Category: McNair Center

These posts were written by McNair Center students and staff between 2015 and 2018 and are archived here.

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McNair Center Women

Women in STEM: Closing the Gap

Economists around the world emphasize the benefits of integrating more women into the workforce. While we are seeing slow growth in women’s presence in many sectors, the Science, Technology, Engineering, and Math (STEM) fields at the core of innovation seem to be especially lacking in girl power.

In 2014, women comprised approximately 47 percent of the U.S. workforce. Within the innovation-focused STEM fields, women only account for about 19.5 percent. This underrepresentation of women is not only holding women back from success and achieving their full potential, but also preventing the U.S. economy from realizing the wide array of benefits which come from increasing women’s labor force participation.

Why We Need More Women in STEM

When women get involved in STEM fields, they are rewarded. Compared to similar women who are working in non-STEM fields, the salaries of women  in STEM are 33 percent higher. For men, the difference is only 25 percent. Not only are salaries higher, but the gender pay gap is also smaller. A 2011 U.S. Department of Commerce study found that the average gap is 21 percent in non-STEM jobs. For STEM jobs, this gap is only 14 percent.

Women aren’t the only ones who benefit. Companies that place an emphasis on gender equality and hiring women tend to see positive impacts on their productivity and success. For companies marketing to women, the Harvard Business Review has shown that having input from women improves their “likelihood of success” by 144 percent. Innovative firms, along with many traditional businesses, can benefit from having female perspectives to help reach female customers.

Gender diversity in the workplace also enhances creativity among workers. When researchers at the University of Maryland and Columbia University teamed up to study top leadership in Standard and Poor’s Composite 1500 list, they found that female representation in leadership positions is associated with a $42 million increase in average firm value. They also saw that companies which emphasized innovation received higher financial gains when women were in top management.

U.S. Initiatives to Empower STEM Women

The Obama Administration has made efforts to increase women’s involvement in STEM. In 2009, President Barack Obama created the White House Council on Women and Girls, a team that coordinates U.S. policy, legislation, and programs to address the needs of women and girls.  The Council has made women’s involvement in STEM a particular priority. They have announced multiple initiatives, like Title IX protections for equal education, work-life balance programs, and speaking tours for successful women innovators. The administration also made efforts to eliminate the gender pay gap through the creation of an Equal Pay Task Force in 2010 and an executive order affecting federal contractors in 2014.

Obama Signs the Executive Order creating the White House Council on Women and Girls

These actions alone cannot address the full extent of gender inequality. However, they may improve the situation. Policies that encourage girls to explore their interest in STEM give girls the opportunity to develop passions in these fields. Once these passions become careers, flexible and non-discriminatory policies in the workplace can incentivize women to stay involved in STEM throughout their careers.

Women in STEM around the World

In North America and Western Europe, on average, only 32 percent of researchers, defined as “professionals engaged in the conception or creation of new knowledge, products, processes, methods and systems and also in the management of the projects concerned,”  are women. Japan, one of the leading tech development nations, has a mere 15 percent. Surprisingly, Central Asia has the highest average proportion of women researchers, with 47 percent.

The United Kingdom ranks second in world scientific achie1512b16-women-in-science-interactive-map-researchers-un1-1vement, behind the United States. 35.7 percent of researchers in the UK are women. Within solely STEM fields, though, the proportion of women is even lower: only 14.4 percent. This trend is apparent across many of the nations with the highest investments and achievements in STEM.

Differences in gender norms affect incentives for women to enter these fields. In some regions, like India, women are expected to be caretakers and homemakers. Their participation in STEM, and the workforce in general, is therefore often very low. On the other end of the spectrum, there are certain areas in Asia where gender stereotypes regarding math and science are less prevalent. In these areas, STEM interest is greater among women than men.

Culture clearly has an effect on the proportion of women who get involved in STEM professions. A prevailing stereotype exists in American society that women are inferior to men in math and science. Although this stereotype has been proven untrue, societal beliefs and expectations can have an effect on women’s empowerment. Research by Claude M. Steele shows the effects of stereotypes on performance and self-perception. If we want to see a change in the proportion of women in STEM, we need to change our culture.

What is the Future for Women in STEM?

Remedying the gender gap in innovation fields is not a simple or quick process. It requires a combination of education for girls, policy changes that eliminate barriers for women workers, cultural changes, shifts in societal prioritization of gender equality, and much else besides. At the current progress rate, we are a long way from eliminating the gender gap. However, with concerted effort from policymakers, educators, and employers, there is hope for a fairer and more productive future.

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McNair Center Rice Entrepreneurs

Rice Entrepreneurs: East-West Tea

This month the McNair Center is spotlighting Rice entrepreneurs to celebrate National Entrepreneurship Month. To kick off our series, we sat down with Andrew Maust, operations manager for East-West Tea.

