Tag: Regulation

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McNair Center Startup Ecosystems

Entrepreneurship for All: Washington D.C.

Washington D.C.

Washington, D.C. is known for its politicians and bureaucrats, but it’s also where the top-20 U.S. government contractors are based. In recent decades, high-tech, high-growth entrepreneurship has been on the rise in the U.S. capital. Startup ventures, coupled with a diverse economy, largely fueled by the federal government, have led D.C. to emerge as a strong entrepreneurial ecosystem.

History of Entrepreneurship

The diversified needs of the federal government have led to a varied ecosystem. Feldman 2001 concludes that two unique conditions impacted the development of D.C.’s entrepreneurial culture: underemployed skilled labor caused by federal job cuts and the commercial exploitation of intellectual property rights from publicly funded research.

Changes in federal employment policy through the Civil Service Reform Act of 1978 led the federal government to outsource goods and services in an effort to reduce civil service jobs.

The Federal Technology Transfer Act of 1986 created the Cooperative Research and Development Agreements (CRADAs) as a mechanism whereby nonfederal entities can collaborate with federal laboratories on research and development projects. CRADAs aim to promote technological competitiveness and technology transfer to marketable products.

Biotech found a partner in the federal government through CRADAs. Proximity to federal labs has created an important biotechnology cluster attracting Merck and Pfizer among others, as well as startups MedImmune and Human Genome Sciences, later acquired by GlaxoSmithKline.

Other notable startups that emerged under the public-private sector collaboration include Stinger Ghaffarian Technologies, Inc. (SGT), who provides scientific and IT service solutions to a wide array of federal government agencies nationwide including NASA and the U.S. Department of Transportation.

Government outsourcing opportunities benefitted the Information and Communications Technology (ICT) industry. The earliest ITC entrepreneurs were government contractors, who began working on ARPANET, the predecessor of the internet.

When the federal government removed the commercial restriction on the use of internet in 1989, former contractors became tech startups with ample opportunities to grow their ventures.

Resources in D.C.

AOL is a prominent ICT company launched in the D.C. metropolitan area during the 1990s dot-com boom. AOL is also credited for shaping the region’s entrepreneurial ecosystem. Prior to its relocation to Manhattan, AOL funded Fishbowl Labs, a business incubator located at its Dulles campus. Fishbowl Labs provides resources to startups at no cost and a mentorship program through its employee network.

The company also invested in firms such as the D.C.-based tech hub incubator 1776. The incubator is modeled after 1871 in Chicago and the General Assembly incubator in New York. Notable companies currently working with 1776 include Babyscripts, Cowlar and MUrgency. 1776 organizes networking events for the government innovator community to promote the interconnectivity of startups and D.C.’s main consumer, the federal government.

Washington D.C. boasts four top universities in the immediate area with entrepreneurship programs: The Sustainable Entrepreneurship and Innovation Initiative at American University, Startup Hoyas at Georgetown University, Mason Innovation Lab at George Mason University and The Office of Entrepreneurship and Innovation at George Washington University.

Current D.C. Startups

Washington D.C.’s economy is stable and diverse. As of February 2017, the area had an unemployment rate of 2.5% and the gross product of the area was $471 billion in 2014, making it the sixth-largest U.S. metropolitan economy.

D.C.’s ecosystem has historically been linked to government agencies, but more recently, the startup community has had greater diversity. Notable startups out of D.C. include LivingSocial, iStrategyLabs and CoFoundersLab. Advertising company iStrategyLabs has created devices and advertising campaigns for 21 Fortune 500 companies. CoFoundersLab connects entrepreneurs via an online network.

The success of LivingSocial has invigorated the D.C. ecosystem with a new generation of startups. Borrowing Magnolia, a wedding dress rental business, Galley, a freshly prepared food delivery service, and online custom framing business, Framebridge, are among the ventures founded by LivingSocial alumni.

Venture Capital in Washington, D.C.

The D.C. startup scene is home to a number of influential venture capital firms that help invigorate the ecosystem. Venture Capital investment in D.C. has reached around $350 million in investment for years 2014 and 2016, with investment lower than $200 million in 2015.

According to a report from the Martin Prosperity Institute detailing worldwide VC investment in high-tech startups, D.C. is ranked eighth in the world with a total cumulative venture capital investment of $835 million until year 2012 (the most recent year these detailed data are available).

