Tag: Entrepreneurship

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Government and Policy McNair Center Small Business

Crowdfunding

What is crowdfunding?

Crowdfunding is constantly evolving and hard to define. Elizabeth M. Gerber at Northwestern University defines crowdfunding as “an open call over the Internet for financial resources in the form of a monetary donation, sometimes in exchange for a future product, service or reward.” Due to the ease and availability of crowdfunding sites, crowdfunding has changed the way entrepreneurs source funds.

A typical modern crowdfunding campaign begins with a page on a crowdfunding website. The page describes the concept of the project, the fundraising goal and the rewards for backers. Videos, sketches and graphics demonstrate the potential of the idea. From there, backers can donate money in exchange for tiered rewards, usually depending on the amount of money contributed.

History

The first popular online crowdfunding platform, AristShare, launched in 2003 as a way for musicians to receive funds to produce new music. Artists could offer incentives to investors, like exclusive access to content or previews. This reward-based structure made the deal appealing to both artists and contributors.http://i.vimeocdn.com/video/590376642_1280x720.jpg

After the success of smaller, niche-based crowdfunding sites like AristShare, larger and broader sites took hold of the crowdfunding scene. Two of the most successful, Indiegogo and Kickstarter, were founded in 2008 and 2009, respectively. Kickstarter boasts that since their founding, more than 12 million people have contributed funds to entrepreneurs, pledging more than $2.9 billion. Indiegogo is similarly successful, raising more than $1 billion from 11 million backers.

A crowdfunding project meeting its goal does not always mean that the project will be successful in the long run. Crowdfunding campaigns can be successful if their product seems exciting to backers, but if their business plan is not sound, then it is hard to maintain success beyond the initial crowdfunding. For example, one of Indiegogo’s most popular campaigns, a high-tech smartphone concept called the Ubuntu Edge, was unable to go into production due to financial issues even though the project had raised the second highest amount of money in Indiegogo’s history.

In 2015, Crowd Expert estimated that the crowdfunding industry was worth approximately $17.25 billion. In comparison, Venture Capital in 2015 was estimated at $58.8 billion.

Successes and Failures

The most basic measure of success for crowdfunding campaigns is whether the project reaches its goal. Research from Ethan Mollick at the Wharton School of the University of Pennsylvania indicates that being successful in a crowdfunding campaign requires strategic planning. “Crowdfunding projects mostly succeed by narrow margins, or else fail by large amounts,” Mollick asserts. Kickstarter’s records back up this claim. Kickstarter’s success rate is only 35.72 percent, meaning that only about one third of projects reach their goals.

Researchers at Northwestern attempted to understand the dynamics of successful crowdfunding campaigns. Using data from previous Kickstarter projects, they used machine learning to try to predict the success of projects. Their algorithm analyzed different factors of project pages, considering aspects like number of sentences in project description, length of campaign, goal of project and number of rewards available, among others. The accuracy rate for this research was 67 percent. This research shows that although some factors can success in some cases, there is no exact recipe for a successful campaign. The researchers explained, “There is a possibility of the existence of a hidden variable that would help us classify better.”

Nonetheless, certain crowdfunding projects receive immense support and go on to experience long-term success through being acquired, undergoing an IPO or surviving as an independent business. The most successful Kickstarter campaign of all time, a smartwatch called Pebble Time, was able to raise over $20 million even though the initial goal was only $500,000. Pebble produced and shipped over 2 million watches before shutting down operations in December 2016, selling its key assets and intellectual property to Fitbit. Indiegogo has also seen projects that turned into profitable businesses, like the Flow Hive and the SONDORS Electric Bike. Both of these startups have grown since their campaigns and expanded their product lines.

Economic Implications

Crowdfunding might be an effective way to use private action to stimulate the economy and help small businesses and startups. For individuals who have difficulty initially accessing angel investment, venture capital or bank loans, crowdfunding can provide an alternative. A successful crowdfunding campaign can enable small businesses to access these more traditional types of funding later in their lifetimes.

A study in 2015 in the Thunderbird International Business Review qualified crowdfunding as a Fast-Expanding Market. FEMs are characterized by youth, rapid growth and highly lucrative results. Crowdfunding encourages virtual “formation of clusters of expertise and capability,” encouraging collaboration across the world. Adding to the “efficiency and productivity in the community value chain,” researchers also speculate that crowdfunding has the potential to bring Small and Medium-sized Enterprises (SMEs) out of sluggish growth rates.

Crowdfunding Policy

Equity crowdfunding allows investors to purchase a small equity or bond-like share in a business.

In 2011 and 2012, mainstream media brought attention to the Facebook Problem. Facebook filed complaints regarding the threshold on private investors that a company could have without registering with the Securities and Exchange Commission. Facebook considered the threshold, 500, far too low. In response, the SEC’s JOBS act in 2012 raised this threshold to 2000. Although this policy change initially intended mainly to help companies like Facebook, it inadvertently affected equity crowdfunding positively. The regulations allowed more investors per equity crowdfunding campaign.

In May 2016, another SEC regulation update gave equity crowdfunding sellers and investors even more leniency. The new policy exempted small crowdfunding operations from certain SEC regulations on investing. To qualify for exemption, issuers may only raise up to $1 million in crowdfunding per year; investors can only contribute a certain percentage of their income per year. The SEC also regulates the extent to which crowdfunding portals can involve themselves in users’ crowdfunding transactions. Although equity crowdfunding may help small businesses get initial capital, it may affect the firm’s ability to raise follow-on funds later in the process.

Nonetheless, there are still other crowdfunding policy issues that the SEC may need to address. The updated regulations place a financial burden on portals, holding them liable in certain cases of issuers not keeping promises. They may also pay too little attention to the size of businesses/individuals that use crowdfunding to raise funds.

Conclusion

Crowdfunding has potential to shake the dynamics of investment in the coming decades. We need to ensure that the regulations surrounding this market are desirable for investors, issuers and crowdfunding portals.

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McNair Center Weekly Roundup

Entrepreneurship Weekly Roundup: 2/24/17

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 entrepreneurship this week:

Austin’s Venture Capital

Eliza Martin, Research Assistant, McNair Center for Entrepreneurship and Innovation

In her latest post for the McNair Center, Martin follows up on her previous analysis of Austin’s booming entrepreneurial ecosystem. Martin highlights Austin’s decreases in VC investment and deal closures from 2016 as signs of a slowing in growth. According to a report released by PitchBook, 2016 brought substantially fewer deal closures than 2015 for Austin startups. Martin suggests that increased perceived risk among investors and a recent decline in startups are byproducts of an over-investment into Austin startups in previous years.