East-West Tea

East-West Tea began in the spring of 2016 as a project in Scott Davis’s undergraduate marketing class. Dr. Davis, a post-doctoral fellow at the Jones Graduate School of Business, had students develop business strategies catering to underserved markets on campus. East-West Tea founder Drew Sutherland observed that students frequently went off campus to get boba tea and developed a plan to sell the beverage on campus. At the end of the semester, Sutherland and team members Tommy Bennett, David Cooper, Glenn Baginski and Leo Meiste implemented their plan. East-West launched retail operations on October 12.

Impact on the Rice Community

Andrew Maust joined the team last spring after going to several tea tastings. Since then, he’s climbed the ladder from kitchen worker to operations manager.

Maust describes the relationship East-West formed with Rice as symbiotic. “One of [East-West’s] core foundations is serving the Rice community. While what we do isn’t necessarily the easiest logistically, or makes us the most money on profit margins, we think it’s really important to serve the students and help them out in our endeavors.”

Maintaining a healthy relationship with Rice is a balancing act. Rice Housing and Dining provides East-West with shared kitchen space in Sammy’s. Without their own kitchen, East-West must “maintain operations but also not encroach on other people’s space.”

Maust says another challenge is running a small business and keeping up with schoolwork. He works 15-20 hours per week in the kitchen, which is “more hours than [he] takes in coursework”.

Advice to Rice Small Businesses

Maust also gave some advise to students who want to start their own business: “It has to be a labor of love. Your first goal shouldn’t be ‘Ooh, what can I do to make money?’ Because in order to build something that lasts and is high quality, it has to be something that you put in a lot of time and effort for. Money is great, but first and foremost you have to have that drive, that passion and put forth a great product.”

This resonates with advice Bob McNair gave students at an event at the Baker Institute on August 29th: Strive to create value and success will follow.

 

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McNair Center Weekly Roundup

Innovation Weekly Roundup: 11/04/2016

Weekly Roundup is a McNair Center series compiling and summarizing the week’s most important Entrepreneurship and Innovation news.

Here is what you need to know about innovation this week:

Microsoft Puts Slack in Cross Hairs with New Office Chat App

Nick Wingfield, NY Times
Tech companies are moving in on Slack’s popular team-messaging market as Microsoft joins Facebook in taking on smaller players in this space. Microsoft’s size and distribution power is not enough to enter a new market. Their product must be innovative, not just another app in the Microsoft Office suite. Slack, in response, took out a full-page ad in the New York Times. They sarcastically congratulated Microsoft while also highlighting the innovations Slack has brought to numerous workplaces.

Microsoft’s current Office suite is just not keeping pace with the changing dynamics of the workplace, which require collaborative software. Slack, and other team messengers, enables multi-channel communication to organize discussion without relying on email. It is additionally fully searchable and allows a variety of app integrations. Team-messaging applications increase transparency and decentralize discussion. They are used at a variety of workplaces emphasizing collaboration (including here at the McNair Center).

AIA Patents – Approaching 50% of newly issued patents.

Dennis Crouch, Professor – University of Missouri School of Law

Crouch has created a chart showing the percentage of patents granted under the first-to-file provisions in the 2011 America Invents Act (AIA). The AIA changed the patent application rules from first-to-invent to first-to-file. By the end of 2016, half of all new patents issued would have been filed under first-to-file rules.

Patents filed under the AIA are subject to post grant review (PGR). A third party successfully petitioning that at least one claim is unpatentable can initiate the PGR process. The purpose of PGR is to dispose of bad patents early in their life through the USPTO rather than the legal system. Petitions must be entered within 9 months of a patent being issued and a final decision of validity is made in less than a year.

Innovation Labs: 10 Defining Features

 Dr. Lidia Gryszkiewicz, World Economic Forum
 Dr. Tuukka Toivonen, University College London
 Dr. Ioanna Lykourentzou, Luxembourg Institute of Science and Technology

Innovation Labs are essential workspaces for collaborative innovation. However, innovation labs’ missions and features are often ill-defined. A simple “I know it when I see it” style definition is not sufficient. Three experts in social innovation have reviewed innovation labs around the world to determine what features are essential. A few key findings include innovation labs needing heterogeneous participants, focus on experimentation and an expectation of breakthrough solutions. Such distinctions can help guide new labs and promote innovation across a variety of industries and social areas.

Additionally, creating a definition for these labs helps distinguish them from other similar models like living lab and coworking spaces. In summary, the writers of this piece define an innovation lab as “a semi-autonomous organization that engages diverse participants—on a long-term basis—in open collaboration for the purpose of creating, elaborating and prototyping radical solutions to pre-identified systemic challenges.”

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McNair Center Weekly Roundup

Entrepreneurship Weekly Roundup: 11/04/2016

Weekly Roundup is a McNair Center series compiling and summarizing the week’s most important Innovation and Entrepreneurship news.

Here is what you need to know about entrepreneurship this week:

Clocking In: Small Business and Overtime Regulation

Catherine Kirby, Research Assistant, McNair Center for Entrepreneurship and Innovation

In December, new US Department of Labor regulations on overtime pay eligibility will come into effect. These regulations will drastically increase the minimum salary for exemptions to overtime from $23,660 to $47,476. McNair Center’s Kirby discusses the pros and cons of the new overtime labor law. Her analysis offers insight on how to mitigate the increased costs to employers while promoting the benefits to low-income salaried workers.