Data indicating the number of first-round deals in D.C. illustrate a stable ecosystem with an average of 36 first-round deals per year in the last five years.

One of the largest venture capital firms in the world, New Enterprise Associates (NEA), calls both D.C. and Silicon Valley home. In 2015, NEA’s fourteenth investment fund closed with $3.1 billion in investor capital, making it the largest venture capital fund ever raised. NEA invests in technology and health care companies around the world, but continues to support companies in D.C. such as online movie player SnagFilms and software producer Cvent. 

A diverse portfolio of venture capital firms are settled in the ecosystem to guarantee funding sustainability. Fortify Ventures, an early stage technology investment fund, nurtures investors and entrepreneurs. Fortify has received $100,000 in funding from the D.C. mayor’s office. D.C. startup, Social Tables, recently raised $13 million in Series B funding from Fortify Ventures and other investors.

Other notable venture capital firms in the D.C. area include Groundwork VC, a fund for minority founders, New Atlantic Ventures, a firm that invests in early stage startups and NextGen Venture Partners, which transitioned from an angel network into a venture capital firm this year.

D.C. venture capital investment is strong, but compared to areas such as San Francisco, which posted over six billion dollars in venture capital investment, San Jose (approximately $4 billion) and Boston (approximately $3 billion), VC investment in D.C. still has room to grow.

Startup-Friendly Government Policy

Local government policy incentivizes companies to move to or remain in D.C. The District waives corporate income taxes for the first five years and provides new-hire wage reimbursements for startups. However, D.C.’s regulatory environment still implies high costs for obtaining business licenses and permits.

Washington’s venture capital firms, angel networks and private investors cannot compete with the extensive network and resources in established ecosystems like Silicon Valley or the Research Triangle in North Carolina. According to Dow Jones VentureSource, about 50% of all venture capital invested in the United States goes to companies in Silicon Valley.

Despite Silicon Valley’s dominance, D.C.’s location, culture and resources position it as a strong ecosystem. D.C. will continue to take advantage of the resources and opportunities presented by the federal government.

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McNair Center Startup Ecosystems

Development of Research Parks and Innovation Districts in Houston

On May 4, Houston Mayor Sylvester Turner stated his support for building a data science center. The next day, he endorsed plans for an Innovation District. How would these types of development promote entrepreneurship, innovation and economic growth in Houston?

The Basics

What are Research Parks, like the proposed data science center, and Innovation Districts?

Research Parks promote research, technological development and commercialization by creating a high density of universities and research institutions within a small area. By placing many innovative researchers and developers in close proximity, Research Parks encourage growth of new companies and collaboration across fields, driving technology-based economic development.

The Brookings Institution defines Innovation Districts as dense areas that bring together research institutions, high-growth firms and startups through thoughtfully designed and resource-rich commercial and residential spaces.

Research Parks and Innovation Districts slightly differ in their implementation, but both spaces aim to accomplish similar goals; they want to create physical hubs for innovation and entrepreneurial development. Typically, developers build Research Parks on new land, cultivating previously undeveloped space. Innovation Districts, however, use old land. This land was previously developed but is no longer in use.

Attribution: ShareAlike 2.0 Generic (CC BY-SA 2.0)
Silicon Valley is a well-known Innovation District.

Both Research Parks and Innovation Districts are generative and can be helpful in stimulating local economies. Stanford Research Park in Palo Alto and Research Triangle Park in Raleigh-Durham are some of the most well-known examples in the United States. Research Triangle Park is the largest in the country and one of the largest in the world. Stanford Research Park played a key role in the creation of Silicon Valley.

Successful Innovation Districts include Kendall Square in Cambridge, Massachusetts, South Lake Union in Seattle and Over-the-Rhine in Cincinnati.

What Makes These Areas Special?

Research Parks and Innovation Districts are highly productive areas. Innovation leads to new ideas and job creation. According to the Association of University Research Parks, each job in a Research Park generates approximately 2.57 additional jobs. Thus, the more than 300,000 Research Park employees in the United States lead to 700,000 additional jobs.

Innovation Districts can also produce strong results. By placing many innovators in close proximity to one another, they facilitate collaborative interactions. As Innovation Districts vary greatly in size and productivity, an accurate estimate for job creation is unavailable.

Key Factors: The Capital Stack

Layered financial tools known as a “capital stack” are necessary to promote the development Research Parks and Innovation Districts. For a capital stack that attracts investors, an area must have access to multiple types of equity, incentives and debt to provide flexibility to developers and innovators.

