Entrepreneur Stuck In Canada Highlights The Need For A Startup Visa Now

from the this-shouldn't-wait dept

I've publicly thrown my support behind the idea of a startup founders' visa that makes it much easier for foreign skilled workers who want to come to the US to start companies and create jobs to do so. Right now, our immigration policies do not favor entrepreneurs at all. The good news is that this very grassroots movement has actually picked up some steam, with a ton of support from the startup ecosystem around the country. Whether or not that translates to enough political momentum remains to be seen.

To understand just how important this is, here's one story of an entrepreneur who's been working hard to help build a startup in Silicon Valley who, only just this week, has found himself stuck in Canada unable to get back to the US, despite believing he had the proper visa (in this case, an H-1b). The story is depressing, and reminds you of all the ridiculous bureaucracy that people are forced to go through for something that makes no sense:

Just as everything seemed to be going so well, I came up to Vancouver on September 24th to renew my H1b visa and it turns out the approval I got last year is not worth it's weight in paper. Upon appearing for my interview, my previous approval notice was held by the consulate till I furnished a ton of extra documentation from our tax filings last year, to a full report of all employees, all of my bank statements right down to the photographs of our work area (as alien founders we cannot have startups in garages and our apartments, it has to be in real offices).

I worked through the rest of Thursday and all through the night gathering all this evidence.... So after working through the night to get the evidence to the officers the very next day by 11:30 am, I was told that my application would take a week to be reviewed.

My biggest concern is that an LLC due to it's structure doesn't pay a salary to it's members but a guaranteed payment. My attorney has already warned me that this is a slippery slope to start explaining to consular officers when the time comes.

Now leaving aside the exorbitant costs of living in a city like Vancouver for a week, I don't have to talk about what an entire week means in startup terms. This particular week in question, since we're in fundraising mode, I have had to cancel a meeting with Comcast Capital and cannot present at the Plug and Play Expo on Thursday Oct 1st - they were nice enough and believed in our product to pretty much waive the $1500 participation fee, only to realize I can't make it.

It makes no sense that someone like this should be going through this sort of ridiculous bureaucratic process, held back by bureaucrats who don't understand how startups work.

Brad Feld, the venture capitalist who deserves all the credit in the world for taking this concept -- originally proposed by startup investor/mentor Paul Graham -- and actually getting some political interest in it, has a post discussing the momentum and some open questions.

The main open question he brings up is about how investors can "sponsor" an entrepreneur. Basically any qualified venture capitalist or "super angel" who is investing at least $100,000 in a round of at least $500,000 could sponsor a founder. I have to be honest that I'm not sure I agree with this. Why should the visa be dependent on financing? These days, we're hearing about more and more startups that are bootstrapping their way to success, or getting by on much smaller amounts of money. If a founder can build a successful company without raising $500k, should they not be allowed to take advantage of the startup founder's visa as well?

The proposal goes on to have renewal rules, as well, that also are dependent on job creation and raising more money. The job creation bit I can understand, but again I am troubled by the "raising money" bit. Why should the investors be the gatekeepers in determining who gets to be an entrepreneur?

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Congrats, RIAA: Chilling Effects Have Killed Interest In New Digital Music Startups

from the nice-work! dept

We've noticed that pretty much every single new and innovative digital music startup that pops up eventually gets sued by the record labels. The labels seem to view this as a part of basic negotiations -- and, in fact, many of the lawsuits have ended in partnership/equity deals. But, those deals tend to be suffocating. Given that (likelihood of getting sued or getting a deal that makes a profitable business impossible), is it any wonder that entrepreneurs are shying away from any sort of digital music startup these days, in favor of opportunities with no obsolete gatekeepers demanding huge chunks of whatever revenue they might one day make?

At a time when the recording industry needs innovative startups more than anything else, the record labels and their oppressive lawsuits and deal terms have basically scared off exactly the people who create those businesses.

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Making It Easier For Startups To Cash Out

from the moving-forward dept

This idea has been talked about for a while, but it looks like it's finally starting to move forward: creating a market for buying/selling shares in startups outside of a full public offering. As you may know, right now, (with a few exceptions) the stock in a startup is basically illiquid in that it can't be bought and sold outside of a full funding round. The downside of that is that it really does lock up the value for many employees who have to sit on the stock and hope that one day the company is sold or goes public. That's become an even bigger issue this past decade as the IPO market for tech startups has been pretty dim -- due to a combination of factors, including (among other things) the dot com bubble burst, regulations like Sarbanes Oxley and even the real estate bubble (diverted plenty of money that could have gone towards IPOs into both real estate and alternative investments).

