AngelList vs. the SEC over general solicitation

Naval’s new campaign against the SEC proposed rules regulating general solicitation is the news of the week. It’s a political mistake.

The problem to be solved is a lack of trust between us and DC bureaucrats, not overly restrictive rules. The rules themselves could be workable if we trusted in their implementation.

First off, since the 1929 crash, private investment has been restricted to those with a certain level of net worth—called accredited investors—determined to protect the average person from investing without expert advice (brokers) and scams and the economy as a whole from lemming-like bubbles. Further, startups have been restricted in their communications during periods of raises, especially regarding sharing key information about their raises and traction metrics.

The JOBS Act allowed for more open communications—called general solicitation—but the new rules say if you screw up, you can face a year ban from further fundraising, which would kill startups.

If you’re a bad actor, such bans protect the pool; if you’re an honest startup, identified as a bad actor by the bureaucrats, you’ve just entered the deadpool. Naval and others don’t trust the bureaucrats to tell the difference or to understand the costs of compliance, especially out on the bleeding edge. Judging from the startup immigration experiences I’ve been part of second-hand (“oh, so you sell software? let’s see the CDs” “uh… cloud?”), Naval et al. are right to be skeptical.

But politically, it’s a mistake. Consumer protection and existing securities interests have long been opposed to the JOBS Act and are quiet causes for many of the delays, as we have mostly ignored implementation after the bill passed. At this point, we’re in a hole, having been disengaged this past year and change. To come in shouting now comes across as usual tech-in-politics arrogance.

Aside from dislike of the ban, the rest of Naval’s proposed fixes can be implemented in practice, such as opening up APIs to allow submission of required forms, rather than needing to be codified in the regulations. Broadly, his memo comes down to “we don’t trust you not to screw this up,” since how can you trust someone to provide accurate oversight when they don’t know the difference between a pitch deck and term sheets?

We don’t build trust by making demands, yet obviously DC won’t understand our proposed tech-driven solutions to the problems their well-intentioned rules seek to solve. What would be a better solution?

Since we can no longer turn back the clock to put more pressure on DC to implement the regulations called for in the JOBS Act, the best approach would be for Naval to organize a hackathon with attendance from DC staff to explain what an API is or how it could be used to automate information transfer from startups to investors or government agencies.

The consumer protection and securities interest groups have spent this past year raising fears about the JOBS Act, and a single big push by us will do more to drive away regulators than make them understand our fears. We need an ongoing dialogue, not a “rush to the barricade” moment.

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PolitiHacks Digest – 1 July 2013 – Immigration reform, startup visa passes the Senate, what’s next?

These folks want your support:

  1.—Oppose government surveillance of us?
  2.—Meetups around the country for the Fourth of July to end unconstitutional surveillance
  3. Tesla Motors—Asks for executive assistance in blocking state laws from halting direct sales (Warning: unclear what the President can do, see below)

Got a cause you want to share? Tell me.

Political issues affecting startups: 

Open Internet and Privacy

More information continues to emerge from the PRISM disclosures. Jumping beyond strict open Internet/privacy issues, the latest is bad news for US hopes for developing a free trade zone treaty with the EU, called the Transatlantic Trade and Investment Partnership, equivalent to the Trans-Pacific Partnership that is opposed by notable Internet figures and organizations for both its secret process and policy positions.

What to know:

  1. Supporters and opponents say that NSA surveillance debate making it harder to pass CISPA, the information sharing proposal to harden networked systems against malicious intrusions, through the Senate
  2. NSA surveillance includes real-time notifications (not direct content) of online activity says Washington Post
  3. NSA surveillance avoided close US allies (New Zealand, UK, etc…) to focus on others, which involved collecting significant data from German, EU sources, in particular
  4. Sen. Ron Wyden (D-OR) leads bipartisan effort in 26 Senators requesting answers from Director of National Intelligence (DNI) Admiral James Clapper on potentially lying to Congress about surveillance
  5. petition crosses 500k signees

People to Watch:

  1. DNI James Clapper—under intensifying political pressure over accuracy of testimony to Congress on surveillance programs
  2. Sen. Dianne Feinstein (D-CA) and Rep. Nancy Pelosi (D-CA)—San Francisco elected officials who are increasingly vocal on their defense of the surveillance programs to a skeptical base
  3. Sens. Patrick Leahy (D-VT) and Richard Durbin (D-IL), the Chair of the Senate Judiciary Committee and No. 2 Democratic Leadership, respectively, forsupporting greater transparency on government surveillance and demonstrating an expansion beyond traditional privacy defenders
  4. Sens. Charles Grassley (R-IA), Mitch McConnell (R-KY), and John Cornyn (R-TX), Ranking Member of Senate Judiciary and top Republican Leadership, whose support would signal a massive Legislative backlash against Executive surveillance
With the Senate wrapped up, the House of Representatives is under increasing pressure to pass one or several immigration reform billsanything at all would be nice. We have some signals from the Senate vote [PolitiHacks analysis], and we heard back in January that leaders in the House of both parties assign a 40-60% chance of success. Advocacy and lobbying will pivot over this next week from Senate to House.