Developers may be able to secure planning grants through the U.S. Economic Development Administration to create the Research Park or Innovation District. These are “designed to leverage existing regional assets and support the implementation of economic development strategies that advance new ideas and creative approaches to advance economic prosperity in distressed communities.” Even though Innovation Districts are built on previously developed land, the government still issues planning grants because they “advance new ideas and creative approaches to advance economic prosperity in distressed communities.”

Tax credit bonds are also common debt instruments. Instead of taking on loans, municipal governments sell bonds, which provide tax credits in lieu of interest payments. Some examples are Build America Bonds, Recovery Zone Economic Bonds and Clean Renewable Energy Bonds.

Equity is also an important necessity. Investment can be incentivized from a variety of sources, like New Market Tax Credits. These give tax credits to investors who make equity investments in Community Development Entities in developing and low-income communities. Housing and Urban Development community development grants and state or federal tax relief programs can also incentivize investment.

Key Factors: Social Factors

The final piece of the puzzle to create a Research Park or Innovation District is social organization. In order to facilitate collaboration and innovation, physical, intellectual and social resources need to be readily accessible.

Networking assets—“the relationships between actors—such as individuals, firms and institutions—that have the potential to generate, sharpen and accelerate the advancement of ideas”—are essential for the development of Innovation Districts. The lines of communication between developers, researchers and sources of funding must be open and easily accessible. This synergy is enhanced in Innovation Districts through the close proximity of ecosystem participants and access to shared meeting and collaboration spaces.

The Potential for Research Parks and Innovation Districts in Houston

Many cities have developed Innovation Districts in effort to grow local entrepreneurship and innovation. Turner’s announcement of the planned Innovation District earlier this month mentioned the 40,000 jobs created by Chicago’s efforts to spur innovation. Turner noted, “It is now time for us to be more competitive, to further diversify and expand our economy. What Chicago can do, Houston can do better.”

In 2015, the University of Texas bought 332 acres of land in southwest Houston with the hopes of developing it into a small Research Park. However, in March 2017, UT Chancellor William McRaven canceled the site’s plans for development. The Houston Chronicle cites timing and lack of transparency as the main causes for the cancellation.

However, there may still be potential for a Research Park in Houston. Mayor Turner also expressed support for the proposed data science center, urging the University of Houston to take the lead. The Chairman of the University of Houston Board of Regents, Tilman Fertitta, has spoken positively about this idea, mentioning excitement about the prospect of collaborating with Rice University, Texas Southern University, Texas A&M University and the University of Texas through the development of a data hub.

Bill Gropp, the acting director of the National Center for Supercomputing Applications, recently stated that there is far more demand for Research Parks than there is supply. It is clear that the development of a Research Park or Innovation District would stimulate the economy and create jobs. If Houston wants to take advantage of these opportunities, the time to act is now.

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Government and Policy McNair Center

Medical Device Startups and the FDA

Does the FDA approval process impede innovation? Medical devices must be reviewed for safety and effectiveness by the Food and Drug Administration before being marketed in United States, which encompasses 43 percent of the global market for medical devices. Startups in the medical device industry are often dissatisfied with this approval process, favoring the FDA’s European Union peer, CE Marking. Some founders even believe the time consuming and expensive FDA process “holds back the entire industry.”

Classification of Medical Devices

The FDA classifies medical devices based on their associated risks. Class I devices, like enema kits and elastic bandages, have minimal potential for harm and are typically exempt from the regulatory process. Devices that present medium risk, like contact lenses, are classified as Class II and carefully reviewed. Class III devices, such as pacemakers and replacement heart valves, are the highest risk devices, subject to the most regulatory controls.

Blood Pressure Cuff -- Class II

The FDA categorizes devices based on their function, not their underlying technologies. These categorizations may cause unnecessary delays by imposing regulatory requirements on technologies that have already been tested. Ariel Dora Stern of Harvard Business School found that for devices based on the same technologies, those placed in already existing product categories took less time to approve than those placed in new categories.

Premarket Processes

There are two FDA processes required of medical devices in different classifications:  Premarket Notification 510(k) and Premarket Approval (PMA).

Most Class I and Class II devices can be marketed after receiving 510(k) clearance. It demonstrates that the device is “substantially equivalent” to a device already on the market. Those devices that can be paired with substantial equivalents or “predicate devices” do not require a PMA. The 510(k) clearance tends to take around 200 days and costs much less than PMA.