Still, Martin remains optimistic about the health of Austin’s entrepreneurial ecosystem going forward, predicting that the city “ will see investment increase again after VC investment balances out.”

Big Food Looks to Startups for Ideas, Innovation

Annie Gasparro, Reporter, Wall Street Journal

When the Kellogg’s and General Mill’s of the food industry realized that they couldn’t quell rising consumer obsession with healthy and unprocessed products, they started investing in food startups.

In recent years, many prominent names in the food processing and consumer goods industry began creating VC funds to invest food startups. According to CircleUp, a company that acts as an investment marketplace for food startups and PE firms, big players in the consumer good industry saw roughly $18 billion of their market share swept away by smaller competitors between 2011 and 2015. These partnerships are also mutually beneficial. Emerging food startups gain access to resources and credibility, and larger corporations receive valuable insight into the successful marketing strategies and recipes of their new competitors.

Why Some Startups Succeed (and Why Most Fail)

Patrick Henry, Founder and CEO of QuestFusion, Contributor, Entrepreneur

In his article for the Entrepreneur, successful entrepreneur and startup consultant, Patrick Henry, analyzes startup failures and successes. Henry reinforces the relevance of his post by citing an article by FastCompany, which states that 75% of venture-backed startups fail. Henry frames the question in two ways: what makes startups fail, and what makes startups succeed? Citing studies from StatisticBrain, CB Insights and Compass,

Henry attributes most business outcomes to company leadership. More often than not, successful startups have CEO’s or c-suite members with general and industry-specific business knowledge. Think Google’s Eric Schmidt, Ebay’s Meg Whitman or Apple’s Steve Jobs. Commons reasons for startup failures, such as raising too much capital too quickly, running out of cash or ineffective marketing, signal poor decision-making at the management level. Company founders should consider adding “seasoned” business veterans who the possess “domain expertise” to best support their strong technical team and existing product design.

According to Henry, startups should not undergo more than two pivots. Pivots are changes “in course of direction that result in a material change in the product-market strategy.” While young businesses should be equipped to adjust to market fluctuations, they should avoid being so flexible that they lose sight of their founding mission.

The Megatrends of Entrepreneurship are Key to Job Growth

Wendy Guillies, Contributor, Forbes

Wendy Guillies, President and CEO of the Kauffman Foundation, discusses the megatrends of entrepreneurship.

The first major trend involves demographics. Despite America’s growing diversity, the country’s entrepreneurial population has remained largely stagnant. Women and other minorities remain largely underrepresented in business ownership. According to Kauffman Foundation data, minorities and women are half as likely as their counterparts to own a business that employs people.

The second key trend focuses on geography. Entrepreneurial activity is becoming increasingly concentrated in urban centers. According to Guillies, this phenomenon is largely a function of population shifts, as more and more people relocate to cities. From the 1980s to 2017, the share of small businesses based in rural communities dropped from 20 to 12 percent. “Increasing urbanism” also has spurred the spread of entrepreneurial activity from the major coastal hubs, “ driving geographical equality.”

The third trend involves job creation and technology. According to Guillies, “in the past, as companies scaled their revenue, jobs scaled in an almost linear fashion.” Now, this is no longer the case. For example, in 1962, when Kodak reached $1 billion ($8 billion today) in sales, the corporation employed over 75,000 people. When Facebook surpassed similar sales targets in 2012, the company employed a mere 6,300 workers. Despite promoting capital efficiency, digitization has slowed job creation from the startup sector, However, there is a significant upside to these web-based technologies: such platforms lower many of the barriers to market entry for small businesses.

According to Guillies, “these three megatrend…are sources of both concern and optimism.” If entrepreneurs and policymakers can better understand and take advantages of these trends, they can “enhance job opportunities for the benefit of us all.” For instance, if minorities alone started as many businesses as non-minorities, the economy would add more than 9.5 million jobs.

QA with Jared Bakewell on the 2017 Annual State of Entrepreneurship Address

Silicon Prairie Team, Silicon Prairie News

The 8th Annual State of Entrepreneurship Address took place this past weekend in Washington D.C. Jared Bakewell, CEO and Co-founder of Proseeds, an Omaha-based startup, recently sat down with the Silicon Prairie Team to discuss the event’s key takeaways. The Kauffman Foundation’s Guillies delivered the address,and she focused on the three major trends of entrepreneurship.

In the interview, Bakewell stressed a general consensus among the event’s attendees, which included entrepreneurs, venture capitalists, and politicians: government policy should remove early barriers to success for startups and small businesses. For entrepreneurs in the midwest and rural areas, access to capital is a concern.Currently, most of the nation’s VC flows toward the coastal hubs. Additional concerns for startups looking to expand operations are instabilities in both healthcare and immigration policy. Bakewell optimistically concluded the interview, adding that many of the attending politicians appeared open to the suggested solutions to these challenges.

IBM Watson joins Indiegogo to back a crowdfund-to-production service for entrepreneurs

Khari Johnson, Reporter, VentureBeat

Last week, IBM Watson and Arrow Electronics announced a new partnership with crowdfunding website, Indiegogo. IBM spokesman Deon Newman shared with VentureBeat that the partnership will expand Indiegogo’s operations from purely fundraising to also incubating and accelerating startups.

Indiegogo cofounder Slava Rubin reiterated the strategic shift, telling VentureBeat that the company plans on evolving its platform into “a springboard for entrepreneurs.” All startups that participate in the partnership’s services will gain access to IBM Watson’s Bluemix. Bluemix, along with IBM Watson’s other AI services, will offer smaller companies the opportunity to apply machine learning processes to their existing infrastructure. Some successful participants will even participate in Bluexmix’s global entrepreneur program and receive $50,000 in capital from Arrow.

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McNair Center Startup Ecosystems

Austin’s Venture Capital

Austin, Texas
Austin, Texas

In my previous blog post, I discussed Austin, Texas’ strong history of entrepreneurship and the many resources in the ecosystem. Supportive Austin policies have resulted in the creation of the Entrepreneur Center of Austin, and resources like Capital Factory and Tech Ranch Austin have emerged. Austin’s entrepreneurial ecosystem appeared to be healthy.

A recent PitchBook Report discussing venture capital in Austin shows the ecosystem to not be as healthy as previously thought. In 2014, Austin saw 286 deals closed at a value of $1.4 billion. Similarly, in 2015, 296 deals closed or $1.3 billion. 2016 saw a substantial decrease in the number and value of deals closed with 199 deals closed at a value of $978 million.