What to Know:

  1. Comprehensive immigration reform (S.744) passes Senate 68-32
  2. Moran, Warner-Udall, and Shaheen startup visa amendments did not receive votes, as only 10 amendments out of more than 500 submitted were voted on
  3. Rep. Darrell Issa (R-CA) successfully sees SKILLS Visa Act through House Judiciary Committee markup 20-14 on party lines with minor improvements made—contains startup visa, though based on original Startup Visa Act of 2010 rather than improved later versions
  4. Senate Republicans voted 14-32 against the immigration bill and are seen as more moderate than House Republicans
  5. Republicans hold a 234-201 advantage over Democrats, with typically 218 votes (50%) needed to pass a bill

People to Watch:

  1. Rep. Kevin McCarthy (R-CA, Bakersfield), Majority Whip—Responsible for counting the votes for and against a bill, he’ll be a decisive player in determining House Republican strategy on immigration
  2. Rep. Bob Goodlatte (R-VA, Roanoke), House Judiciary Committee Chair—determines which immigration bills are available to move to a final vote, father of former Facebook designer Bobby Goodlatte
  3. Rep. Luis Gutierrez (D-IL, Chicago), Gang of Seven negotiator—notably engaged the startup community on immigration reform via TechCrunch and a Democratic leader on immigration reform, who supports startup visa
Catch-all on startup policy

Primarily addressing establishment industry backlash against startup disruption, this week has two good examples on why unspecific political power is not enough to hit the political system and get a desired outcome—the first step of any successful political fight is identifying decision makers [PolitiHacks Analysis].

What to Know:

  1. Tesla makes progress in blocking North Carolina bill that would stop direct sales;New York is next, while Texas has banned Tesla direct sales andMassachussetts’ legal fight continues
  2. Uber, Lyft, Sidecar sent cease-and-desist orders by City of LA, despite CA state approval
People to Watch:

  1. Tom Kalil, Nick Sinai, and Doug Rand; White House Office of Science and Technology Policy (OSTP)—Someone in OSTP will be tasked with the official response to the Tesla petition, which now has 75k signers and a week left; it’s an office more should be aware of
Campaigns and Elections
Expect Representatives and Senators to visit the Bay Area for fundraising and mixers during this weekend recess.
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PolitiHacks Digest – 1 July 2013 – Immigration’s Senate success and House troubles ahead

The Senate voted 68-32 on Thursday to successfully pass comprehensive immigration reform.

Now, as eyes turn to the House, here’s the state of play:

  1. A bipartisan group of Representatives has shrunk by one as conservative Rep. Raul Labrador (R-ID) withdrew early in June, leaving a Gang of Seven
  2. Reports are that health care benefits are the primary remaining sticking point
  3. Republican House Speaker John Boehner is pledging to only move bills that have a support of a majority of his party (234 → 118)
  4. Republican House Judiciary Chair Bob Goodlatte is moving piecemeal immigration bills through the committee, including a border security bill and a high-skilled immigration bill, as well as a bill specifically focusing on employee verification.
  5. Democrats insist that the package of bills include a process for undocumented immigrants (~11M in the country by best estimate) to eventually become citizens, which many Republicans oppose

Here’s what we can pick out from the Senate vote:

  1. Traditional Republican areas voted against the bill (South, Great Plains, Mountain West)
  2. States represented by a split of a Republican and Democratic Senator saw a number of no-yes split votes, respectively
  3. Senate Republican leadership voted en masse against the bill—Leader McConnell (R-KY), Whip Cornyn (R-TX), Conference Chair Thune (R-SD), Vice-Conference Chair Blunt (R-MO), Campaign Chair Moran (R-KS), and Judiciary Committee Ranking Member Grassley (R-IA)—giving cover for Republican Majority leadership to oppose the Senate bill
  4. Senate Republicans voted against the bill 14-32, meaning that an approximate percentage of House Republicans in support would give a majority of the House (201 Democrats + 71 Republicans) in favor of a comprehensive bill, if it were to be allowed to come to a vote—a gross oversimplificiation

We can expect that House Judiciary Chair Goodlatte (R-VA, Roanoke) will continue his progression of piecemeal bills through the House, though none will include a specific process for undocumented immigrants to become citizens, instead only allowing legal work status without a possibility of becoming a citizen. That will likely be a deal-breaker for Democrats.

