Broken glasses theory

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Last week, I attended an event featuring three Democratic US Congressmen and one Democratic US Congresswoman. The event celebrated the launch of “Future Forum,” a way for Congress to connect with Millennials to work on issues that matter to young hard-working Americans. Amidst an assembly of New York tech entrepreneurs, the event, held at District CoWork (a co-working space), opened with a cocktail hour.

I signed in, popped on my name tag, headed straight to the bar, grabbed a glass of wine, and was shimmying over to a person I wanted to speak with when the unthinkable happened: My sleeve brushed against someone else’s wine glass, set atop a table , and SPLAT, the glass tumbled to the floor, shattering into a thousand pieces.

Within seconds, a hundred faces turned to stare at me. I immediately started to clean up the mess I made. Then, I noticed a man helping me. He’d grabbed a plate and started to pick up large shards of glass with his bare hands. I noticed the man’s lapel pin, denoting him as a Congressman. This was Rep. Steve Israel, a fellow Long Islander, who I’d never previously met.

What started off as us working together to expediently clean up the mess I made quickly turned into a conversation. He asked me about my work at Skillbridge, and I explained to him what we are trying to build. We ended up speaking for a while, and when the conversation concluded, he said to me, “Here’s my business card. Give me a call when you’re down in Washington.” Steve Israel’s act of humility — he didn’t have to help me clean anything up — may be why he is in Congress today.

This incident immediately jogged my memory back to a similar one from 2011: I was taken out to dinner by the CBS news crew who were covering Amanda Knox’s trial in Italy. Who saddles up next to me at the table? None other than Peter Van Sant, the news anchor and 48 Hours host. Peter’s an ace: he’s won four Emmy Awards, three Edward R. Murrow Awards, two Overseas Press Club Awards, and more.

A dozen people at our table split a couple of bottles of red wine. And then, after a toast, I put my glass back down on the table, directly on the spot where, under the tablecloth, two tables of unequal heights met. Boom! The red wine spilled all over Peter.

Yet Peter Van Sant faced the red wine with humility. Despite his deeply stained white shirt, he insisted it wasn’t a big deal at all. A precursor to my more recent incident with Congressman Israel, Peter and I ended up talking and laughing all night long.

The lesson is that broken glasses and spilled red wine can be the world’s best icebreakers — and they give larger than life people opportunities to show that they’re human too.

Practical note: An episode of Curb Your Enthusiasm taught me that, immediately applying club soda and salt to red wine will remove all stains.

Startup Act 2.0 Will Make Sure the Next Google is Made in America

We’ve got to get America beyond Ellis Island: America needs people, but not just the tired, poor, and huddled immigrants referenced by Lady Liberty. Though we are a nation of immigrants, the American 20th and 21st century success means that we must find a way to attract the creme-da-la-creme to start businesses in America.

The proposed Startup Act 2.0 puts America on the right path to attracting just that. The Act, introduced Tuesday as a bipartisan effort by Senators Jerry Moran, Mark Warner, Marco Rubio, and Chris Coons, is designed to help America regain the edge in attracting top entrepreneurs.

As the bill’s authors state, “Research has shown that for close to three decades, companies less than five years old have created almost all of the net new jobs in America—averaging about 3 million jobs each year. ”

As other nations develop, it is increasingly necessary for America to retain its edge by creating the best new businesses. However, as an entrepreneur, academic, and friend, I have heard way too many horror stories about highly intelligent individuals, many of whom have been educated in America, being unable to remain in America after graduation.

America has a dearth of engineers. Our science and math education system is pathetic in relation to the rest of the world. And we have skilled labor jobs that need to be filled. The only way for America to thrive in the future is to retain the undergraduate and postgraduate students who have thrived in this country. What if Sergey Brin had to start Google in Russia? Then America would have far fewer jobs, fewer tax revenues, and less dominance over the Internet industry, not to mention less knowledge. (As Forbes wrote, immigrants make great entrepreneurs.) But the reality is that many awesome American-educated entrepreneurs are returning home.

The Startup Act 2.0 is a solid first step to halt this brain drain. One strong feature of the bill is that it “eliminates the per-country numerical limitation for employment-based immigrant visas and adjusts the limitations on family-based visa petitions from 7 percent per country to 15 percent without increasing the total number of available immigrant visas.” This will help America retain Chinese and Indian talent. Immigrants from these countries with large populations are currently getting an unfair shake, so many are returning home to start their businesses.

While there may be some backlash from academic purists, I strongly support the bill’s provision to assist universities by providing “federal funding for research and development to support innovative initiatives at American universities to accelerate and improve the commercialization of taxpayer-funded research. Grants will be awarded to universities pursuing specific initiatives to improve commercialization capacity and to assist universities that want to pursue initiatives that allow faculty to directly commercialize the research.”

Hopefully, these subsidies will enable institutions to incubate businesses while also fostering competition in various markets. While I understand that it may be deemed unfair for some universities to receive funding at the expense of others, so long as jobs are created from the companies that are emerge, America should come out ahead. I view this tactic as particularly helpful when countries like China are directly subsidizing industries to the detriment of American producers, as the American solar sector experienced. (One must note that many Chinese companies are run by “sea turtles,” or Chinese citizens who were educated in America and then returned home.)