Austin’s ecosystem reflects a nationwide trend in declining deals. According to PitchBook, the number of deals closed nationwide had been rising steadily since 2009, peaking in 2014 with 10,501 deals closed. 2015 and 2016 both saw decreases in the number of deals closed; 10,293 and 8,136 respectively. The 8,136 deals closed in 2016 is the lowest number of deals closed since 2012.

An insufficient supply of startups and an increased perception of risk are decreasing VC investment in the Austin ecosystem. Investors likely fear that the oversupply of capital that has been invested in the system in 2014 and 2015 has led to slumping returns, so they are pulling back their investments. Once VC investment balances out, it is likely that Austin will see investment increase again.

Outside investment in Austin-based companies soared in 2014 and 2015, as respectively, 396 and 370 investors from outside the Austin metropolitan statistical area invested in Austin-based ventures. In 2015, Austin had the most venture capital invested in its first financings with $324 million. However, venture capital activity in the United States overall has declined. Austin’s most prominent VC fund, Austin Ventures, closed in 2015. After the two-year boom period from 2014 to 2015, the rate of VC investing in Austin startups has slid considerably over the 2016 period.

Austin’s diverse ecosystem is an asset to the stability of VC investment in the area. While the majority of VC activity occurs in the software industry, the pharmaceutical and biotech industry also attract significant VC investment. In 2015, 12 deals were closed in health care devices and services, and in 2016, 11 deals. The opening of the Dell Seton Medical Center and Capital City Innovation, which will work to connect entrepreneurs with healthcare research, will likely contribute to increases in VC for health care devices and services.

According to a McNair Center Report, VC investment in Texas is falling. Yet Austin’s relatively low costs and the boom of angel/seed investment have given Austin a reputation as a thriving startup ecosystem in a state where VC investment is dropping. Despite decreases in a 2016 VC investment in the region, it is likely that Austin will see investment in crease again after VC investment balances out.

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McNair Center Weekly Roundup

Entrepreneurship Weekly Roundup: 2/17/17

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 entrepreneurship this week:

The International Entrepreneur Rule: The US Startup Visa

Ramee Saleh, Research Assistant, McNair Center for Entrepreneurship

During the last days of the Obama Administration, the United States Citizenship and Immigration Services (USCIS) passed the International Entrepreneur Rule. The legislation intends to attract international entrepreneurs to the U.S. by granting them “discretionary parole.”

Under the rule, entrepreneurs can apply for temporary five year visas, as long as they partially own a startup that has received at least $250,000 in VC funding from “established U.S. investors” or $100,000 from “government entities.” If a startup fails to meet these funding requirements, the applicant must prove that a “significant public benefit” would result from the his or her entry into the United States. Due to the strict standards, the Department of Homeland Security estimates the program to admit only 2,940 entrepreneurs annually.

Scheduled to go into effect July 17, the International Entrepreneur Rule is still subject to change by any reforms to the H-1B visa program by the Trump Administration.

With $6B in Deals in 2016, ID Management Is a Hot Sector You May Have Missed

Joanna Glasner, Contributor, TechCrunch

In 2016, startups involved in identity management collectively claimed over $6 billion in acquisitions from private equity buyers. Identity management startups also experienced successful funding rounds, raising over $200 million from VCs. These startups are responding to a growing need for improvements in health care IT and authentication. Last year,ECRI Institute, a global nonprofit focused on patient safety, listed “patient identification errors” as the second most important safety concern for health care organizations.

TechCrunch’s Glasner highlights tech unicorn Otka, an identification management and authentication platform provider, that has raised over $200 million from VCs. Otka is considering going public this year.

Lawmakers Try to Stop State-Sponsored Retirement Plans

Anne Tergese, Reporter, The Wall Street Journal

Last week, Republican Congressmen introduced measures to prevent small businesses from automatically enrolling employees in state or locally sponsored retirement plans. The bill comes as several states have enacted retirement savings programs that automatically deduct earnings from employee’s paychecks for deposit into individual retirement accounts.

These programs only affect residents who do not have access to a workplace retirement plan; AARP estimates that this number stands at 55 million people nationwide by. AARP executive vice president Nancy LeaMond has publicly stated that Congress should take steps to support, rather than end, these state savings programs.

Supporters of the bill believe that state-sponsored retirement plans “discourage small businesses from offering private-sector plans” by forcing employees “into government-run plans with fewer protections and less control over their hard-earned savings.”

Banks Are Finally Sprouting Anew in America

Rachel Witkowski, Reporter, The Wall Street Journal

In the past few months, the Federal Deposit Insurance Corporation received the greatest volume of applications for “startup banks” since the financial crisis.The increase reflects an improving economy and expectations for future deregulation of the financial sector.

Startup, or “community,” banks are traditionally viewed as banks that hold less than $1 billion in assets. According to Q3 FDIC data from last year, community banks are responsible for 43% of loans to small businesses. The Wall Street Journal’s Witkowski reports that many community bankers believe that “the decline in the number of banks has led to fewer lending options for startups and small businesses.” Supporters of deregulation believe that greater numbers of community banks spur economic growth and job creation.

Don’t Panic Labs Pioneers “Dev-for-Equity” Model to Help Startups

Christine McGuigan, Reporter, Silicon Prairie News

Don’t Panic Labs is an offshoot of the engineering arm of successful VC fund, Nebraska Global. Don’t Panic Labs adopts a “dev-for-equity” model, assisting startups and entrepreneurs with software and product development in return for company equity. The firm also provides software development services for publicly traded companies that do not require capital investment.

Despite serving established companies, Bill Udell, Integrator for Don’t Panic Labs, told Silicon Prairie News that the firm’s “DNA is in creating startup companies.” In 2016, the firm poured $396,000 of dev-for-equity investment into startups. Don’t Panic Lab focuses on product development and training for its clients’ in-house software engineers.

PitchBook Brings Company Financial Data to Its Mobile App

John Mannes, Writer, TechCrunch

MorningStar, Chicago-based investment research and management firm, acquired PitchBook in 2016. Pitchbook is an industry leader in providing investors with up-to-date coverage of VC, PE and M&A transactions. According TechCrunch’s Mannes, PitchBook, although known for its comprehensive coverage of tech firms, is also increasingly expanding its database to include coverage on non-tech companies as well.

PitchBook recently announced plans to add financial data for 226,000 private companies to its mobile app. The update will provide the database’s 7,000 active members with previously unavailable insight into the financials and revenue figures of private companies.