The question is whether or not Democrats can get a bill they’re happy with to a final vote, as it’s got decent odds of passing. We might see the discharge petition used as a lever to accomplish this goal, which is rare.

Alternatively, Republicans pass a series of immigration bills and head to a Senate-House conference to iron out the differences. Assuming Democrats succeed in conference in insisting on many of the Senate details, the House response to a final conference report that a majority of the majority is unhappy with will be very interesting.

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PolitiHacks Digest – 1 July 2013 – Identifying political decision-makers

Decision-makers in politics are not always the obvious leaders. While you can always target the President through the We the People platform, often times Congress or specific Members make the final decision on an issue. Or for ultra-narrow issues, a specific staffer or bureaucrat makes the call.

Further, rarely are political decisions made on a handshake like in the startup world, and even more rare is when a handshake agreement is completed without staff-level follow up. Elected officials are more like a non-executive board chairman than a CEO, as they are symbol as much as executive.

In the run-up to its statement on SOPA, the White House hosted meetings with top executives at record labels (RIAA) and movie studios (MPAA) on the one hand and tech VCs and executives on the other. In the end, they decided to support the latter. That decision resulted in the Senate consensus on PIPA falling apart following the initial collapse of SOPA in the House.

Simple? Not so fast. House Majority Leader Eric Cantor made a stand-alone decision based on public outrage several days before the White House moved to announce that even if SOPA was ready for a final vote, he wouldn’t schedule one. Even if the White House had released its statement earlier, Eric Cantor is not one to follow the lead of President Obama.

Who in the tech community targeted Eric Cantor on SOPA?

When it comes to taking effective action in the political space, the best first step is to figure out whose decision matters. It’s not always the person with the most generic political power.

When it comes to the House on immigration, President Obama doesn’t matter—Rep. Bob Goodlatte matters, who chairs the Committee that oversees all immigration bills. Bob is from Roanoke. Virginia Tech is just outside his district, with many students born and raised within his district, and all elected officials know that they need to listen to their districts to get reelected.

So if you need to convince Bob on something that matters to startups, you can start by convincing the excellent Hokie entrepreneurs to become evangelists to bring a local voice to Bob.

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PolitiHacks Digest – 24 June 2013 – Immigration bill enters the Senate end game

These folks want your support:

  1.—Oppose government surveillance of us?
  2. Support Sen. Moran’s startup visa amendment

Got a cause you want to share? Tell me.

Political issues affecting startups: 

Open Internet and Privacy

What to know:

  1. petition crosses 400k signees
  2. EFF calls for new Church Committee to address government overreach on surveillance programs
  3. Minority Leader Pelosi distributes comparison spreadsheet on post-PATRIOT Act surveillance
  4. Secretary of Treasury Jack Lew meets with Chamber of Commerce on cybersecurity—they played leading role in defeating the Senate’s version of CISPA last year
  5. Aaron’s Law introduced by Rep. Zoe Lofgren (D-CA) to reform Computer Fraud and Abuse Act (CFAA)—the bill has support from both Republicans and Democrats but needs support from currently-noncommital Rep. Bob Goodlatte (R-VA), as Chair of the Judiciary Committee, to move forward

People to Watch:

  1. Reps. Conyers (D-MI) and Amash (R-MI)—introduced LIBERT-E Act to curtail NSA surveillance programs, with 32 cosponsors
  2. Rep. Bob Goodlatte (R-VA)—support or non-opposition is needed for Aaron’s Law to make any progress in the House
What to Know:

  1. Final Senate vote expected on comprehensive immigration bill on Wednesday or Thursday, with 70 votes+ in support
  2. Vote on substitution amendment to implement Corker-Hoeven border security agreement—expected to bring in confirmed support of 10-15 Republican senators
  3. Negotiations continue on bringing Moran Startup Visa amendment to a vote
  4. Immigration Voice backs amendment from Sen. Warren (D-MA) to reduce visa backlogs, increase job flexibility
  5. Markup expected Wednesday or Thursday in House Judiciary Committee onhigh-skilled immigration bill proposed by Rep. Darrell Issa (R-CA)

People to Watch:

  1. Sens. Bob Corker (R-TN) and John Hoeven (R-ND)—border security proposalopens door to significant Republican support on immigration reform
  2. Sen. Harry Reid (D-NV), Senate Majority Leader—setting schedule on amendment votes
  3. Sens. Patrick Leahy (D-VT) and Charles Grassley (R-IA)—lead Senate Judiciary Committee members, primary negotiators on approving amendments for votes
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PolitiHacks Digest – 17 June 2013 – What happens when a bill is debated in Congress?

These folks want your support:

  1.—Oppose government surveillance of us?
  2. Support Sen. Moran’s startup visa amendment
  3. Lincoln Labs—Local to the Bay Area? Check out this politically-themed hackathon focusing on economic liberty this weekend

Got a cause you want to share? Tell me

Political issues affecting startups: 

Open Internet and Privacy

What we’re learning is that neither reporters nor Members of Congress have any clue about the technical details they’re talking about.