  • The pros: Estimates forecast that the new regulations will create jobs in addition to providing compensation for employees working over 40 hours a week.
  • The cons: New regulations come with new costs for employers. Requiring employers to keep track of attendance and hours of more employees could be costly, especially for small businesses.
  • Policy recommendations: The Department of Labor could implement the regulations in phased increments rather than in one single shock. The government could lower small business taxes to reduce the regulatory burden.

Immigrants and Entrepreneurship

Dylan Dickens, Research Assistant, McNair Center for Entrepreneurship and Innovation

Many U.S. immigrants start businesses. Immigrant entrepreneurs are a diverse and growing group; immigrant entrepreneurs also have greatly varying levels of education. While immigrant entrepreneurs tend to live in larger states such as Texas and California, they compete for business in every U.S. state. The type of work immigrant entrepreneurs engage in is extremely varied. Partly as consequence of this, on average immigrant entrepreneurs outperform their native counterparts and are more skilled at finding market gaps by fulfilling unmet demand. Overall, McNair Center’s Dickens proposes that recent research supports the claim that immigration bolsters entrepreneurship in the US.

10 Marketplace KPIs That Matter

Andrei Brasoveanu, Author, Mattermark

Brasoveanu’s article summarizes the top ten Key Performance Indicators (KPIs) that every entrepreneur should closely monitor when building a market for their product.  Markets ultimately determine how every good and service in the economy is “discovered, priced and delivered.” KPIs, such as return on investment, growth and and burn rate, offer powerful and important insights for entrepreneurs. According to Brasoveanu, KPIs are effective and efficient marketplace metrics for getting startups on track to visualizing and contextualizing their success.

kpis

Scientists Working Outside Their Fields Are More Likely to Become Entrepreneurs

Brianna Stenard, Assistant Professor of Management and Entrepreneurship at the Stetson School of Business and Economics at Mercer University, Harvard Business Review

Highly skilled scientists and engineers are increasingly taking jobs that are outside of, or only slightly related, to their STEM degrees. Weak labor conditions in some STEM fields are partly to blame, but largely, the educational mismatch among scientists is voluntary. Stenard’s research indicates that many employees trained in the STEM fields take jobs outside of their field to acquire technical and managerial skills. Voluntarily mismatched scientists are nearly 50 percent more likely to become entrepreneurs.

Rather than bemoan an apparent oversupply of highly skilled scientists and engineers, Stenard recommends that policy makers implement initiatives that encourage technology entrepreneurship among these mismatched experts. Following a similar vein, Stenard proposes that universities should also consider adopting measures that equip STEM students with the “nontechnical skills…particularly valuable in entrepreneurship.”

And in startup news…

Airbnb’s Terms of Service just blocked a racial discrimination case

Russell Brandom, Reporter, The Verge

On Tuesday, Airbnb successfully blocked a class-action lawsuit that challenges the company’s platform on the basis of systematic racial discrimination. However, thanks to an arbitration clause in the company’s terms of service, the case will go through individual arbitration, and Airbnb will avoid a pricey and public lawsuit. The company recently added a nondiscrimination policy to its terms of service and has apparently taken measures to elimination discrimination from its network of hosts. When approached by the Verge on this issue, an Airbnb representative insisted that “Discrimination has no place in the Airbnb community.”

Palantir Prevails in Lawsuit Over U.S. Army Contracting Practices

Rolfe Winkler, Reporter, The Wall Street Journal

Another California-based startup recently won big in the courtroom, as data-mining software firm, Palantir, prevailed in its lawsuit against the US Army in the Court of Federal Claims. Palantir Technologies, Inc. ranks among Silicon’s Valley’s “most highly valued private companies” and was valued at $20 billion in a late funding round in 2015. The company specializes in big data analysis and offers its services to large commercial customers and government agencies within the intelligence community,. The court’s decision means that Palantir is now eligible for a federal contract that would award up to $200 million for work relating to the Army’s Distributed Common Ground System.
At the 2016 Wall Street Journal  Global Technology Conference, Palantir Chief Executive Alex Karp revealed that his company was positioned to go public.

GIF Site Giphy Is Valued at $600 Million

Rolfe Winkler, Reporter, The Wall Street Journal

Founded in 2013, Giphy, Inc. serves as a search engine and database for Graphical Interchange Format files(GIFs). GIFs are the “short, looping video files” that have most likely taken over your, or your teenager’s, Facebook News Feed. Thanks to Giphy, GIFs have surged in popularity and are now ubiquitous on social media sites and group-messaging platforms, such as Facebook messenger, Twitter, and Groupme. Giphy’s Chief Operating Officer Adam Leibsohn summarizes the company’s platform as a ”search engine…for the messenger generation.“
Giphy recently released an update stating that the company currently serves more than one billion GIFs per day, that are in turn watched by over 100 million users daily. This New York startup’s obvious popularity has not gone unnoticed by investors; Giphy raised $72 million in equity funding from venture capitalists during its most recent funding round, which brings the company’s  cash total to $150 million.