And in startup news…

Ford to Invest $1 Billion in Artificial Intelligence Start-Up

Mike Isac, technology reporter based in The Times’s San Francisco bureau, and Neal E. Boudette, Reporter, The New York Times

Many automakers are hoping to achieve some of the success that many Silicon Valley startups have found by investing in autonomous vehicle technology and ride-hailing services. Ford recently announced that it will invest $1B in Argo AI, startup focused on utilizing artificial intelligence to develop self-driving cars. Mark Fields, president and CEO of Ford, told reporters last week that the automaker hopes to become “part of the ecosystem of Silicon Valley.”

With the rise in popularity of “mobility services,” car ownership is growing increasingly unnecessary for consumers living in urban centers. Ford’s move suggests an industry-wide shift in strategy, as traditional automakers must adapt to shifting consumer attitudes. For instance, last year General Motors invested $500 million in ride-hailing startup, Lyft, and acquired Cruise Automation, a startup geared toward developing roadway technologies that support autonomous vehicles.

Fields explains the motives behind Ford’s investment: “If we can combine the best of a start-up and marry that with proper equity compensation, then that’s the best of both worlds.”

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Government and Policy McNair Center

The International Entrepreneur Rule: The US Startup Visa

SAN FRANCISCO, CA - SEPTEMBER 7: Atmosphere during the TechCrunch Disrupt SF 2013 Hackathon inside The Concourse at San Francisco Design Center on September 7, 2013 in San Francisco, California. (Photo by Jeff Bottari/TechCrunch) *** Local Caption ***

The Obama administration proposed new provisions for immigrant entrepreneurs in August 2016. The administration designed the proposal to attract international entrepreneurial talent to the United States, especially in advanced technology fields. In mid-January, with only days left in President Obama’s term, the United States Citizenship and Immigration Services (USCIS) finalized the details of the “International Entrepreneur Rule.” It is scheduled to go into effect on July 17, 2017. Whether it goes into effect will depend on President Trump’s immigration plan, which may see changes in the current H1-B visa program.
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Overview

The International Entrepreneur Rule would allow USCIS to grant discretionary parole to international entrepreneurs for two and a half years . However, entrepreneurs may struggle to qualify for a parole grant unless they are already involved in a successful venture. The rule states that first-time applicants must own at least 10% of a U.S. startup that is less than five years old and play a significant role in its management.

Applicants must also demonstrate that their startup has high potential for growth and job creation. The two main avenues for satisfying this criterion are demonstrating that the company has received $250,000 or more in venture capital from “established U.S. investors” or at least $100,000 or more in funding from government entities. Applicants that do not meet these standards may still qualify if they can demonstrate “significant public benefit that would be provided by the applicant’s (or family’s) parole into the United States.”

After their initial parole is over, entrepreneurs may apply to extend their stay for an additional two and a half years. In order to receive an extension, entrepreneurs must show that their startups have “shown signs of significant growth.” A total of two parole grants is the maximum; there are no further extensions. If entrepreneurs wish to stay longer, they must find another method to secure a visa or a green card.

Analysis

When this rule was originally proposed by the Obama administration, it received early praise; Tim Ryan, the co-founder of Startup San Diego, applauded the proposal as a step in the right direction.

However, government agencies only expect this rule to impact a very limited number of entrepreneurs. The Department of Homeland Security estimates that a mere 2,940 international entrepreneurs will qualify annually. DHS also estimates they will bring approximately 3,234 dependents and spouses. In contrast, the USCIS approved 85,000 H1-B visas in the 2014 fiscal year.

The high level of investment required may serve as a hurdle for applicants. Y Combinator, widely considered the world’s best startup accelerator, only offers startups a maximum of $120,000 in investment funding. However, to qualify for the proposed International Entrepreneur Rule, USCIS expects companies to have at least $250,000. Not only that, but this money must come from investors with a record of repeated investment successes. Some policy advocates worry that there simply will not be enough reputable investors able to provide that level of funding. Moreover, even if some investors can fulfill the requirement, they may not all have the necessary experience to satisfy the rule.

The rule may help to keep entrepreneurial talent in the U.S., but will do little to attract new recruits. The applicant pool may be limited by the requirements that the company must be U.S.-founded and that the applicant have a significant role in the company. Because of these specifications, applicants must be individuals who are already in the U.S. Nonetheless, this rule may help international students at U.S. universities who are unable to acquire H-1B visas.

There is also an issue of time — entrepreneurs only have five years, maximum. The high levels of investment required for initial application and renewal may put strain on startups. TechCrunch puts the average time of an “IPO-track startup” at about seven years, although it can take up to ten years. Given this information, the parole periods may not be long enough to positively impact startups.

Ultimately, potential investors may view the startup visa as an undesirable risk. Investors will be aware of the possibility that a company, or at least its key members, could lose immigration status.

Lastly, it is unclear whether the Trump Administration will alter the details of the rule. A Department of Homeland Security spokesman informed CNN on January 23 that the DHS is still awaiting guidance on how President Trump’s executive order freezing new and pending regulations will impact the International Entrepreneur Rule’s implementation.

Learning from Other Countries

The U.S. is not the first to propose a visa for startup entrepreneurs. Many other countries have established their own processes for admitting international entrepreneurs, including the United Kingdom, Canada and France.

The U.K. allows individuals wishing to set up or take over a business within its borders to apply for a Tier 1 (Entrepreneurship) Visa which can be extended before they can apply for settlement or an indefinite leave to remain. The U.K.’s financial requirements for applicants are also more flexible than the U.S. requirements in sources and amounts of funding. The U.K. startup visa does not require that applicants start the business themselves. Instead, intention of starting a new business, taking over one or providing significant funding is enough.

Canada seeks to attract innovative talent by tying them to government-approved Canadian entities with a goal of facilitating long-term success. The Canadian Start-Up Visa Program focuses on the creation of new startups. Applicants must obtain at least one letter of support that details funding from a list of designated organizations. This includes venture capital funds, angel investor groups and business incubators.

France launched its French Tech Visa in 2016 to complement the “French Tech Ticket” program it began in 2015. The French Tech Ticket program selects 70 international entrepreneur teams and provides funding and support with a French incubator for a year. The French Tech Visa expands this program to attract foreign startup founders, exceptional talent, investors and angels by offering renewable visas.

The U.S. could look into incorporating aspects of these programs to compete for the top foreign entrepreneurs. For example, the entrepreneurs can only renew this visa once; perhaps lawmakers could extend its duration or allow additional renewals. The U.S. could also aid the integration of accepted businesses into the startup and tech communities. These changes, however, would be dependent on President Trump’s immigration policy.