The new plan, from a company called InsideVenture and backed by a bunch of VCs is what they're calling a "hybrid public-private offering," nicknamed a "Hippo." And it is basically just what it sounds like -- a mix between a private fundraising and a public market. Companies that go through the process will file the standard earnings reports with the SEC -- but the initial shares will be sold to member investors prior to the offering being final. I'm all for experiments of this nature, though there certainly are questions about whether or not this will really catch on. Many may see it as "what a company does if it can't IPO" which could attach a stigma to companies that go this route. Also, I still think that the old "quarterly reports" system needs a reboot involving radical transparency, so I'm not sure that reinforcing the old quarterly report system (which stunts long term vision for short term results) is really such a good idea.

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Last Chance For The Old Recording Industry... But Plenty Of Excitement In The New Music Industry

from the time-to-be-optimistic dept

I spent Monday at the wonderful SanFran MusicTech Summit and I have to admit that I came away quite optimistic. You may recall earlier this year that my takeaway from MidemNet was how optimistic people were becoming -- but how much the old school industry folks then took that optimism and twisted it into something bad (saying things like "we have to stop treating our fans as criminals, but we need to stomp out piracy at any cost!"). In contrast, I have to say that after the SF MusicTech event, I'm back to the optimistic viewpoint, though I recognize there's still plenty of shaking out to occur.

Terry McBride, whose insights always are worth thinking deeply about, made a comment that this was "the last chance for the music industry" to stop screwing things up and pissing off customers, and that it was time to get it right: meaning stop treating customers as criminals, stop focusing on the sale of things that people don't want to pay for and stop worrying about copyright (he even agreed with David Bowie's comment that copyright was over). I agree with much of what McBride said, with one exception: this isn't the last chance for the music industry. The music industry is doing great -- with more music than ever before being produced and available to fans, and more musicians than ever before being able to connect directly with fans and put in place a business model that works for them, instead of getting worked over by a major label with a dreadful contract. Instead, I'd argue that it's the major labels who have one more chance... and even that may be iffy given how badly they've screwed some stuff up in the past decade.

But much of the rest of the event showed why there's so much reason for optimism. There are so many different startups entering the space these days that it's honestly difficult to keep track of them. And while the market is certainly confusing, we'll start to see some clear leaders shake out of the pack in the next few years. But, combine it all and these startups provide all of the tools that any musician today needs to record, perform, build a fan base, manage a fan base, tour, manage a tour, connect with fans, communicate with fans, transact with fans, promote, distribute, analyze and share. Basically, absolutely everything that you used to need a record label for is showing up from a hodge podge of startups. They don't all necessarily work well or work together, but that'll change over time. On top of this, there are additional tools that let you do things that simply weren't possible before, such as providing better, more detailed recommendation systems and analytics. Among the cool or compelling companies I saw or spoke with at the event were Band Metrics, Topspin, Bandize, 100000Fans, Instinctiv, Jamendo, Drop.io, thesixtyone... and those were just the ones that I'm remembering off the top of my head. There were at least two dozen other interesting startups as well.

Again, this doesn't mean there's no room for a label anymore -- but the role of that label changes. Some bands won't need labels at all, and will be able to manage everything themselves using these tools and services. Others will rely on label reps to help piece all of the different services together, so they can focus on the music. But the routes around the old system are growing at a phenomenal rate. On top of that, there were some major label representatives who actually seem to recognize all of this, even if not all of their colleagues agree.

So while I am still nervous about what the old guard and its lobbyists will do to laws around the globe, the next generation is clearly growing up from below. It's quite messy right now, but it's coming. Fast.

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Wall Street Quants Not Interested In Startups

from the pay-cut dept

With Wall Street firms crashing left and right, some tech startup investors thought there would be plenty of smart and available talent in NYC looking for work, who might be persuaded to join startups. Turns out that it hasn't worked that way. Laid off Wall St. quants seem to want to stay on Wall Street, and don't seem particularly interested in joining startups at a greatly reduced salary and a small chance for eventual stock option wealth. This actually might be for the best. It helps to really believe in what a startup is doing before committing to it -- and a lot (certainly not all) of the Wall St. folks are simply focused on making lots of money as quickly as possible. That doesn't always mix well in a tech startup.