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McNair Center Small Business

Small Business and Overtime Regulation

Clocking in: Small Business and Overtime Regulation

What is the New Overtime Regulation?

frustrated workerOn December 1, 2016, the Labor Department will officially institute new regulations on overtime eligibility for workers. Announced on May 17, the new rules require business owners to pay salary workers earning up to $47,476 a year time-and-a-half overtime pay when they work more than 40 hours during the week. This new regulation will be updated every three years to adjust for average pay in the United States.

Federal employment law stipulates two different ways for employees to receive overtime pay. First, if the employee is not an executive or a professional with decision-making authority they are eligible. Second, if the salary of an employee is below a certain amount, that employee can receive overtime pay.

Who is Affected?

While the Labor Department calculated that the new law will affect 4.2 million workers, the Economic Policy Institute estimates that this new regulation will affect 12.5 million employees. That is 23% of salaried workers. The institute expects these new rules to affect over one million Texans.

The new overtime rule will apply to any business that is subject to the Fair Labor Standards Act. This includes any business with sales of at least $500,000, or employers involved in interstate commerce. The National Federation of Independent Businesses says that the requirements will affect around 44% of US business with fewer than 500 employees.

History of Overtime Pay Regulations

The 1938 law that began federal minimum wage also started the overtime rule. While the government has raised the overtime pay salary cut-off several times over the years, the current cut-off is at $23,660. Vice President Biden noted that that more than 60 percent of salaried workers qualified for overtime in 1975 based on their salaries, but only 7 percent do today.

Complying with Regulations

To comply with these new regulations, employers will have to track employees work hours, even those of salaried employees. This change can involve costly adjustments as employers may have to buy new systems and spend time on regulatory compliance. Additionally, employers may have to change the way they manage their labor budget. Failure to comply can result in lawsuits or penalties.

Employers will most likely respond in a couple of ways. Some employers will choose to limit their employees’ work hours to avoid paying overtime. Others may hire additional workers and divide up existing jobs. Additionally, employers could raise the pay of employees whose salaries are close to the cutoff to avoid paying overtime work. Or employers could cut salaries of workers with the hope that overtime will make up the difference in income.

Oxford Economics predicted that a “disproportionate number[s] of workers” [that] became eligible for overtime and worked more than 40 hours would see their hourly rates decreased by an equal amount, leaving their total annual earnings unchanged.” On the other hand, the Institute for the Study of Labor, said that base wages would fall somewhat over time, but that the higher overtime payments would more than offset any loss in regular salary levels.

Positive Aspects of the New Regulations

The new regulations could potentially have positive effects on the labor force. Goldman Sachs and the Economic Policy Institute estimate that the new regulations will create about 120,000 jobs.

The main argument, however, it is only right for employees to earn overtime for working over 40 hours. Vice President Biden and other supporters of the change present the idea of fairness as the main positive aspect of the new regulation. The Obama Administration hopes that the rule change will give middle-class families additional income.

Negative Aspects of the New Regulations

Despite the potential for positive effects, the new regulations could bring numerous negative consequences for employers.

The new regulations will immediately require employers to keep track of employee attendance and hours. This tracking will impose implementation and operation expenses, which may be prohibitively high for smaller and less profitable firms. Payroll reclassification for small businesses can also be time consuming and expensive. Business owners must also figure out whether their workers are exempt from the new requirements. Misclassification can result in lawsuits and penalties. And, of course, small businesses may face increased payroll expense.

All of these changes can be costly for small businesses to implement. A study by the National Retail Federation estimated employers could end up having to pay as much as $874 million to update payroll systems, convert salaried employees to hourly wages and track their hours. The potential costs have not gone unnoticed; the National Federation of Independent Businesses filed a petition to delay the implementation of these new rules. Otherwise, the new regulation may drive some small firms out of business.

Hurting Workers

This new measure could even hurt employees by giving workers less flexibility, hour cuts and decreased morale. Salaried employees often enjoy flexibility in working hours that can allow them a certain amount of freedom. This flexibility is about to become more expensive as employees are required to record every hour of their work. Being a salaried employee, rather than per-hour labor, also has positive psychological benefits. Employee morale may therefore drop. Finally, employees will soon run the risk that their employers will cut their hours to avoid paying overtime.

Jobs may be created by this regulation. However, most of those new jobs could come from cutting a full-time job in half to avoid paying overtime. Coordinating two people to do one person’s job will make America’s workforce less productive.

Room for Improvement

These new regulations disproportionately hurt small businesses. It may be important to respect the rights of workers to earn more money for overtime. However, the government must find a solution to help low-income workers without imposing a burden on small business owners.