Conclusion

Eligibility requirements of the International Entrepreneur Rule are rigorous, and the time period allotted by the visa is short. It is reasonable to assume that the proposed startup visa would have little, if any, economic impact. Moreover, if President Trump repeals the order, there may be little hope for a truly meaningful startup visa. While Trump vows to “establish new immigration controls to boost wages and to ensure that open jobs are offered to American workers first,” his exact plans for reforming H-1B visas, including the possibility of a startup visa, are unclear.

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McNair Center Weekly Roundup

Entrepreneurship Weekly Roundup: 2/3/17

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 entrepreneurship this week:

Reducing Recidivism through Entrepreneurship

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

In her latest piece, McNair’s Kirby highlights the promise of entrepreneurial programs in curbing recidivism among newly released inmates. Beyond supporting local economies and communities, reducing recidivism increases productivity of the formerly incarcerated – an often overlooked and underutilized portion of the labor force.

Many ventures that offer entrepreneurial education programs in prisons have witnessed high returns on their investments. For instance, alumni of the Prison Entrepreneurship Program, a Houston-based nonprofit, boast a 100% employment rate after one year of their release and have created more than 2,000 small businesses.

Report: Trump Plans H-1B and Other Work Visa Reforms

Ingrid Lunden, Writer, TechCrunch

President Trump’s recent executive order on immigration was criticized by some Silicon Valley tech firms, including Google, Facebook and Microsoft. According to a report published by Bloomberg, the administration plans to announce another executive order that will reform the H-1B visa program. A draft of the order circulated by Bloomberg reveals an emphasis on protecting American workers.

Many tech companies rely on H-1B visas for recruiting  foreign employees who possess specific skills or talent that cannot be found domestically. However, there is a bipartisan consensus that the visa program needs reform as many outsourcing firms abuse H-1B visas.  Some legislators propose adding wage requirements to increase competition and quality in foreign recruitment.

Snap Said to Choose NYSE over Rival Nasdaq for Upcoming IPO

Sarah Frier and Alex Barinka, Reporters, Bloomberg Technology

Snap Inc.’s IPO will go through the New York Stock Exchange for its IPO, which is expected to come sometime in March. Snap’s choice reflects a reversal in tech IPO’s, as an increasing number of tech firms are choosing the NYSE over the Nasdaq to debut their shares. This transition follows Facebook’s botched IPO on Nasdaq in 2012.

In other news, Snap Inc. is developing technology that will update Snapchat’s in-app lenses to include filters for environments and landscapes. The AR features, though not scheduled for a near-term launch, also offer an attractive “range of options for potential advertisers.”

Small Businesses Uneasy over Border-Adjustment Tax Plan

Ruth Simon and Richard Rubin, Reporters, Wall Street Journal

The U.S. House Republicans’ proposal to reform the tax code includes an important section on border adjustment. Border adjustment restricts businesses from deducting the costs of imports from their taxable income. Some skeptics fear that the provision will pressure firms that rely on imports to raise their prices.

However, small businesses that rely on imports for obtaining cheap raw materials worry that border adjustment will bring higher operating costs. According to House Representative Tom Reed (R – N.Y.), a member on the House Ways and Means Committee, lawmakers are considering offering “safe harbors”  for small businesses to avoid increased expenses.

The proposed plan exempts domestic purchases and adopts a flat corporate tax rate of 20%. Supporters of the plan believe that “the dollar will rise to offset the tax change” through cheaper imports.

And in startup news…

Lyft Cuts Sales Staff, Reorganizes Team as the Startup Chases Uber

Eric Newcomer, Startup Reporter, Bloomberg Technology

San Francisco-based startup, Lyft, was founded in 2012 as ride-booking app.Despite trailing Uber in overall market share, Lyft has found success in marketing directly to customers. By cutting fares, the startup also now serves 20-40% of consumers in large U.S. cities. Coupled with recent cost-cutting efforts, Lyft plans to turn a profit by 2018.

Recent trims in its labor force are helping Lyft gain a competitive edge over other ride-hailing apps. The company also plans to partner with more governments and health-care organizations going forward. In January, Lyft announced a collaboration with National MedTrans Network to offer “2,500 rides a week for medical appointments” in New York City.

Cafe X Opens in San Francisco, Bringing Robots to the Coffee Shop

John Mannes, Reporter, TechCrunch

Cafe X founder Henry Hu is transforming the traditional coffee shop with his latest startup. With Cafe X, customers order their drinks at an on-site kiosk using a mobile app, and a “robot” prepares and serves their coffee. The startup opened its first American location in San Francisco this past week. Hu hopes to expand the company’s operations into a franchise, with each shop locally sourcing its coffee beans.

Hu’s startup received backing from a successful seed round from last year that drew in $5 million from prominent VCs, Khosla Ventures, Social Capital, Jason Calacanis, Felicis Ventures, Silicon Valley Bank and the Thiel Foundation.

With Cafe X, customers save time and money (only $2.25 for an 8 oz drink). Furthermore, automation introduces a marketing advantage, as profits can be spent on sales rather than labor costs.

Comparably Raises $7.25 million to Help Match Employees with the Best Companies

Ken Yeung, Staff Writer, VentureBeat

California-based startup Comparably collectively raised $7.25 from VC firms in its latest funding round. Competing with Glassdoor and LinkedIn, the startup offers job-market monitoring services and publishes relevant information on industry salaries and company culture for job hunters.

The startup’s recent funding totals enable Comparably to expand its monitoring services and partner with more companies. Comparably co-founder Jason Nazar told VentureBeat in 2016 that the company’s mission was “to make work better” through “transparency around compensation and culture.”

The Weekly Roundup is taking next week off and will return on February 17.

Categories
Government and Policy McNair Center

Reducing Recidivism through Entrepreneurship

Reducing Recidivism through Entrepreneurship

High rates of recidivism in the United States negatively affect prisons, inmates, the government and tax-paying citizens. In 2013, the U.S. imprisoned 2,220,300 people. A Bureau of Justice Statistics study found that within three years of release, 67.8% of released prisoners were rearrested. Utah_State_Prison_Wasatch_FacilityWithin five years, 76.6% of released prisoners were rearrested.

Researchers typically link recidivism to unemployment, low levels of education, mental health problems, inability to re-integrate into society after prison, impulsiveness, association with other criminals, family instability and as well as other factors.

