot benefit from the credit. The R&D credit created in Startup Act 2.0 is designed to allow startups to offset employee taxes—helping these young companies grow and create jobs.

How does Startup Act 2.0 help small- and medium-sized companies and startups?

To build a successful startup, an entrepreneur needs a good idea, talented employees, capital, and an environment that fosters growth. Startup Act 2.0 creates new opportunities for talented foreign- born students and workers to stay in America so that they can employ their skills at innovative startups. It also makes smart changes to the tax code that will encourage investment in startups and will reform the federal regulatory process so that entrepreneurs can spend more time growing their company rather than trying to comply with government mandates.

The Startup Act seems pretty uncontroversial -- after all, who is going to argue with enabling job creation in a post-recession America? What kind of shot at getting this legislation passed this year do we really have, and how can Engine and its members help make this happen?

Many Washington critics say nothing gets done in an election year. Yet, our country cannot wait another 6 months or more to act on commonsense job creating ideas. Other countries are not taking this year off and Congress shouldn’t either. Since March 2012, seven countries have changed their laws to attract talent or offer incentives for entrepreneurs and new companies. This is an urgent issue that demands attention now.

Given the stalled immigration bill proposed by Rep. Chaffetz, passed in the House but stalled in the Senate, it seems like there could be definite roadblocks for the Startup Act. Are there some things that are more likely to pass than others? Is this an all or nothing kind of deal? What kind of opposition do you anticipate and what are you planning to do to give this legislation the best chance of passing?

Startup Act 2.0 is more than an immigration bill - it is the jobs package of this Congress. As unemployment remains above 8 percent for nearly 40 months, Americans are losing faith that Congress can help our struggling economy. Despite the hyper-partisan environment in Washington, this legislation has strong bipartisan support in both chambers. Additionally, Startup Act 2.0 creates American jobs at little to no cost to taxpayers, making the package attractive to many members concerned about our country’s fiscal situation.

Cantor: No Limits to Entrepreneurship, Continue the Startup Discussion

House Majority Leader Eric Cantor pushed the cause of entrepreneurs and startups on Capitol Hill today, emphasizing the importance of government’s role in the formation and success of small businesses. America should be the “Startup country,” the Virginia representative said at a conference on entrepreneurism, “We want to be the destination for the world’s best and brightest, for those willing to work hard, to take a risk and make something of themselves.”

Lawmakers are continuing to shift their focus to issues facing entrepreneurs, startups, and small business this year. Despite the presidential election, partisan division, and other seemingly intractable differences, members of both parties have been able to agree that Washington needs to get to work for startups.

Last week, a bipartisan group of Senators -- Jerry Moran, Mark Warner, Marco Rubio, and Chris Coons -- introduced a bill titled Startup Act 2.0 which would make critical reforms to the immigration system, incentivize the rapid commercialization of research and development, and lessen the tax burden on profits made by small, thriving firms. Engine encourages lawmakers in the House of Representatives to take up similar legislation to bolster small business, help startups hire talented workers, and incentivize the development of innovative products and services that grow the American economy.

Midweek Policy Roundup

Immigration

Senators Jerry Moran, Mark Warner, Marco Rubio, and Chris Coons introduced Startup Act 2.0 on May 22, building on measures introduced in December 2011 that create more visas for immigrants with advanced degrees in STEM fields, among other critical reforms for startups. Engine’s coverage here.

Privacy

The Federal Trade Commission announced the final agenda for a May 30 workshop focused on privacy disclosures for advertising and social media on mobile devices. The workshop, titled “In Short: Advertising & Privacy Disclosures in a Digital World,” will include participants from companies such as Facebook, Groupon, and TRUSTe. 

The FTC also announced the hiring of Paul Ohm, an associate professor at the University of Colorado, to serve as senior policy advisor for consumer protection and competition issues in the agency’s Office of Policy Planning. Mr. Ohm specializes in information privacy, computer crime law, intellectual property and criminal procedure, according to his personal website. 

Spectrum

The Federal Communications Commission held a workshop on channel sharing May 22. Channel sharing is an approach to broadcasting where two stations use the same broadcast infrastructure and television channel. This may maximize the amount of spectrum available in new wireless auctions. The commission will also consider a report and order on plans to ease the transition from 2G to more advanced technologies at its open hearing May 24. 

Cybersecurity

On May 21, Senator Ron Wyden gave a speech on the Senate floor opposing any cybersecurity legislation that would limit Americans’ privacy. The speech came as the Senate is said to be considering new cybersecurity legislation. Watch the speech here. 

Policy Update: Startup Act 2.0

Engine has been following closely the evolution of Startup Act, legislation designed to ease the way for startups to access the capital, skilled labor, and research that enables them to grow and prosper. We’re excited to bring to your attention the new and improved Startup Act 2.0, which was released this morning.

We voiced support for S.1965, the original Moran-Warner Startup Act, in March, which promised to provide tax credits for startups, reform the process by which foreign-born STEM graduates of U.S. universities are granted visas, and spur innovation by providing incentives for the commercialization of university research.

Startup 2.0 keeps many of the provisions of the original, and adds key measures for skilled immigration from the Coons-Rubio AGREE act -- in particular, the removal of per-country visa caps. A new R&D tax credit specifically for startups with less than $5 million in annual receipts has been added to allow startups to offset employee taxes and to counterbalance the existing credit which is overwhelmingly used by businesses with over $1 billion in receipts.

After consultation with universities, the new version of the Startup Act modifies the provision dealing with university research to ensure that the rules set forth in the Bayh-Dole Act are not altered. Bayh-Dole, or the Patent and Trademark Law Amendments Act, was adopted in 1980 to ensure that small businesses, universities and nonprofits have ownership of intellectual property created from government funded research.