PMA is required for new Class III high-risk devices. Companies need to submit evidence that provides reasonable assurance that the device is safe and effective. The PMA can take more than 450 days and include the ongoing costs of clinical trials among other expenses.

The clinical study stage often takes as long as the initial concept development stage. Josh Makower, Aabed Meer and Lyn Denend at  Stanford University surveyed over 200 medical device companies and found that it took the companies an average of 31 months from first communication with the FDA to receive 510(k) clearance and 54 months for PMA. 81 percent of survey respondents believed that the FDA has a difficult time with novel technologies. Stern also found that the first device in any given category took 34 percent longer to receive approval than the next device in that category, leading to an average delay of 7.2 months.

Hefty Expenditures

Makower et al. found the average total cost to bring a low- to moderate-risk 510(k) product from concept to clearance was $31 million, with $24 million spent on FDA-related activities. For a higher-risk PMA product, the cost became $94 million, with $75 million spent on FDA requirements. Approximately 50 percent of medical device exits (acquisitions or IPOs) are under $100 million; 75 percent are under $150 million. As the cost of getting to market approaches the average exit value, the funding equation looks less attractive to venture capitalists.

Obstacles to True Innovation

It is likely that companies sometimes compromise and pursue the less risky yet also less innovative 510(k) route. They make relatively simple extensions to low-risk product lines already in existence. The FDA typically evaluates more than 4,000 510(k) notifications and about 40 original PMA applications each year. This means that only one percent of devices are innovative, new medical technologies that require clinical data to get FDA approval.

Challenges Facing Small Companies

Startups face particular challenges in navigating the FDA regulatory process. More than 80 percent of the 6,500 medical device companies in the U.S. have fewer than 50 employees. According to the industry-wide survey, 72 percent of small companies submit new products. Only 35 percent of large companies do this. The total average review time for small companies is 330 days, as opposed to 177 days for large companies. However, Stern found that privately-held firms with revenues under $500 million made up only 14 percent of FDA submissions for follow-on devices and 7 percent for novel devices.

CE Mark or FDA?

The EU represents 31 percent of the global medical device market, which has a projected value reaching $544 billion by 2020. Access to both the American and European markets gives startups 74 percent of the global market, worth $400 billion. Attempting both FDA approval and CE Mark approval simultaneously is not feasible for most companies

In 2012, a Boston Consulting Group study found that most PMA medical devices were available in Europe 3 years earlier than in the U.S. Makower et al. found it took medical technology firms an average of seven months to get CE Mark clearance and 11 months to get PMA for the EU. Approximately two-thirds of small medical device companies obtained clearance in Europe first. The number one reason is the unpredictability of 510(k) requirements, according to a comprehensive industry-wide survey conducted by John H. Linehan and Jan B. Pietzsch at Northwestern University.

The difficulty of obtaining FDA approval also makes it harder for startups to raise VC funding. In 2012, BCG interviewed venture capitalists on medical device investments and found that some investors would not invest in a medical device startup unless the company received a CE Mark and promised consequent revenues in Europe.

Conclusion

The value and importance of FDA approval are undeniable. However, policymakers should examine whether the lengthy and expensive FDA approval process is necessary. The FDA might consider reducing the length of the process for all applicants. It might also help if the FDA accommodates startups’ specific needs. This can be done by granting subsidies to small businesses, offering expedited paths to truly novel and needed technologies and providing equipment or space for conducting clinical trials to innovative startups.

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McNair Center Weekly Roundup

Weekly Roundup on Entrepreneurship 4/7

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 Carried Interest Debate

Tay Jacobe and Jake Silberman, Research Assistants, McNair Center for Entrepreneurship and Innovation

McNair’s Jacobe and Silberman analyze the ongoing discussion surrounding carried interest. A complicated concept in the financial sector, carried interest refers to the profits earned on a private investment fund that are paid to fund managers. Private investment funds include VC, PE and hedge funds.

Debate arises from carried interest’s subjection to the capital gains tax rate. The capital gains tax rate caps taxes on carried interest at 20 percent. Critics of the so-called carried interest “loophole” argue that the government should tax carried interest at the standard federal income tax rate of 39.6 percent. Supporters of maintaining the capital gains tax rate for carried interest claim that it acts as a performance incentive for fund managers.