High levels of recidivism costs states millions of dollars; A Pew Charitable Trusts study estimated that if 41 states cut their recidivism rates by 10%, they would save $635 million. On top of the monetary costs for the states, recidivism rates have a negative effect on families and communities including family instability and a higher probability that a family will live in poverty. Solving the recidivism issue would not only save the government and taxpayers money, but it would also improve the lives of former inmates and those around them.

Entrepreneurship Potential of Inmates

A variety of entrepreneurs and public service organizations have developed programs to empower prisoners and combat high recidivism rates. Notable social entrepreneurship programs such as the Last Mile and Cafe Momentum provide leadership skills and help reduce recidivism through a variety of methods. The Last Mile, as the McNair Center’s Julia Wang describes, focuses on teaching inmates business and computer skills in California. Cafe Momentum, a functional restaurant in Dallas, gives released youth offenders transferable life skills related to the restaurant industry.

While social entrepreneurship is a start, what about actually teaching entrepreneurship skills to prisoners?

While some might assume that inmates are incapable of holding down a job, let alone establishing their own businesses, the reality is that many people leaving the prison system are potential entrepreneurs. Inmates that took the Miner Sentence Completion Scale-Form T test, an assessment of entrepreneurial aptitude, scored higher than average entrepreneurs, slow-growth entrepreneurs and manager scientists. Additionally, many inmates are in prison due to their participation in illegal forms of entrepreneurship, including drug trafficking and smuggling. In Freakonomics, Steven Levitt remarks that the gang in Sudhir Venkatesh’s study of the drug trade acted as a franchise for the larger Black Disciples organization. Coupled with the willingness to take risks that characterizes many inmates, prisoners could be prime candidates for entrepreneurship.

Prison Entrepreneurship Program

One of the most notable and successful programs is the Prison Entrepreneurship Program (PEP), an innovative rehabilitation program aimed at transforming inmates in Texas. PEP places carefully selected inmates through a four-month business education program. This program teaches them skills valuable in entrepreneurial settings, including financial literacy, an employment workshop, a business etiquette course and a Toastmasters class. Participants take over forty exams and interact with business executives. The final exam involves a thirty-minute business-plan presentation. PEP also provides a prison-release and post-prison components including follow-up and startup mentoring.

PEP’s results demonstrate a fantastic return on investment, especially given the 1,300+ participants. 100% of PEP graduates find jobs within 90 days of release. Nearly 100% of these graduates stay employed after a year. Since 2004, PEP graduates have launched more than 200 businesses. Six of these generate over $1 million in gross annual revenue. Most importantly, PEP graduates have a recidivism rate of less than 7%.

Defy Ventures

Defy Ventures also provides an entrepreneurial education to inmates. This national organization, which mostly operates in New York and California, describes itself as “an entrepreneurship, employment and character development training program for currently and formerly incarcerated men, women and youth.” It puts former inmates, mostly former leaders of drug rings and gangs, through a two-month training program. Defy Ventures graduates of this program are eligible to apply for a 12-month entrepreneurship program in which they compete for startup grants. This program has a 3% recidivism rate and has produced more than 150 startups. Most of these startups are small businesses, such as eco-friendly cleaning services. Defy has distributed over half a million dollars to these startups and small businesses through business-pitch competition awards and micro-loans. Additionally, participants report a 95% employment rate within 7 months of enrolling in Defy.

Inmates to Entrepreneurs

Inmates to Entrepreneurs provides educational seminars on entrepreneurship, online resources and group-based support to help former inmates start low-capital businesses. This program, based in North Carolina, focuses on giving seminars on starting businesses in local prisons to inmates with six or fewer months to serve. Additionally, the organization brings in ex-offender mentors who run successful businesses. A.J. Ware, a member of the Board of Directors for this nonprofit noted in a TEDxRaleigh talk that participating inmates had less than a 3% recidivism rate. Additionally, former inmates had 75% employment rate within 90 days of release. Ware also stated that in 2012, participants started 14 business. Inmates to Entrepreneurs is unique in its ability to provide large-scale learning. Its online resources and seminars are easier to implement in a variety of locations compared to the other two programs.

For the Future

These three programs illustrate the potential of entrepreneurship programs in reducing U.S. recidivism rates. Expansion of these programs could potentially make the same positive impact on prison populations across the nation. However, it is also possible that the small size of these programs is integral to their success.

All of the programs described here carefully select a small group of participants. It may not be possible to target all parts of the prison population. Many of these programs have a competitive application process and low acceptance rate. Researchers could conduct further studies to see the effects of entrepreneurship programs on a large scale without rigorous selection criteria.

It may be impossible to use these programs to help all prisoners, so how many can these programs help? A 2012 Bureau of Justice Statistics statistic table on federal arrests indicates that approximately 20% of inmates could have entrepreneurial potential based on their crime. White-collar crime and drug trafficking offenses all indicate entrepreneurship potential. Targeting these specific offenders with entrepreneurship programs can help reduce recidivism.

Focusing on a small subset of the population still has long-term beneficial effects for inmates and their communities. PEP has a 340% return on every dollar donated due to reduced recidivism and reliance on government assistance. The potential economic benefit of an expansion of these programs could save the government and taxpayers millions of dollars.

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McNair Center Weekly Roundup

Entrepreneurship Weekly Roundup: 1/27/2017

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 entrepreneurship this week:

The Right to Entrepreneurship

Tay Jacobe, Research Assistant, McNair Center for Entrepreneurship and Innovation

This week, McNair’s Jacobe focuses on the link between entrepreneurship and human rights. While the intersection between activism and entrepreneurship has yet to gain significant traction in the U.S., international collaborations between the two sectors have found success. Jacobe points out that “Human rights and entrepreneurship have the ability to reinforce one another,” citing reports from Fordham University and Pontifical Catholic University of Peru on the potential of human development-centered entrepreneurial ventures. According to Jacobe, U.S policy should reflect a balance that advances entrepreneurship and promotes protection of human rights.

Prairie meets CES: Top 10 trends to watch in 2017

Keith Fix, Contributor, Silicon Prairie News

The annual Consumer Electronic Show (CES) took place earlier this month in Las Vegas. Silicon Prairie’s Fix shares his 2017 predictions for major trends to shake consumer technology, and artificial intelligence, smart homes, intelligent systems (Amazon Echo), wearables, self driving cars, virtual reality, and drones are among his top picks. Fix expects the industry to experience further fragmentation and democratization as startups continue to develop new technologies in order to keep pace with consumer expectations.