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Investors Back Out Of InDenver Times After They Can Barely Get 3,000 People To Subscribe

from the people-don't-pay-for-news dept

We pointed out last week that it was no surprise that the new InDenver Times operation, that sprang forth from reporters from the defunct Rocky Mountain News, was unable to meet its target of 50,000 subscribers before launching. However, it turns out that they only got around 3,000 subscribers, or around 6% of their goal. Not surprisingly, the folks who originally wanted to finance the operation have now backed out, over disagreements over how many people to employ. As some are noting, the reporters seem to think that you can just recreate a fully staffed newsroom from scratch, rather than building it up organically like a startup. Sure, there's obviously a feeling of bringing along a team from the old Rocky, but the idea is to get it right where that paper failed as a business -- and you don't do that by setting up the same bad cost structure (or... by trying to charge for subscriptions online).

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Time For A Startup Founder Visa

from the let-'em-in! dept

In our various debates about immigration policy in the US, we here have always been in favor of a much more permissive immigration policy for skilled immigrants, noting that skilled immigrants have been shown to create more jobs rather than "take them away." For some reason, too many folks incorrectly think that jobs are a zero-sum game, and if a foreigner takes a job, it means one fewer job for Americans. That's wrong in so many ways that it's difficult to take seriously anyone who makes such a claim. That said, it would be interesting to see what even those opposed to expansions of existing skilled worker immigration plans think about Paul Graham's new suggestion of a special startup founder visa, that would allow 10,000 immigrants into the country, but only if they're starting their own company. Thus, they wouldn't be "taking" anyone else's job, since the job they'd be creating wouldn't exist otherwise -- they'd be creating it from scratch. Such a visa would encourage more entrepreneurial activity, and create more startups that should (in all likelihood) end up creating a lot of new jobs as well -- including a few that might go to those people whining about foreigners "stealing" their jobs...

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Why The Stimulus Package Isn't For Startups: The Gov't Doesn't Want Creative Destruction

from the startups-are-about-short-term-job-destruction dept

Earlier this week, I was on a fun panel put together by the Telecom Council of Silicon Valley, which was mainly focused on what the Obama Stimulus plan (and the broadband allocation specifically) would most likely mean for the industry. At one point, an attendee in the audience said that he was from a startup, and questioned how he might partake of the stimulus funds -- and I responded, perhaps flippantly, that he was out of luck: the stimulus isn't for startups. That's not entirely true, of course. There will be some token amounts of money handed out to startups, but pretty much everyone on the panel agreed, the administration has made clear that the stimulus package is about creating jobs as quickly as possible, and the administration has made it clear in so many words that this means handing it to incumbents. They've been pretty frank that the stimulus plan has a lot less to do with increasing broadband capabilities than with job creations -- and plans to get funds that show more job creation will get preference over those that actually increase broadband.

And that's why the stimulus package is not for startups -- and is potentially dangerous in the long run. Truly revolutionary startups don't immediately create jobs -- they destroy them. The process of creative destruction takes on those incumbent providers and wipes them out. We're seeing it with plenty of industries today that are challenged by new upstarts that have upset their old business models. And, while most economists should recognize that this process is good for the overall economy, in that it leads to economic growth and more efficiency, it does upset the status quo, and causes many big companies to contract or disappear altogether.

So, think about it from a government bureaucrat's perspective right now. Go back a few decades, and assume someone came to you with a plan to create the internet -- and even accurately described how it would allow a great free exchange of information. The reaction, if you were trying to deal with an economic crisis, would be to focus on all of the jobs it upset. People can share music online? Think of all the job losses in the music industry! People can read news for free? Think of all those newspapers shutting down! But they wouldn't consider all of the economic activity created by the internet -- the billions of dollars and millions of new jobs created thanks to it.

If, today, you had a concept for a totally new technology that would greatly increase broadband access across the globe, in a revolutionary way. It would allow anyone to have super high speed access anywhere. It wouldn't be that costly to create or build or even maintain... and it wouldn't even require making use of existing infrastructure. From any normal calculation this would be fantastic. It would spur enormous new economic growth opportunities and speed along our economy in massively useful ways. Yet, it's exactly the type of project the government would be against right now -- because it would make AT&T, Verizon and others obsolete... and think of how many people that would put out of work, at the same time that the gov't wants to claim how many jobs it's created.