Some of the earlier measures of Startup Act, such as the call for a comprehensive analysis of the impact of Sarbanes-Oxley on startups, have been removed from the new version due to an overlap with JOBS Act, which was passed earlier this year and dealt with access to capital for startups, most notably legalizing crowdfunding. The income tax credit of S.1965 has also been eliminated as a means to making the bill more fiscally feasible, with Startup 2.0 costing less than 20 percent of the original bill.

We are encouraged by the Senate’s willingness to work on policy initiatives that will have a direct impact on jumpstarting the American economy. We look forward to their colleagues in the House following suit. It’s time to set the table for legislation like Startup Act 2.0 and continue the debate on these fundamental issues that drive our economy.

Correction: An earlier version of this article incorrectly stated that the capital gains exemption of the original Startup Act has been eliminated. The actual provision removed for the release of Startup 2.0 is an income tax credit. Startup 2.0 features a permanent exemption of the capital gains tax on startup stock held for at least 5 years. 

Midweek Policy Highlights

This week in Washington: the FTC goes deeper on privacy, Facebook amends its SEC filing to account for potential regulatory review, and immigration and spectrum remain hot topics.

Finance

Facebook amended its S-1 filing with the Securities and Exchange Commission ahead of its initial public offering May 15. The filing extended the expected closure date of the $1 billion Instragram purchase from the second quarter of 2012 to 2012 generally. The move could signal deeper scrutiny by regulators on the competitive impact of the deal. Currently, the transaction is in a procedural 30-day review under the Hart-Scott-Rodino Act premerger notification program. Engine will continue to monitor the review and its potential impact on future startup acquisitions.

Privacy

Associate director of the Federal Trade Commission’s division of privacy and identity protection Maneesha Mithal spoke at a Congressional Internet Caucus event on Monday about the agency’s recent report on privacy. She highlighted recent settlements with social networks including MySpace that involved companies’ adherence to their privacy policies.

Edward Felton, the agency’s chief technologist on leave from Princeton University’s Center for Information and Technology Policy, also blogged this week on the technical details of recent moves by the government to address privacy on social media platforms.

Immigration

Engine blogged earlier this week on moves by the Department of Homeland Security and Congress that may help startups gain access to more highly-skilled immigrant workers. Senator John Cornyn is said to be introducing a bill that would boost the number of visas available to immigrants with graduate degrees in science, technology, engineering, and mathematics fields.

Spectrum

Federal Communications Commission chairman Julius Genachowski is slated to give a speech May 17 at 10:30 EST on spectrum reallocated to support “medical body area networks” (MBAN). GE Healthcare and Philips Healthcare are scheduled to demo MBAN devices. Repurposing spectrum for new technologies is a major priority to open innovation across industries and MBAN is a major development in the healthcare field. A live stream can be viewed here.

Congress Weighs STEM Visas as DHS Extends Some Grads’ Stay

The Department of Homeland Security announced Friday an expansion of the number of Science, Technology, Engineering, and Mathematics (STEM) degree programs that qualify students to stay in the United States after they graduate. The move comes as legislation is set to be introduced that would expand the number of visas available to STEM graduate degree holders. Reforms like these are a step in the right direction toward meeting the demand for highly-skilled labor in the United States.

STEM graduates fuel the startup ecosystem by providing skilled labor critical to startups that develop innovative products and grow the American economy. Research has shown that many high-skilled immigrants go on to start successful companies of their own, further boosting job prospects for native-born Americans and generating large amounts of revenue. On Friday, CQ reported that Senator John Cornyn plans to unveil legislation that may increase the allotment of visas for immigrants with graduate degrees. While no specific language has been released yet, Engine will monitor and update on the bill as it emerges.

Bad immigration policy not only constrains the labor market, it also impedes the creation of entire businesses. U. S. Citizenship and Immigration Services (USCIS) has launched an initiative aimed at easing the visa process for foreign-born entrepreneurs. This is just one step forward in fixing a broken immigration system that is in need of broad reform, but these small changes can have a meaningful impact on small- and medium-sized businesses that are fighting for the talent to make their startups succesful.

“New Tech City”: Improve Education, Expand Broadband, Reform Immigration

Image by kaysha.

Education and immigration reform are vital for the continued success of startups and of the American economy as a whole. A study released on Wednesday highlighted startups’ importance to the economy and recommended broader efforts to incorporate technology in schools and more innovative approaches to the U.S. visa system. In no place are these needs more apparent than the focus city for the study, New York.

The study -- “New Tech City” -- was conducted by the Center for an Urban Future with support from AT&T and the Association for a Better New York. The findings of the study demonstrate New York’s place as a tech hub, eclipsed only by Silicon Valley and San Francisco purely in terms of growth. The study identified 486 startups that had received angel, seed, or venture capital funding in the city of New York since 2007 and more than 1,000 web-based startups, most of which haven’t received funding. The number of jobs in the New York information technology industry grew 28.7 percent over the past five years, increasing by about 12,000 according to data the study drew from the New York State Department of Labor.

The study addresses key issues facing startups around the country, emphasizing the need for the reform of key issues that are affecting startups today. We need immigration reform to allow more highly-skilled immigrants to work at startups, enhancements of broadband and wireless infrastructures to connect businesses and consumers, and support for schools to prepare teens for careers in STEM fields.

Silicon Valley and New York City are known centers of innovation, but the startup story of these places can be replicated in communities all across the United States. To achieve these successes, policy should support small companies, which play a vital role by creating new jobs, improving local economies, and providing consumers with innovative products and services.