During the 2016 presidential campaign, Trump criticized the massive profits that investment fund managers earned from carried interest. Since taking office, President Trump has not commented on his administration’s plans for taxation on carried interest. The House Republican’s 2016 Tax Reform Proposal proposes a “reduced but progressive” capital gains tax on carried interest. As Jacobe and Silberman note, such a plan would likely cause fund managers’ net incomes to go up.

Looking Forward: Why the VC Industry Needs More Female Investors

Dana Olsen, Reporter, PitchBook

PitchBook’s Olsen analyzes the need for promoting gender diversity in VC firms. Despite modest gains in diversification at many VC firms, most firms are yet to make substantial change. In 2016, only 17 percent of global VC deals involved companies with female founders, while only 9 percent were female-led at the time of backing. Admittedly, these statistics reveal improvements from 2007, when these numbers stood at 7 and 6.8 percent, respectively.

According to Olsen, “the most efficient way to increase the number of female-founded companies that receive VC funding is to have more female venture capitalists.” Aileen Lee, prominent venture capitalist and founder of Cowboy Ventures, believes that “women who have more numbers on the investment team invest in more women.” Another obvious way to increase rates of female entrepreneurship is to introduce educational programs that spark girls’ interest in STEM-related fields at an early age.

A Dearth of I.P.O.s, but It’s Not the Fault of Red Tape

Steven Davidoff Solomon, Contributor, The New York Times

University of California, Berkeley School of Law’s Professor Davidoff Solomon writes for the New York Times on the recent decline in IPOs in the U.S. Many politicians point to over-regulation of the private market as an explanation, evidenced by the line of interrogation at the confirmation hearing of President Trump’s nominee to head the SEC, Jay Clayton. Since 1996, the number of publicly listed firms on the NYSE has been cut by nearly half. Furthermore, the number of IPOs has decreased from 706 in 1996 to only 105 in 2016.

Professor Davidoff Solomon proposes a number of theories for explaining the dropoff in deal-making activity – none of which involve government regulation. Firstly, Davidoff Solomon suggests that “structural changes in the market ecosystem” might be encouraging increased mergers and acquisitions in public and private markets, respectively. Alternatively, the dropoff in IPOs could potentially be caused by a decline in attractiveness of small offerings as the public. In 1996, 54 percent of new offerings were considered large, compared to only 4 percent in 2016. According to Davidoff Solomon, the “market for new issues has moved toward liquidity and bigger stocks.”

And in the Startup News…

New Clerky Tools Help Startups Hire and Raise Funds without Running into Legal Problems

Lora Kolodny, Contributor, TechCrunch

Founded in 2011, Clerky is a San Francisco-based startup that builds software to assist startups and their attorneys with legal paperwork. The startup, founded by former attorneys, focuses almost exclusively on providing legal templates and software for high-growth startups. Originally, Clerky’s services centered around helping startups incorporate their company online. Now, Clerky is looking to expand its services beyond business formation, with its latest two online tools Hiring and Fundraising.

By using Clerky, startups can spend their cash on higher level services and advice, rather than costly legal paperwork. For example, many startups spend thousands of dollars on attorney’s fees for handling seed rounds finances. With Clerky, however, companies can pay $99 in return for six months of unlimited issuances of SAFEs and convertible notes. Many of Y Combinator’s co-founders have used Clerky’s Formation tool to launch their business. Now, they can also rely on the firm’s software throughout their various growth stages and funding rounds.

Dropbox Secures $600M Credit Line with IPO on Horizon

PitchBook News & Analysis

Last week, the Weekly Roundup series covered a PitchBook article on a relatively recent trend in startup financing: debt. Debt financing is not uncommon for startups that are looking to go public. IPO are costly, and opening up lines of credit gives a company some cash without “diluting equity stakeholders.” However, many startups without IPOs in their near future are increasingly accumulating debt; according to PitchBook News and Analysis, funding rounds that were at least partially debt brought in $14 billion in deal value in 2016.

Dropbox, the latest tech unicorn to announce debt financing ahead of an upcoming IPO, is a well-known startup that provides users with cloud-based storage services. Dropbox reportedly secured the $600 million line of credit ahead of a possible offering in 2017.

With Mulesoft’s successful IPO in March, 2017 could deliver a good year for tech enterprise. Cloud-based identity management firm Otka is another enterprise tech firm set to go public within a few weeks.