That's an extreme hypothetical, but it's useful in illustrating the point. So, this focus on using the stimulus for short-term job creation is dangerous in that it will likely be used to prop up existing incumbent businesses, because they can create the most jobs most quickly -- by doing very inefficient things. The startups that do things more efficiently end up doing short term job destruction, even if the long-term results would be a much larger, more stable economy with larger job creation.

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Journalism Isn't Dead: More Journalism Projects Getting Funded

from the ain't-dead-yet dept

Last week, in yet another post about old school journalists complaining about the supposed "death" of journalism, someone complained in the comments, saying that the "utter lack of interest" from venture capitalists concerning journalism startups should disprove that there are others out there who can build such a business. That seems like a ridiculous criteria (venture capital interest is hardly a barometer of what works and what doesn't). But, even if we assume that you need to see VC interest, well, then that commenter is wrong also. Someone anonymous pointed us to the recent launch of Patch, a company that is hiring full-time journalists and building hyperlocal community sites and is funded by Polar Capital. And that's hardly the only one. In the last month alone I've had conversations with three different VCs looking at journalism startups and exploring whether their models made sense. Once again, we're seeing that if there's demand for a product (journalism), there will be businesses that will figure out ways to supply it. Not all will succeed. In fact, many will fail. But from that we'll certainly come up with models that work.

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Microsoft Tries A 'First One's Free' Strategy To Lure Startups

from the you-know-you-want-to-try... dept

Microsoft certainly recognizes the fact that most startups these days are automatically gravitating to a LAMP infrastructure (Linux, Apache, MySQL and PHP). So, now it seems to be trying out a new program to lure startups by offering them free software for a few years and combining it with additional services that they hope will appeal to startups. It's an interesting approach, though, in the long run, it still seems like they may have the equation backwards. While they are giving some stuff away free initially, the ultimate goal is to lock companies into paying for infinite goods like software, rather than scarcities like services.

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Do Celebrities And Startups Mix?

from the where's-william-shatner? dept

Back during the first dot com boom, you may recall that various startups started to suddenly find "celebrity" front men, from Whoopi Goldberg touting "Flooz" to William Shatner pitching Priceline. This time around, it appears that the various Hollywood celebrities are perhaps a bit more involved in various web startups, but does it matter beyond getting an initial burst of press? Liz Gannes, over at GigaOm, has a good look at the rise of "celebrity" startup founders, noting that while there are a bunch of Hollywood folks jumping in and starting web companies, not many of them have done all that well (at best, a few are muddling along). Apparently, unlike Hollywood, having a big name star isn't all that's needed to make something a success. It also needs a plan that works.

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Powerset Turns Out To Not Be All That Powerful

from the powering-down dept

We never understood the hype around Powerset. It was the latest in an extremely long line of startups that claimed to focus on "natural language search" -- which is one of those holy grails for computer scientists who never stop to ask whether or not there's actually any market demand for it. As Google has shown, people don't need to use natural language to search. They're just fine doing keyword search. Yet, for some unclear reason, Powerset was able to raise a ton of money at a ridiculous valuation, and did so using all sorts of buzzwords (and vague patent threats). But when it finally released a product (just to search Wikipedia) it proved to be rather ho hum. Searching Wikipedia via other means was still more effective.

Now comes the news (first leaked last week) that Microsoft has bought Powerset. While both sides will present this as a big win, the numbers being tossed about ($100 million) are not a big win at all for Powerset's investors, and the exit certainly falls well short of the hype around Powerset. If Powerset was actually seeing any traction at all it never would have agreed to sell at that price. Basically, Powerset discovered what was widely known by industry watchers for years: natural language search is a neat challenge, but it's not something the market is demanding. It will be interesting to see if Microsoft actually does anything with the technology, but my guess is that it will slowly fade away. If anything, Microsoft may do a little saber-rattling over the patents Powerset hyped up, but little else.

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What Happens If A Startup Founder Gets Hit By A Bus?

from the perhaps-not-much dept

The importance of a founder working at a company is a question that gets a lot of attention for various reasons. Most startup founders certainly want to stick around and see their "baby" through, obviously. However, once investors get involved, the role of founders gets trickier. Investors often ask the key question: "what happens if a key founder gets hit by a bus?" That's the point at which a founder needs to convince the investor that the structure of the company itself is so well established that it can live on without the founder. Of course, if they're too convincing, it can backfire when the investors look to replace the founder (as they very often do), noting that the founder made a convincing enough argument as to why they're not needed.