In a tech-saturated world, customer feedback is everything

Jeremy Bailey, Contributor, TechCrunch

TechCrunch’s Bailey emphasizes the importance of gauging customer feedback throughout the design process in the tech industry. Too often, design teams undervalue the power of customer interactions. As evidence, Bailey cites AirBnB’s notorious success in growing its consumer base by 200% after meeting for one afternoon with its early users. In order to achieve a dynamic and responsive design model, companies should restructure their “internal bureaucracy” and adopt a “customer-centric” mindset. Bailey suggests that design teams take a simple approach: development of a problem statement, collaborative hypothesis-generation, and constant reevaluation.

Most Small Businesses Create Fewer Than One New Job a Year, Study Finds

Ruth Simon, Senior Special Writer, The Wall Street Journal

According to a recent study from JPMorgan Chase & Co. Institute that spanned the payroll records of 45,000 small business in 2015, small business hiring has been sluggish and inconsistent. In fact, the sector’s median level of employment growth sits at less than one new full time position per year. Although small businesses are often considered the crucial driver of the American economy, most do not expand. While small businesses employ 17% of America’s labor share, 89% employ fewer than 20 workers. Professor Scott Stern, who studies entrepreneurship at MIT, explains that the “belief that entrepreneurship in general is a driver of economic growth and prosperity” might be misguided.

How to Find and Start Your Next Entrepreneurial Effort

Nathan Resnick, Contributor, Entrepreneur

Nathan Resnick, founder of Sourcify, a startup based in Tel Aviv that helps connect entrepreneurs with trusted manufacturers, offers helpful advice for millennial entrepreneurs who are considering their next venture. Resnick advises entrepreneurs to consistently gauge audience feedback during early planning stages as audience responses help narrow the focus of a project.  Resnick emphasizes the importance of an entrepreneur’s willingness to acquire new skills and embrace market competition.

Fintech Companies Could Give Billions of People More Banking Options

Jake Kendall, Author, Harvard Business Review

Harvard Business Review’s Kendall is the director of Digital Financial Services Lab, an early stage incubator that supports entrepreneurs who launch fintech startups in developing companies. Financial technology, or fintech, refers to the high-tech industry involved in computer software development of innovative financial services, such as digital banking programs. Despite investment into fintech increasing eight-fold since 2011, its benefits have largely been restricted to mature economies.

Kendall identifies three main challenges that fintech startups operating in developing countries must overcome: “lack of cloud infrastructure, users who are “less digital” than rich-world users, and users who live economically chaotic lives based primarily in the informal sector.” Still, many entrepreneurs are launching fintech startups to support the 2 billion customers living in regions without formal banking services. Plus, an increasing global trend of mobile phone ownership serves as a promising platform for fintech startups.

3 charts that show the effect of venture fundraising on founder ownership

Adley Bowden, VP of Market Analysis, PitchBook

PitchBook released an article illustrating the diluting effects of venture fundraising on founder ownership. The data used in the graphic analysis are taken from the results of a survey conducted by J.Thelander Consulting’s of 380 private venture-backed companies in the US. Although capital raises are a critical and necessary component of any startup’s success, PitchBook’s Bowden emphasizes that founders should understand the diluting effects of venture fundraising on their equity percentages. According to Bowden, “If all goes well and the company’s value increases, this is a win-win situation, but in the case that things don’t go well, the economics can turn against founders fairly quickly.” The article includes three charts that track founders’ shares in their companies – distinguishing between biotech, medical device, and tech industries – through various funding stages. At pre IPO, all three industries reveal founder ownership percentages below 10%.

15 charts that illustrate how the US venture industry looked in 2016

Kyle Stanford, Analyst, PitchBook

PitchBook also recently released an article that depicts the state of venture capital in 2016. The article features 15 charts of the key performance indicators that are frequently used in measuring VC activity. Utilizing standard industry metrics, PitchBook’s full report offers an in-depth analysis of VC-backed firms in the U.S, including graphics on angel and seed funding, fundraising by quarter, VC-backed exits, and corporate VC participation.

Categories
Government and Policy McNair Center Women

The Right to Entrepreneurship

Entrepreneurship and human rights are not frequently mentioned in the same conversation in the United States. However, in international policy, human rights and entrepreneurship are linked by many common policy goals, including enforcing the rule of law, improving infrastructure and fighting corruption. Rights necessary to pursue entrepreneurial endeavors–like the right to participate in the economy, the rights to education and information and access to credit–are considered crucial for the world’s poor. By pursuing these goals, human rights activists and entrepreneurship advocates can work together for the good of all.

https://upload.wikimedia.org/wikipedia/commons/d/de/UN_Geneva_Human_Rights_and_Alliance_of_Civilizations_Room.jpg The UN Human Rights Council meets here.
The UN Human Rights Council meets in Alliance of Civilizations room in Geneva.

Human Rights

Human rights are defined by the UN Office of the High Commissioner for Human Rights as “rights inherent to all human beings, whatever our nationality, place of residence, sex, national or ethnic origin, colour, religion, language or any other status.” Since the 1948 UN Universal Declaration of Human Rights, criteria has changed. Nonetheless, human rights continue to be a top priority in international law. According to the Department of State, the U.S. places an emphasis on human rights while pursuing foreign policy goals:  “A central goal of U.S. foreign policy has been the promotion of respect for human rights, as embodied in the Universal Declaration of Human Rights.”

A Mutually Beneficial Relationship

Human rights and entrepreneurship have the ability to reinforce one another. Hrishikesh D. Vinod of Fordham University examined the policy and advocacy goals of entrepreneurship and human rights, looking for areas for collaboration. He identified five key areas where the goals of entrepreneurs and rights advocates align: promotion of fair competition, creating infrastructure, protecting migration rights, exposing government corruption and preservation of the rule of law. Vinod describes entrepreneurship and human rights as natural allies. He notes that “their cooperation is likely to become a potent force for a worldwide progressive change.”

A study done by the Pontifical Catholic University of Peru helps to demonstrate Vinod’s argument in action. In this study, implementation of a human rights awareness and training campaign in Central Asia by a nongovernmental group increased new micro-businesses by five percent. The researchers who conducted this study urged that “the time is now ripe for acceptance of human rights approach to development of entrepreneurship as the human rights and entrepreneurship share a preoccupation not only with necessary outcomes for improving the lives of the people but also with better processes.”

The Right to Entrepreneurship

The United Nations Development Programme asserts that the rights that allow someone to start a business or become self-employed are “essential for the livelihoods of the poor.” The UNDP stresses that micro-entrepreneurship and self-employment are often the only option for the poor to generate money. Protection of these rights can impact many lives.