A step in the right direction would be to institute this new regulation in phases. The overtime income cutoff change from $23,660 to $47,476 is a huge difference. But unless government offsets these costs, perhaps by lowering taxes on small businesses, this new policy will discriminate against the 28 million small businesses that provide more than 8 million American jobs.

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McNair Center Weekly Roundup

Innovation Weekly Roundup: 10/28/2016

Weekly Roundup is a McNair Center series compiling and summarizing the week’s most important Entrepreneurship and Innovation news.

Here is what you need to know about innovation this week:

FTC Takes an In-Depth Look at Patent Assertion Entities

Weil Gotshal & Manges LLP – Adam C. Hemlock, John E. Scribner and Lisa Marie Madalone, Lexology

FTC report on Patent Assertion Entities (PAE) delineates the two major business models employed: portfolio and litigation. As the name implies, litigation entities acquire licenses by filing suit. Portfolio entities tend to negotiate licenses over expansive patent portfolios often valued in the millions. Portfolio entities account for 80% of all PAE revenue despite holding only 9% of all licenses.

The FTC has proposed a variety of measures to deter what they deem “nuisance legislation.” The report found that discovery costs were the major factor in causing the accused to settle. In response, measures to reduce the burden of discovery were suggested. Changes reducing the incentive to settle will drastically change the patent litigation landscape since 83% of litigation PAE cases are settled within 18 months.

Three angles to look at Google’s Pixel phone: design patents, antitrust, copyright

Florian Mueller, FOSSPatent

Mueller examines the Google Pixel from the perspective of different areas of law: design patents, antitrust and copyright. Innovators must consider a variety of legal frameworks designed to protect them. However, these protections have also lowered the risk of innovation and prevent copycat designs from flooding the market. Mueller discusses the strategy Apple could take against Google for infringing design patents, but he also discusses why such an exertion might fail in light of Apple v. Samsung. This FOSSPatent post provides a broad overview of the regulatory environment tech innovators face.

What’s New with the Changes to the Trademark Trial and Appeal Board Rules of Practice

Eric Ball and Emily Gische, Attorneys at Fenwick & West writing for IPWatchdog

Soon after we ring in the new year, the Trademark Trials and Appeals Board will enact new inter and ex partes proceeding rules. These new rules become part of Title 37 of the Code of Federal Regulations. Key changes include limiting the number requests for document production to 75 and minimizing surprises right before trial begins. Surprise requests for substantial discovery are being clamped down on as a litigation strategy. Testimony can now be submitted through affidavit solely, as opposed to live recordings, and all filings must be electronic. In sum, these changes will accelerate TTAB proceedings.

Lex Machina releases data on design patent litigation showing strong correlation with trademark infringement actions

Steve Brachmann, IPWatchdog

The theme of this week is design patents and trademarks, and in accordance, Lex Machina has released a design patent litigation report. While overall patent litigation is decreasing, the number of design patent cases filed has remained consistent. This is still a small portion of all patent litigation, about 6 percent. 14.6 percent of design patent cases resulted in a claimant win as compared to 2.5 percent of claimant wins in other patent litigation.  Another key finding is that 36.4 percent of all design patent infringement cases also include a claim of trademark infringement, a rare claim in other filings.

Self-driving car startup cancels first product because dealing with regulators and lawyers “isn’t worth it”

Dave Gershgorn, Quartz Artificial Intelligence Reporter

Most innovation policy tends to focus on intellectual property regulation, but there is a host of additional regulations innovators must abide by depending on industry. With all the momentum surrounding self-driving cars and their go-to-market strategy, it was inevitable that the National Highway Traffic and Safety Administration would attempt to ensure their safety. While such regulation may seem fair and necessary, the founder of one self-driving car startup has decided abiding by these requests is not worthwhile. We must question the ability of current regulation and enforcement to keep pace with innovation.

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McNair Center Weekly Roundup

Entrepreneurship Weekly Roundup: 10/28/2016

 Weekly Roundup is a McNair Center series compiling and summarizing the week’s most important Innovation and Entrepreneurship news.

Here is what you need to know about entrepreneurship this week:

Big Problems for Small Practices

Catherine Kirby, Research Assistant, McNair Center for Entrepreneurship and Innovation

Kirby examines the effects of the Affordable Care Act on entrepreneurship within health care. U.S. health care regulations currently hinder entrepreneurship among healthcare professionals, particularly for doctors seeking to establish private practices.
Kirby recommends that the U.S. implement policy changes that would better foster entrepreneurship among physicians. Measures like restructuring reimbursement rates and improving quality of care requirements would reduce the burdens that many private practices face and enable physicians to start small medical practices.

U.S. early stage investment holds up, late stage plunges

Joanna Glasner and Gené Teare, Contributors, CrunchBase

Venture capital investment slowed in the third quarter. Glasner and Teare write that estimates relying on end-of-quarter data may overstate declines in early stage investment.
Crunchbase compares its own projected funding totals with reported round count totals for the third quarter. Quarterly projected funds show bullish early stage investment. When factoring in projections, Crunchbase’s report for the third quarter finds that U.S. startups continue to enjoy high levels of strategic, seed and venture capital investment during seed and early stage rounds. However, there is a steep decline in late stage investment, with fewer companies raising late stage rounds and investors pouring less money into Series C and later rounds.