Of course, until now, all of the stories on this were anecdotal. But, Paul Kedrosky points us to new research that was done on what happens if a founder dies early on in the life of a company, in an attempt to determine just how important it is for founders to stick around. It may surprise many (as it surprised me) to discover that, apparently, there isn't much of an impact if the founder passes on. The only real impact is a brief hit to profitability -- but it doesn't seem to have much long term impact. In other words, it really does take a team of folks to successfully implement an idea and bring it to market. While that doesn't necessarily mean founders are "expendable," it does highlight the importance of a strong overall team, rather than reliance on a single "visionary" expected to guide all aspects of the company. It doesn't mean founders shouldn't watch out for speeding buses, however.

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When We Said OLPC Should Act Like A Tech Company, We Didn't Mean Microsoft

from the bureaucracy dept

In the latest blow to the OLPC project, the organization's security chief, Ivan Krstić, has resigned over philosophical disagreements with the organization's direction. The nub of the dispute seems to be chairman Nicholas Negroponte's belief that now that it's out of its startup phase, the project needs to be run "more like Microsoft." Krstić complains that the organization's previous president, Walter Bender, was demoted, and Krstić was asked to report to "a manager with no technical or engineering background who was put in charge of all OLPC technology." Now as we've said before, it's healthy that the OLPC organization is beginning to realize that they face many of the same challenges as for-profit technology companies, and might be more successful if it adopted some of their methods. But bringing in non-technologists for senior leadership positions and adopting a rigidly hierarchical org chart might be taking things a little too far. Culture matters in technology companies, and it probably matters even more in an organization like OLPC that depends on having employees willing to go above and beyond the call of duty for relatively modest pay. More orderly management is a good thing, but not if you cause your best people to jump ship in the process.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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Hollywood Writers Eye Startup Life

from the risky-business dept

The LA Times reports on ongoing negotiations between writers and venture capitalists to create Hollywood startups. Apparently "dozens" of Hollywood writers are looking to launch companies that would allow them to produce video content that would be distributed directly to fans on the web. We've noted that there are already a number of companies pursuing this strategy, and with thousands of talented writers sitting idle, this is an ideal time to start more of them. In the long run, these kinds of startups will ensure writers get compensated fairly because it will give writers who feel they're under-compensated an exit option. On the other hand, the LA Times makes clear that writers jumping into alternative business models may find that the reality of Hollywood startups to be a culture shock. A lot of successful online content outfits tend to be shoestring operations, and it's likely to take a few more years before the bulk of viewers make the switch to Internet-based sources of information. Writers used to the relatively large budgets and large audiences of Hollywood studios may find it difficult to adjust to being at a web startup that no one has (yet) heard of. This may explain why in a town with ten thousand writers, only "dozens" are looking at the startup option. On the other hand, those writers with an appetite for risk or a thirst for creative control may thrive in an environment where they call the shots and reap a much larger share of the rewards if they succeed.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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If You Want To Attract Venture Capital, Don't Tell VCs Anything

from the we-need-money,-but-for-what-we-can't-say dept

The news that the micro-blogging/message service Twitter has attracted a round of venture capital funding has been greeted with the requisite back-slapping and congratulations, but also with some bemusement by folks wondering what the company's business model is. Even the investors, Union Square Ventures, don't know yet, and say the investment will go towards making Twitter "a better, more reliable and robust service." Paul Kedrosky offers an interesting take on the matter by saying that for companies looking for VC money, business plans and profits are overrated. He contends that offering VCs a detailed business plan only gives them more things to nitpick, while early profits can overinflate their expectations, so it's better for a startup looking for cash to go light on both. It's easy to take his point to an extreme and say it's yet more evidence that we're in another bubble, but Kedrosky really seems to be saying that startups shouldn't pitch their detailed plans to VCs, and not that they shouldn't have one at all. Of course, regardless of whether you have business plan or not, if you can grab the traffic and attention of something like Twitter, there will be plenty of VCs ready to open their wallets, either as a vanity investment, or because they know they should be able to flip the company to a bigger buyer pretty quickly -- much like Union Square did with a previous investment, the social-bookmarking service Del.icio.us, which was later bought by Yahoo.

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