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McNair Center Weekly Roundup

Weekly Roundup on Entrepreneurship 3/31

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:

Business Groups Hope Trump Can Change Health Law by Administrative Action

Jeffrey Sparshott, Reporter, The Wall Street Journal

Juanita Duggan, CEO of the National Federation of Independent Businesses, described the unraveling of the American Health Reform Act as “a dismal failure.”

Despite several nationwide organizations like the National Retail Federation, the U.S. Chamber of Commerce and the National Association of Manufacturers pushing lawmakers to support the plan, Republicans could not build a consensus for the bill.

Not all small business owners favored the GOP bill. According to Tom Embley, CEO of Precision AirConvey Corp., a Newark manufacturing company that employs 40 workers, the proposed plan wouldn’t have done “anything to lower costs” for his firm.

More Than Obamacare Repeal, Small Businesses Want Congress to Rein in Costs

Stacy Cowley, Reporter, The New York Times

The New York Times’ Cowley reports on health care reform as told from the perspective of small businesses. While small businesses have been some of the most outspoken critics of the ACA since its passage in in 2010, the group as a whole is actually fairly divided on the issue; according to Manta and BizBuySell, approximately 60 percent of small business owners want the ACA to be repealed.

As Cowley points out, “every business is uniquely affected by the complex law.” She spoke to small business owners across the country, representing a variety of regions and industries. Two themes were common: The lack of sustainability of the status quo and the need for bipartisan reform. One thing Congress’s recent health care drama did accomplish was to reveal small businesses’ growing disdain for Congress’s inability to find common ground and deliver policy stability.

Early-Stage Investment for Software Startups Holds Steady

Alex Wilhelm, Editor In Chief, Crunchbase News

A recent Crunchbase report reviews the performance of younger SaaS companies after a year of relatively illiquid market for late-stage SaaS startups in 2016.

SaaS, or software as a service, refers to “firms that sell software products on a recurring basis.” As Wilhelm notes, SaaS firms constitute an “important part of the modern startup landscape.” According to Crunchbase analysis, early and mid-stage SaaS startups experienced relatively tame Series A and B funding rounds last year, despite the sector as a whole putting on a poor showing for enterprise IPOs when compared to 2015.

Wilhelm suggests that the better-than-expected fundraising aggregates indicate investor confidence that “the late-stage and public markets would figure out SaaS, or a blind willingness to follow a plan that was supposed to work.”

Kushner to Oversee Office of American Innovation at White House

Michael C. Bender, Reporter, The Wall Street Journal

President Trump recently announced the opening of a new White House office, the Office of American Innovation (OAI). The new White House office, tasked with mimicking “private-sector efficiency inside the federal government,” will be led by Jared Kusher, senior policy advisor and son-in-law to President Trump. The office will oversee a number of ambitious task forces, including the taskforce that will be headed by Governor Chris Christie to address the opioid epidemic.

According to Press Secretary, the OAI will address both long-term and urgent needs, such as” modernizing information technology” and “streamlining the Department of Veteran Affairs.” Additionally, the office will conduct communications with many executives, including prominent Silicon Valley CEOs who visited the White House in recent months.

 

Ask a Female Engineer: How Can Managers Help Retain Technical Women on Their Team?

Cadran Cowansage, software engineer at Y Combinator Blog

Y Combinator’s Cowansage attempts to understand why women tend to step out of technical positions more frequently than their male counterparts. Cowansage asked several female engineers about their past decisions to leave their technical position at a specific company or the industry entirely. Interestingly, many of the responses don’t specifically address gender-driven workplace conflicts or discrimination. Instead, many of the women attribute their departures to irreconcilable differences with company management.

Startups often lack formal HR departments. Impartial organizational roles, like senior HR employees, who are distanced from the executive team are valuable resources; these positions offer employees an outlet for voicing their complaints without fear of jeopardizing their job status. Additionally, many women left their previous engineering positions due to lack of shareholder attention to the project they were dedicated to. Another commonly voiced problem during the interviews was rejection of requests for a promotion or raise. The interviews revealed that many women were willing to leave their company when they learned that employees with less experience were earning higher salaries or bonuses.

Startups Increasingly Turning to Debt Financing Despite Dangers

Mikey Tom, Reporter, PitchBook

PitchBook’s Tom shares some insight from  2016 Annual VC Valuations Report. According to the report, median early-stage valuations and the tally of firms that exited the market at a lower valuation than their most recent valuation reached an all-time high. As Tom points out, “rather than raising a new equity round at a sub-optimal valuation or seeking a premature liquidity event,” startups are increasingly relying on debt financing for cash. In fact, excluding 2016, the number of startups composed of debt has increased since 2008. Notably, many of the massive tech unicorns, like Airbnb and Uber, raised billion dollar loans in recent years.