Startups get bought not sold

Ken Elefant, managing director at Intel Capital, PE Hub

Many entrepreneurs focus, sometimes shortsightedly, on the dream of reaching an IPO. As a result, start-ups often fail to develop important relationships with corporate investors. According to data from Dealogic, only five U.S.-based tech companies went public in the first eight months of 2016. To avoid going out of business or selling at a fire-sale price, Elefant recommends that entrepreneurs develop strong relationships with corporate investors early on so that a later search for an acquisition offer does not turn into a last-ditch attempt to save a sinking ship.
Corporate investors invest in companies for three reasons: to gain access to a technology, to break into other markets and to acquire. For start-ups, relationships with corporate investors offer viability and credibility. Additionally, these relationships provide development, support,  feedback and access to corporate engagement and funds. For companies that might not be on track for an IPO, strong relationships with corporate investors can lay the groundwork for an acquisition.

‘Shark Tank for Students’ Re-Defines Entrepreneurship

Christopher Putvinski, SAPVoice, Forbes

Putvinski focuses on a new television series, The Social Innovation Series. This “Shark Tank or a Y Combinator for students” asks aspiring entrepreneurs to address problems in health or wellness in their own communities.
The show grants $1,000 to students with promising and innovative ideas and a grand prize of $10,000 and the title of “SAP Teen Innovator” to the student with the winning idea.

How Blind Hiring Can Make Your Company More Inclusive

Frida Polli, Mattermark


In an editorial for Mattermark, Polli writes on how diverse companies outperform their non-diverse counterparts. Increasing diversity among employees not only promotes a more fair and equitable workplace environment but also offers a high return on investment for companies. See the McKinsey & Company Report on how diversity improves company performance. Polli suggests that “blind auditioning” is a possible solution for the lack of diversity in companies’ workforces. Using advanced analytics and assessment technologies, companies can ensure predictability and eliminate bias in their pre-hiring assessments of applicants. According to Polli, “improving diversity isn’t just the right thing to do, it’s the smart thing to do.”

And in startup news…

Google buys eye-tracking VR firm Eyelock

Grant Gross, Senior Editor for IDG News Service

Eyefluence is a California-based startup focused on eye-interaction technologies in Virtual Reality (VR) and Augmented Reality (AR) headsets. Serial entrepreneurs Jim Marggraff and David Stiehr founded Eyefluence in 2013.
Google acquired the startup on Tuesday. The acquisition reflects Google’s growing interest in VR and AR technology. The deal further shows the growing potential of VR and AR for entrepreneurs interested in building successful tech startups.

Wavefront gathers $52 mil Series B

Iris Dorbian, Author, PE Hub

Another California-based tech-based startup, Wavefront, recently reported raising $52 billion in Series B funding. Investors include big names such as Sequoia Capital, Sutter Hill Ventures and Tenaya Capital.
Wavefront develops metrics monitoring services for cloud and modern application environments. Wavefront offers invaluable services to leaders in the software industry that rely on Cloud technology, such as Workday, Box, Lyft, Microsoft, Intuit and Groupon.

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McNair Center Small Business

Big Problems for Small Practices

Big Problems for Small Practices: Examining the Effect of the Affordable Care Act on Entrepreneurship in the Healthcare Field

doctor-1461911946b29The doctor-patient relationship is an important aspect of healthcare. Small physician practices, offices with no more than a couple doctors, have been the long-standing foundation of this relationship. Unfortunately, legislative changes disincentivize doctors from being small business owners.

The Health Information Technology for Economic and Clinical Health Act (HITECH) and the Affordable Care Act (ACA) have discouraged physicians from starting their own businesses. They have done so by differing reimbursement rates and requiring unreasonable electronic medical record requirements. These conditions have decreased entrepreneurship in the healthcare field. A 2014 Physicians Foundation study found that among 20,000 U.S. doctors, only 35% described themselves as independent, not employed by a hospital or large group. This is a change from the 49% in 2012 and the 62% in 2008. Doctors now overwhelmingly choose employment at hospitals where they have less overhead, less administrative responsibilities, and better pay.

Reimbursement Rates

Reimbursement rates for Medicare actively discourage private practices. The government pays hospitals at a higher rate than independent offices for the same services. For example, the government reimburses hospitals $749 for heart scans but only gives small practices $503. Additionally, hospitals receive $876 but independent practices only get $402 for colonoscopies.

Electronic Medical Records

The required use of electronic medical records (EMR) increases administrative burdens and may decrease the quality of patient care.

Introduced as part of HITECH in 2009, EMRs were intended to increase efficiency, care coordination, and quality of patient care. Despite the apparent positive effects of EMRs, installation, maintenance, and training costs all serve as barriers to use.