The right to entrepreneurship, along with other economic rights, can lead to the promotion of other social and political rights. A study commissioned by the World Bank explains the nature of the relationship: “The importance of participation in economic decision-making demonstrates how civil and political rights and socio-economic rights are mutually supportive, and why human rights recognize them to be interrelated, indivisible and interdependent.” For example, micro-credit and micro-entrepreneurship can increase economic, social and political empowerment of the poor, especially poor women. The Benazir Income Support Program offers small loans to women in Pakistan to pay for expenses and pursue entrepreneurship opportunities. However, this program did more than just bolster these women’s rights to entrepreneurship; the program also resulted in previously “unregistered” women becoming “registered,” giving them access to other social and political rights.

A 2010 study on women in rural Bangladesh also noticed a connection between entrepreneurship and other rights. Bangladeshi women often don’t have the opportunity to become formally involved in the economy. In this study, small bank loans gave them capital to start micro-businesses and increase their economic empowerment. With the ability to participate in trade, women can use their newfound security to pursue other rights as well.

In 2008, the Harvard Human Rights Journal pushed for the promotion of entrepreneurial rights of the poor. In their recommendation for the U.S. Human Rights agenda going forward, they suggested that the U.S. increase micro-entrepreneurship funding for other countries “because we know it works.” They added that it is “up to us to focus our resources on building a new generation of small entrepreneurs in the developing world.”

How Can This Impact Policy Decisions?

Knowing that entrepreneurship and human rights have the power to reinforce one another, we can create policy that accelerates both. When we protect human rights, individuals can feel empowered and safe to explore entrepreneurial endeavors. The trend works in the opposite direction as well; possessing the right to entrepreneurship can empower individuals to pursue the protection of their other rights. Economic power can allow vulnerable individuals to fight more effectively for the promotion of their rights.

This relationship demonstrates an important point for advocates of any cause: it is important think about collaboration whenever possible. There is always potential to find compromises that benefit all, and we have more in common than we expect.

Categories
McNair Center Small Business Women

Startups of the Season

While the holiday season approaches, educational toys are in high demand. Some of the most innovative new toys are produced by startups. For many of these toys, they began with an entrepreneur who saw a need to integrate play and learning.

According to the most recent statistics, the United States toy market is worth $21.18 billion. In 2015, the industry surpassed growth expectations, which is especially impressive when compared to the overall retail industry, which grew 0.7 percent less than expected. The toy industry’s prosperity is drawing in entrepreneurs who are enticed by potential for high earnings. Although there are many start-up-developed toys on the market, here are some that have received waves of public support.

Robot Turtles

In 2013, father Dan Shapiro decided to teach his four-year-old twins how to program. Improvising, he created a game using printed pictures from his computer, which led to the creation of Robot Turtles, a board game designed to teach preschoolers how to program. After noticing how much his children enjoyed the game, Shapiro took time away from his job at Google to develop the game full-time.

Robot Turtles utilizes kid-friendly challenges and elements that teach the fundamentals of computer programming while kids play. Children do not even need to be able to read.

After the idea was ready, Shapiro took the idea to Kickstarter, an online community that funds creative ideas. The site connects creators to backers who can provide funds to get a project off the ground. With Robot Turtles, Shapiro set a funding goal of $25,000 so that he could produce his first set of games. Support was incredibly strong, meeting this goal 5 hours after being released. In the funding period of 24 days in September 2013, Robot Turtles managed to draw in 13,765 backers. The most-backed board game in Kickstarter history, Robot Turtles raised a whopping $631,260 in that short period.

By August 2014, Robot Turtles was in every Target store in America. Now, Robot Turtles continues to thrive. An interactive eBook, coloring sheets, and other add-ons were developed to supplement the game.

Roominate

When Alice Brooks and Bettina Chen began their master’s program in engineering at Stanford University, they were two of the few women within their program.

In response to this gender gap, Chen and Brooks partnered up to create Roominate, a building toy designed for girls. Roominate sets include many modular and mechanical pieces that allow girls to explore their interests in design and engineering through play.

Roominate began on Kickstarter in 2012, raising $85,964. The project page highlighted their goal with bold lettering, “We believe that early exposure to STEM through toys will inspire change.”

Later, the product was also featured on Shark Tank, an ABC show where inventors pitch their ideas to successful investors in order to get funding, in September 2014. In the episode, investors Mark Cuban and Lori Greiner decided to partner with the organization.

After a few years with successful growth, Chen and Brooks took back to KickStarter in 2015 to fund development of a new product line for Roominate, “rPower,” featuring new modular wire pieces. This addition makes building and using the circuits easier for children. The Kickstarter campaign was extremely successful, raising over $50,000.

Roominate has grown quickly and is now found in over 5,000 retail locations around the world.

PopUp Play

Argash, https://commons.wikimedia.org/wiki/File:Austin_Evening.jpg
Home to PopUp Play, Austin is growing as a startup hub in the United States.

Home to PopUp Play, Austin is growing as a start-up hub in the United States.Not surprisingly, innovative Educational Toy start-ups can also be found in Texas. In Austin, married couple Bryan Thomas and Amelia Cosgrove have found a niche in harnessing children’s creativity.

PopUp play utilizes an iPad app to let children design the play fort of their dreams. The company then produces an assemblable fort out of corrugated fiberboard and delivers it in as little as a week. There are also plans to expand the iPad app so it can be used to supplement the play experience once the fort has been assembled. For example, the company is looking to develop a Submarine fort template along with a virtual periscope on the app to search the imaginary seas.

Like Robot Turtles and Roominate, PopUp Play found its start on Kickstarter. During a 32-day period beginning in May 2015, 135 backers provided $25,676 to help make PopUp Play a reality.

But that was just getting started. The team then began working with Capital Factory, a collaborative workspace and Accelerator Austin, Texas. They later also found allies in Techstars, an Austin Accelerator where they participated in a three-month mentorship program.

Since then, they have received waves of recognition, including being named one of the top 50 Best New Apps for Kids by Apple in 2015 and an American Airlines Innovator in June 2016. The company also won the top prize in its category in the South by Southwest Accelerator Competition in March 2016. This demonstrates that there is large potential for success. PopUp Play is also supported by high-profile investors, including Capital Factory, Silverton Partners, Floodgate, and Techstars.

Supporting Startups for the Holidays

Entrepreneurs tend to be passionate about their products and creative in how they make them a reality. Parents who are hoping to find fun, educational toys for their children can look to startups to find some of the most creative, innovative products on the market.