Tom acknowledges the attractiveness of debt financing for many startups, but he forewarns founders of the dangers of accumulating too much debt: “if a startup is unable to achieve the amount of growth it forecasts, the debt ends up acting as more of a time bomb than growth equity.”

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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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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
Government and Policy McNair Center

Bureaucracy and Public Sector Innovation

The public benefits greatly when there are innovations in how our government approaches policymaking and regulation. However, sometimes barriers created by bureaucratic structures can slow implementation. When regulation and rigidity are holding us back, leaders are responsible for ensuring that our government institutions are allowing for change when our old ways of approaching challenges become antiquated.

Innovation in the Public Sector

Our traditional idea of innovation tends to point science and technology developments, like the iPhone or social media. Innovation within the public sector takes many forms. Journalist Alex Howard broadly defined public sector innovation as any government-created “new idea, technology or methodology that challenges and improves upon existing processes and systems, thereby improving the lives of citizens or the function of the society that they live within.” For example, the introduction of speeding cameras in the late 1980s in the U.S. is a public sector innovation that allowed local police to improve public safety by catching speeders more efficiently.

In the U.S., innovation in public policy takes place in many levels of government. For example, the Rebuild by Design program, launched in response to Superstorm Sandy, created a competition for innovators to develop creative solutions to problems posed by natural disasters. In Boston, this program created Climate Ready Boston (CRB). CRB works with the Boston city government to ensure that infrastructure is created to withstand the impacts of climate change, like rising sea levels and extreme temperatures. Another public sector innovation, the Citizen Archivist Initiative, uses online tools and crowdsourcing to make public records more easily accessible to the public.

United States Efforts to Encourage Public Sector Innovation

Within the last 30 years, federal executive and legislative action have also encouraged innovation within the public sector. For example, the Small Business Research and Development Enhancement Act of 1992 gave the Small Business Administration the ability to conduct the Small Business Innovation Research Program to better serve small businesses. Later, President Bill Clinton’s Executive Order 13103 placed an emphasis on increasing government awareness of computer vulnerabilities, demonstrating that the government would be adapting to new technologies.

President Barack Obama emphasized this as well. In 2009, his administration released the Strategy for American Innovation to increase efforts to support American innovators. In 2015, they released an updated strategy that placed importance on public sector innovation. The new strategy includes “new efforts to make the Federal government more innovative to improve performance and create a better environment for innovation by the private sector and civil society.”

Public Sector Innovation Around the World

Public sector innovation is not unique to the United States. The Organization for Economic Cooperation and Development’s Observatory of Public Sector Innovation tracks these innovations for each member country.  In Iceland, the Reykjavik Metropolitan Police Department began using social media to connect with citizens. In the United Kingdom, policy innovation took place through the creation of the What Works Network, an evidence-collection initiative to inform policy decisions.

Although there are success stories, innovation in the public sector can be difficult. Government agencies tend to be deeply entrenched in the rigidity of bureaucracy, a structure that can hinder creativity.

How Can We Boost Innovation within Government Agencies

We should want to encourage policy innovation. However, this is easier said than done. The hierarchical layout of many government agencies can be beneficial for clarity and accountability, but it can also inhibit creativity, thereby stifling innovation. Bureaucratic structures can prevent change and creativity. How can we overcome these obstacles?

University of Connecticut and Georgia Tech researchers found that workplace environment can enhance or curtail creativity. Encouraging creativity is essential for innovation. Employees must have the time, physical resources and supportive peers to implement innovative solutions. Within a government agency, these factors could manifest in many forms: Collaborative and open work spaces, efficient technologies like portable laptops and tablets and smart deadlines that are both challenging and realistic can all be effective.

The Importance of Leadership

The barriers to change in the government bureaucracies can make innovation difficult. Leadership plays a large role in whether bureaucratic organizations successfully overcome the obstacles that accompany bureaucracies. Leaders must actively prioritize innovation. The Harvard Business Review suggests, “Leaders of big bureaucracies need to get — and keep — everyone enthused, create and communicate a future vision, assure support during the transition, insist on excellence, create demands on managers and convince everyone of top management’s conviction and commitment to change.”