PRISM and related phone wiretapping is a huge story, still breaking, because sources are frequently, honestly wrong. Will PRISM be a bombshell or a yawn? Still too soon to tell.

What to know:

  1. More details about PRISM are coming out—the AP dives into the history, Protect America Act, and explains a wider set of data collection than previously known, while the Washington Post quietly wiped (updated) several of its more incendiary claims but continues to break new ground in its reporting.
  2. EFF, Mozilla, reddit, and many other groups (including PolitiHacks) launch to mobilize the internet community to oppose these recently uncovered programs
  3. Congress continues to not get it—Majority of Senate skips Friday’s classified hearing on PRISM
  4. Reps. John Conyers (D-MI) and Justin Amash (R-MI) plan anti-PRISM bill to revise PATRIOT Act survaillance provisions: LIBERT-E
  5. Declan McCullough reports that the NSA has been directly wiretapping conversations; results in an unusual direct response refuting the claim from the Office of the Director of National Intelligence
  6. Google, Facebook, Microsoft, and others struggle to separate themselves from anti-government surveillance firestorm; Google rejects deal that Facebook and Microsoft strike to gain permission to disclose additional details about government data requests over insufficient openness

People to Watch:

  1. Gen. Keith Alexander—EFF fan, DEFCON regular, head of the NSA
  2. Director of National Intelligence James Clapper—head of all US intelligence programs (CIA, FBI, NSA, etc…)
PolitiHacks Analysis:

  1. 84-15? 82-15? What the first two Senate votes on immigration mean

What to Know:

  1. Senate easily clears first procedural votes on immigration reform
  2. Amendments filed: 103 as of Friday
  3. Initial reports are that opposition remains muted in the key metric of phone calls into Congress
  4. March for Innovation goes to the states: Arkansas today; Tennessee on Thursday
  5. Sen. Grassley (R-IA) border security amendment quickly tabled, i.e. killed

People to Watch:

  1. Sen. John Cornyn (R-TX) emerges as key to 70 votes—makes border security amendment his stand
  2. Sens. Jeanne Shaheen (D-NH), Jerry Moran (R-KS) introduce startup visa amendments
  3. Sen. Harry Reid (D-NV)—Senate Majority Leader, i.e. controls the calendar, so watch him for when the first successful amendments begin to get votes
Catch-all on Startup Politics
  1. Federal Trade Commission sides with Uber against DC regulations
  2. Patent reform rising on the agenda, nudged by Sen. Schumer (D-NY) and President Obama
  3. Woz is pissed at surveillance, puts tipping point in 2001 passage of PATRIOT Act
Elections and Campaigns
  1. VP Joe Biden came to town to support Rep. Mike Honda (D-CA) in San Jose who is facing a tech-backed challenger in Ro Khanna
  2. NYC Mayor Mike Bloomberg gave the commencement speech at Stanford to advocate passage of comprehensive immigration reform, meet with staff
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PolitiHacks Digest – 17 June 2013 – 84-15? 82-15? What the first two Senate votes on immigration mean

The Senate opened up debate on Tuesday with two procedural votes, with an additional vote scheduled and withdrawn on Monday. These two votes passed first 82-15, then 84-15. They represent a big win for immigration reform supporters.

First: Monday, Sen. Harry Reid (D-NV), Senate Majority Leader, had initially planned to begin the immigration debate on Monday. However, the Senate Farm bill wasn’t quite done, so the first scheduled vote was withdrawn.

What happened here is that for cloture votes, the Majority Leader generally files three to build in flexibility for situations like this one, as each cloture filing takes a minimum of one day and an hour to be ready for a vote, referred to as ripening.

On Tuesday, the Senate record displays the following:

Cloture on the motion to proceed to measure invoked in Senate by Yea-Nay Vote. 82 – 15. Record Vote Number: 146. (consideration: CR S4086; text: CR S4086)

Motion to proceed to consideration of measure agreed to in Senate by Yea-Nay Vote. 84 – 15. Record Vote Number: 147. (consideration: CR S4093)”

Here’s what happened. In the first case, Sen. Reid’s cloture motion was ripe and voted on, requiring a 60 vote minimum to succeed. Cloture is the inverse to the filibuster, i.e. unlimited debate, so a cloture vote is to end debate.

In this case, the base debate was on whether or not to begin debate on the Comprehensive Immigration Bill. Confusing, yes. Following the successful ending of the base debate, the Senate proceeded to vote to begin debate on the bill itself, which also succeeded.

That’s where the situation in the Senate stands now—we’re on to the legislation itself.

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