The National Ambulatory Medical Care Survey found that quality of care was no different with the use of an EMR. The required system comes with an average cost of $163,765 for a single practice. For small practices this cost may be prohibitively expensive. As this is a fixed cost, it is cheaper to share the costs across multiple physicians, which incentivizes doctors to work at hospitals or large practices.

Meaningful Use and Quality of Care

Also introduced in HITECH, and further encouraged in the Affordable Care Act are “meaningful use” and “quality of care” measures. Meaningful use involves inputting specific codes that correspond with patient diagnosis into the EMR system. Many doctors find this a tedious process. However, they often have to spend a lot of time on it or risk losing a percentage of their reimbursements.

Quality of care involves the EMR system picking out documented points that are entered in a patient’s exam. It then calculates an improvement percentage that it requires doctors to meet. This is measured through filtering for certain code words or confirming that patient results are as good as the quality measure requires. For example, a month after cataract surgery, unless the patient has a previous condition, the patient should have achieved 20/40 vision.

The government instituted quality of care measures to help standardize patient care. However, this comes at the loss of human interaction between doctor and patient. Furthermore, all patients and their cases are different. Requiring certain points of improvement can be an impractical or impossible for doctors to meet. Quality of care should involve talking to patients and tailoring treatments to their needs, not a pre-defined set of instructions.

Penalties

Filing patient bills and participating in meaningful use or quality of care measures improperly can result in penalties. If a doctor cannot prove “meaningful use” of their EMR, they will receive a 2% deduction in medicare reimbursement. In 2017 the 2% will become a 3% deduction. If a physician even forgets to note that they sent a letter to the patient’s primary care doctor about a diagnosis of diabetes, the doctor can be penalized.

The quality of care requirement may seem beneficial. However, it is difficult for small practices to ensure that they meet the “meaningful use” and “quality of care” requirements. Reductions in reimbursement rates for hard to meet requirements further disincentivize doctors from owning their own offices. Independent doctors do not make as much money by seeing patients but still have to shoulder costs of running a business that hospital workers do not need to pay.

Time Wasted

Due to these new measures, physicians spend just 27% of their time in their offices seeing patients and 49.2% of time completing EMR paperwork. Even in the exam room, doctors spend 52.9% talking or examining patient and 37% of their time doing paperwork. A JAMA Internal Medicine survey stated that family practice physicians reported an EMR-associated loss of 48 minutes of free time per clinic day.

Some doctors who want to meet the regulatory burden while maintaining patient interaction choose to spend money to hire scribes or other technicians. However, this may pose too high of a cost for some small practices.

Benefits of Independent Practices

The close relationship that small practices can build between doctors and patients has shown to be helpful. The CommonWealth Fund found that small primary care practices have a lower rates of preventable hospital admissions. Hospitals or bigger practices may seem better or more efficient. However, the decrease in private practice can lower quality of patient care, increase the cost of health care, and harm the doctor-patient relationship.

Patients do want personal care. In fact, using a concierge health care service, is becoming more popular for those who can afford it. According to the American Academy of Private Physicians, in 2012, there were around 4,400 private doctors. This was a 25% increase from the previous year. This quality time, both in private practices and in concierge services, translates to being able to tailor treatments to patients needs individually.

Hospital Monopolies

The government must remedy the lack of incentive to operate a private practice. When hospitals get together, they can charge higher costs to patients for treatment. This raises the cost to the government for reimbursement rates. Reduced competition and the monopoly power of hospitals is bad for both patients and the government. The Journal of the American Medical Association found that patient costs are 19.8% higher for physician groups in multi-hospital systems compared with physician-owned organizations.

Policy Changes

The U.S. government should find a way to preserve the entrepreneurial spirit of the health profession. Without changes, doctors will lose the ability to start their own businesses as the system is rigged against them. Changing the reimbursement rates to be equal between hospitals and private practices would an important first step. Additionally, improving the requirements of meaningful use and quality of care measures so that they are less difficult to complete would alleviate the burden on private practices.

Overall, the requirements of the Affordable Care Act and other recent health laws should be changed to foster entrepreneurship in the healthcare community, not destroy it.

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McNair Center Small Business

Immigrants and Entrepreneurship

Embracing Immigrant Entrepreneurs

Every day Sharan Gahunia, owner of Raja Sweets in the Hillcroft area of Houston, Texas, sells mithai and other Indian pastries in the shop her father founded over 30 years ago. When Raja Sweets first opened up, there was little South Asian cuisine and culture within Houston, but through hard work and entrepreneurship, South Asian immigrants like Gahunia have helped turn the Hillcroft area into a booming cultural center officially recognized as the Mahatma Gandhi district.

Immigrant entrepreneurs like the Gahunia family are a key factor in American small business and entrepreneurship. 

Where are Immigrant Entrepreneurs from?

Immigrant entrepreneurs are a diverse and growing group. According to statistics from the 2013 American Community Survey, the vast majority of immigrant business owners, 23.4%, originate from Mexico, reflecting the large and long-standing Mexican immigrant population in the United States. The next three countries of origin in terms of raw number of business owners are Korea with 5.1% and India and Vietnam with Houston's Chinatown is home to many immigrant-run small businesses. https://commons.wikimedia.org/wiki/File:MetropoleCenterHoustonTX.jpg4.1% each.