Simply articulating creativity as a goal can improve creativity of groups. When leaders direct groups to develop creative solutions, their groups generate more creative results than groups who are not given this instruction. If leaders want to see creativity amongst their employees, they should communicate that creativity is a goal for every project.

Hierarchies can often be complex and make it difficult for senior leadership to stay in touch with employees on the lower end of the hierarchy. To combat this, leaders need to make themselves available to employees. Open communication between leaders and lower-level employees can promote development of new ideas.

Further Applications

Any business that is looking to transform their culture to encourage creativity and innovation can use these lessons. Change requires sustained efforts on the part of leadership. With continuing organizational support, the benefits can be great.

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McNair Center Weekly Roundup

Entrepreneurship Weekly Roundup: 11/11/2016

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:

Small Businesses Can Expect Policy Changes Under Trump

The Associated Press

Entrepreneurs might expect policy shifts under a Trump presidency. Trump has released his plan for his first 100 days in office. However, much uncertainty over his policies and objectives remains. The battle over health care and immigration reform, taxes, regulation, the federal minimum wage, trade deals and federal contracts will be fought in a Republican-led congress that has not always agreed with the President-elect’s proposals.

David Levin, CEO of the American Sustainable Business Council, expressed the concern of many small business owners in the US: “What we don’t know is whether or not there is a sincere interest in supporting small and medium-size enterprises in this country — rebuilding Main Street, rebuilding manufacturing.”

With Election Over, Small Firms Look to Hire, Invest

Ruth Simon, Author, Wall Street Journal

With the uncertainty of the election partly resolved, some small business owners have said that they are ready to begin investing and hiring. According to a recent Vistage Worldwide poll of 380 small business owners, 49 percent of respondents said that the election of the outcome had improved their outlook for the economy. Nearly 20 percent stated that the election results encouraged them to increase their hiring or capital investment. Many point to the prospect of lower taxes and healthcare costs as sources for their optimism.

Not all business owners surveyed viewed the election’s outcome positively. 35 percent responded that their outlook for the economy had worsened. Roughly 20 percent planned on decreasing hiring and investment. Many are wary of Trump’s tough position on immigration, which could make the search for high-skilled workers more costly.

Black-Owned Businesses Face Credit Gap

Ruth Simon and Paul Overberg, Authors, The Wall Street Journal

According to data from the U.S. Census Bureau’s 2014 Survey of Entrepreneurs, black entrepreneurs are less likely to ask for capital when they need it. When they do ask, black entrepreneurs are not as likely to receive the full amount that they requested.

Black entrepreneurs in 2014 were three times more likely than white entrepreneurs to say that they were in need of additional financing but opted not to apply for it. Compared with 74 percent of white entrepreneurs, only 46 percent of black entrepreneurs received the full amount of funding that they had requested.

Simon cites challenges in access to capital and funding as obstacles for black entrepreneurs who are trying to grow their businesses. According to Alicia Robb, a senior fellow from the Ewing Marion Kauffman Foundation, “Across the board, blacks have higher denial rates, even after controlling for credit and wealth.”

How Lucrative Startups Can Avoid Disruption as They Grow

Jason Albanese, Contributor, Inc.

Jason Albanese, CEO and founder of Centric Digital, offers advice to startups looking to be the next Google or Facebook by redefining their industry. Revolutionary startups are often some of the most lucrative and successful in their field.

Market-shaking startups frequently fail to maximize their potential because market and operational disruptions often go hand in hand. Disruptive startups need to take time to grow at their own pace. Entrepreneurs cannot afford to rush the incubation period.

Most market ecosystems eventually find a new equilibrium; Airbnb and Uber recently experienced this within their industries. Albanese recommends that market-shifters foster and embrace change within company culture. Adaptivity, creativity and agility are instrumental in introducing and surviving a market disruption.

6 Strategic Business Practices For Freelance Entrepreneurs

Sam Cohen, Contributor, Huffington Post

The life of a freelance entrepreneur is uncertain and irregular. For example, daily operations lack the typical structure and comfort level that most industry jobs offer. On the other hand, self-employed entrepreneurs get to set their own work schedules and define the rules and best practices for their companies.

Despite the obvious discrepancy between freelance entrepreneurship and corporate culture, Sam Cohen recommends that entrepreneurs borrow business practices, such as building up cash reserves and establishing a performance review process, from bigger industry players.