Even though both chambers of Congress passed the JOBS Act that was then signed into law by President Obama, this Congress has a poor track record for passing meaningful legislation. Let’s hope that neither party tries to derail this unique bipartisan effort. And if any lawmaker does, may he/she pay with his/her own job this November.

On a personal note, thank you from the bottom of my heart to the authors of this bill who have decided to call it the Startup Act 2.0 rather than the Start-up Act 2.0. That unnecessary hyphen is probably costing the American economy $25 million annually.

Part 1: The law that could save sustainable journalism will be destroyed unless the US Senate acts now!

I recently argued that upstarts like Matter that have made successful pitches on Kickstarter are not the solution to solve journalism’s long-term problems. Why? Because crowdfunding, in its current form, does not permit ordinary people to make investments. Rather, crowdfunders make donations, or in some cases loans. The outcomes are variable and generally unsustainable.

When David Cohn started the crowdsourced journalism non-profit Spot.us four years ago, it worked on a similar premise to Kiva, whereby donors received part or all of their money back if and when a crowd-funded story sold to a legacy media outlet. Cohn prevented any one person from influencing which stories were funded by limiting each donor to funding 20% of the total amount raised for each pitch. Of course this system is potentially flawed in that one donor can spread his/her money out to friends etc, but at least Cohn tried to implement a system of checks and balances.

We’re on the brink of a revolution that could lead to saving sustainable journalism and create many jobs

We may be on the brink of a journalism revolution. Currently, only accredited investors are able to invest in newly formed companies, which prevents Kickstarter, Spot.us, and any other crowdfunding site from raising capital for startup companies and entrepreneurial journalism ventures.

Forbes reports:

Under current federal and state securities laws, startups are prohibited from selling stock or other securities via crowdfunding sites or social networking sites. Such laws include:

  • A prohibition against “general solicitation” – which means that a company may not offer or sell securities unless there is a substantive, pre-existing relationship between the company (or a person acting on its behalf) and the prospective investor (see “Can I Raise Money For My Startup Via Twitter?” );
  • Disclosure and state law compliance requirements if the investors are not “accredited investors” — which usually makes the offering of securities too costly and onerous for a startup (see “Ask the Attorney – Securities Laws”);
  • A requirement that any intermediaries (including websites) must be registered with the SEC and applicable state securities commissions as a “broker-dealer” in order to legally accept any transaction-based compensation in connection with the sale of securities (see “Ask the Attorney – Beware of Finders”); and
  • A requirement that any company that has 500 or more shareholders and total assets exceeding $10 million must register with the SEC and file periodic reports.

These laws were designed with good intentions: Nobody wants to see Mom and Pop lose their hard-earned money to a snake oil salesman. But in today’s crowdfunded world, they no longer make sense. When tech-savvy Americans realized this, they sought action.

In the United States Congress, Rep. Patrick McHenry (R-NC) (who made some excellent contributions to 2010 Census oversight, which I know from my time spent running MyTwoCensus.com), introduced crowdfunding legislation that was one of the most popular bipartisan initiatives in recent history, garnering support from Democrats all the way up to President Obama himself. McHenry’s bill, the Entrepreneur Access to Capital Act,  H.R. 2930 (full version here), passed 407 to 17.

This makes total sense. Republicans generally don’t believe that the government should be able to tell people how to spend their money. After all, anyone can gamble or booze away all of their savings, can’t they? And Democrats don’t see why accredited investors who are members of the “top 1%” should be the only folks permitted to invest in startups, thus preventing the upward mobility of the masses.

Specifically, the highlights of H.R. 2930 are as follows:

– Create a crowdfunding exemption from SEC regulations for firms raising up to $2 million, with individual investments limited to $10,000 or 10 percent of an investor’s annual income.

– Excludes crowdfunding investors from counting as shareholders for purposes of calculating the 499-shareholder cap under 12(g) of the Securities Exchange Act

– Preempt state law and exempts the ban on general solicitation for the new crowdfunding exemption.

Now, as always seems to be the case as of late with the American government, just when we’re on the brink of something great, the millionaire’s club also known as the United States Senate has failed to move forward with this legislation, thus preventing it from making its way to President Obama’s desk to become a law.

Despite Senate Republican Scott Brown of Massachusetts championing similar legislation to the resolution that the House of Representatives passed, lobbying groups like the NASAA (North American Securities Administrators Association, “the oldest international organization devoted to investor protection”) have wielded their influence over the 100 people who control the fates of the other 300+ million.

What needs to happen now is simple: An online campaign of the magnitude of the SOPA/PIPA protest variety must be enacted to create swift and effective action to boost America’s economy by causing the US Senate to pass comprehensive crowdfunding legislation. Sites like crowdfundinglaw.com and startupexemption.com have already been set up to explain this law and advocate its passage. And using a Wefunder.com petition, more than $6 million has already been pledged to support investment in new ventures if this legislation is passed.

But will Google, Craigslist, Wikipedia, and all of the other organizations that led the charge against SOPA and PIPA step in to assist with this one?

As someone who is not interested in the “rewards” that Kickstarter campaigns promise their donors, but rather direct return on investment in monetary form, I and other like-minded people would be happy to invest in startups despite our lack of accredited investor status. I don’t gamble in casinos, but I’d be happy to gamble on good ideas and innovation.

Coming soon: Direct effects of crowdfunding legislation on new journalism business models…