Examining the percentage of business owners by country of origin provides further insight. Iran appears to be the largest exporter of entrepreneurs, with nearly 1/4, or 24.4%, of Iranian immigrants in the U.S. owning a business. The next three countries of origin with the highest rates of business ownership are South Korea with 23.1%, Brazil with 21.0% and Italy with 20.1%.

Educational Extremes and Type of Work

The survey also shows that the distribution of educational degrees among immigrant entrepreneurs is statistically bimodal. 29.8% of immigrant business owners possess a college degree, yet 25.7% of them, the second largest portion, do not have a high school degree. This wide range of educational backgrounds may reflect differences in the immigrant entrepreneur’s countries of origin.

Immigrant entrepreneurs tend to live in the larger states, with 27.8% in California, 11.8% in Florida, 10.7% in New York and 10.5% in Texas. Most immigrant entrepreneurs own either construction or professional service firms, representing 17.2% and 16.7% of all immigrant owned small businesses, respectively. However, the type of work immigrant entrepreneurs engage in is diverse, ranging from agriculture to wind-power generation. A surprising 16.2% of all immigrant owned business fall into the impossible to categorize category “other.”

Small Business Entrepreneurs

In 2012 the Small Business Administration reported higher rates in business ownership and business formation among the U.S. immigrant population as compared to the non-immigrant population. The SBA further found that immigrant-owned businesses tend to export to the global market at a disproportionately higher rate as well.

In 2014, the Kauffman Foundation found that the percentage of small businesses owned by immigrants more than doubled from 13.3 % in 1996 to 28.5% in 2014. The foundation also showed that immigrants did as well or better than native-born entrepreneurs with “opportunity entrepreneurship.” Immigrants are skilled at finding and filling market gaps — such as the unmet demand for Indian pastries the Gahunia family exploited.

Research even suggests that immigrant entrepreneurs perform better as compared to non-immigrant entrepreneurs. In a 2015 study, economists Robert Fairlie and Magnus Lofstrom found that immigrants were well suited to entrepreneurship. They listed ties with already existing immigrant populations, high amounts of family savings, and a lack of pre-existing career, as factors the may make immigrant entrepreneurs particularly successful.

High-technology Entrepreneurship

In the world of high-technology, high growth entrepreneurship, the National Venture Capital Association (NVCA) reported that, “If immigrant-founded venture-backed public companies were a country, then the value of its stock exchange would rank 16th in the world, higher than the exchanges of Russia, South Africa and Taiwan.”  These trends hold for privately held venture-backed companies as well. The study found that immigrant entrepreneurs started 30% of these businesses.

Even outside of high-growth start-up firms, immigrants have a strong positive impact in high-technology. For example, the University of Michigan showed that total computer science employment would have been 3.8% between 9.0% lower if immigration were held at 1994 levels.

 

Looking toward the Future

The NVCA study reported that 78% of immigrant entrepreneurs started their business while either on an H1B employer-sponsored or a F-1 international student visa. Overall, there is strong evidence that immigrants perform better as entrepreneurs than native-born individuals and that they are a boon to the U.S. economy. Reforming immigration policy to encourage yet more immigrant entrepreneurs would therefore contribute to America’s prosperity in the 21st century.

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McNair Center

A Conversation with Bob McNair

Bob McNair addresses the crowd with the Director of the McNair Center, Dr. Edward J. Egan.

On August 29, 2016, the McNair Center for Entrepreneurship and Innovation hosted an evening with Bob McNair.  As the founder of Cogen Technologies and the founder, chairman, and CEO of the Houston Texans, McNair drew on his vast experience in business and philanthropy to offer advice to Rice University students and young professionals.

In 1960, McNair arrived in Houston with $700 and a goal to break into the trucking industry. However, after he established his trucking company, the industry became deregulated, forcing him into millions of dollars of debt. Despite this failure, McNair used his new knowledge of deregulation to find opportunity in three industries: intermodal transport, telecommunications, and cogeneration. Cogeneration, or the concurrent production of electricity and heat, became McNair’s most successful investment, and in 1999, he sold his company Cogen Technologies for $1.5 billion.

When asked for career advice, McNair emphasized to students and young professionals the importance of adding value to their environments. “The most important thing is putting yourself in a position where you can add the most value, and when you add the most value, the compensation will come to you,” he stated.

This idea of adding value was behind the $8 million endowment from the Robert and Janice McNair Foundation that launched the McNair Center for Entrepreneurship and Innovation at Rice University, one of six across the country. McNair said, “this is an opportunity for us to make a real contribution to society and to help create an environment that empowers ingenuity and creativity, unleashes the productivity of private enterprise and builds sustainable economic growth.”

Read more in the Baker Institute’s newsletter and the Rice Thresher’s article on the event.