Reform the US low-income broadband program by rebuilding Lifeline

“If you build it, they will come” is a mantra that’s been repeated for more than three decades to embolden action. The line from “Field of Dreams” is a powerful saying, but I might add one word: “If you build it well, they will come.”

America’s Lifeline program, a monthly subsidy designed to help low-income families afford critical communications services, was created with the best intentions. The original goal was to achieve universal telephone service, but it has fallen far short of achieving its potential as the Federal Communications Commission has attempted to convert it to a broadband-centric program.

The FCC’s Universal Service Administrative Company estimates that only 26% of the families that are eligible for Lifeline currently participate in the program. That means that nearly three out of four low-income consumers are missing out on a benefit for which they qualify. But that doesn’t mean the program should be abandoned, as the Biden administration’s newly released infrastructure plan suggests.

Now is the right opportunity to complete the transformation of Lifeline to broadband and expand its utilization by increasing the benefit to a level commensurate with the broadband marketplace and making the benefit directly available to end users.

Rather, now is the right opportunity to complete the transformation of Lifeline to broadband and expand its utilization by increasing the benefit to a level commensurate with the broadband marketplace and making the benefit directly available to end users. Instead, the White House fact sheet on the plan recommends price controls for internet access services with a phaseout of subsidies for low-income subscribers. That is a flawed policy prescription.

If maintaining America’s global competitiveness, building broadband infrastructure in high-cost rural areas, and maintaining the nation’s rapid deployment of 5G wireless services are national goals, the government should not set prices for internet access.

Forcing artificially low prices in the quest for broadband affordability would leave internet service providers with insufficient revenues to continue to meet the nation’s communications infrastructure needs with robust innovation and investment.

Instead, targeted changes to the Lifeline program could dramatically increase its participation rate, helping to realize the goal of connecting Americans most in need with the phone and broadband services that in today’s world have become essential to employment, education, healthcare and access to government resources.

To start, Lifeline program participation should be made much easier. Today, individuals seeking the benefit must go through a process of self-enrollment. Implementing “coordinated enrollment” — through which individuals would automatically be enrolled in Lifeline when they qualify for certain other government assistance benefits, including SNAP (the Supplemental Nutrition Assistance Program, formerly known as food stamps) and Medicaid — would help to address the severe program underutilization.

Because multiple government programs serve the same constituency, a single qualification process for enrollment in all applicable programs would generate government efficiencies and reach Americans who are missing out.

Speaking before the American Enterprise Institute back in 2014, former FCC Commissioner Mignon Clyburn said, “In most states, to enroll in federal benefit programs administered by state agencies, consumers already must gather their income-related documentation, and for some programs, go through a face-to-face interview. Allowing customers to enroll in Lifeline at the same time as they apply for other government benefits would provide a better experience for consumers and streamline our efforts.”

Second, the use of the Lifeline benefit can be made far simpler for consumers if the subsidy is provided directly to them via an electronic Lifeline benefit card account — like the SNAP program’s electronic benefit transfer (EBT) card. Not only would a Lifeline benefit card make participation in the program more convenient, but low-income

Americans would then be able to shop among the various providers and select the carrier and the precise service(s) that best suits their needs. The flexibility of greater consumer choice would be an encouragement for more program sign-ups.

And, the current Lifeline subsidy amount — $9.25 per month — isn’t enough to pay for a broadband subscription. For the subsidy to be truly meaningful, an increase in the monthly benefit is needed. Last December, Congress passed the temporary Emergency Broadband Benefit to provide low-income Americans up to a $50 per month discount ($75 per month on tribal lands) to offset the cost of broadband connectivity during the pandemic. After the emergency benefit runs out, a monthly benefit adequate to defray the cost of a broadband subscription will be needed.

In order to support more than a $9.25 monthly benefit, the funding source for the Lifeline program must also be reimagined. Currently, the program relies on the FCC’s Universal Service Fund, which is financed through a “tax” on traditional long-distance and international telephone services.

As greater use is made of the web for voice communications, coupled with less use of traditional telephones, the tax rate has increased to compensate for the shrinking revenues associated with landline phone services. A decade ago, the tax, known as the “contribution factor,” was 15.5%, but it’s now more than double that at an unsustainable 33.4%. Without changes, the problem will only worsen.

It’s easy to see that the financing of a broadband benefit should no longer be tied to a dying technology. Instead, funding for the Lifeline program could come from a “tax” shared across the entire internet ecosystem, including the edge providers that depend on broadband to reach their customers, or from direct congressional appropriations for the Lifeline program.

These reforms are realistic and straightforward. Rather than burn the program down, it’s time to rebuild Lifeline to ensure that it fulfills its original intention and reaches America’s neediest.

How startups can ensure CCPA and GDPR compliance in 2021

Data is the most valuable asset for any business in 2021. If your business is online and collecting customer personal information, your business is dealing in data, which means data privacy compliance regulations will apply to everyone — no matter the company’s size.

Small startups might not think the world’s strictest data privacy laws — the California Consumer Privacy Act (CCPA) and Europe’s General Data Protection Regulation (GDPR) — apply to them, but it’s important to enact best data management practices before a legal situation arises.

Data compliance is not only critical to a company’s daily functions; if done wrong or not done at all, it can be quite costly for companies of all sizes.

For example, failing to comply with the GDPR can result in legal fines of €20 million or 4% of annual revenue. Under the CCPA, fines can also escalate quickly, to the tune of $2,500 to $7,500 per person whose data is exposed during a data breach.

If the data of 1,000 customers is compromised in a cybersecurity incident, that would add up to $7.5 million. The company can also be sued in class action claims or suffer reputational damage, resulting in lost business costs.

It is also important to recognize some benefits of good data management. If a company takes a proactive approach to data privacy, it may mitigate the impact of a data breach, which the government can take into consideration when assessing legal fines. In addition, companies can benefit from business insights, reduced storage costs and increased employee productivity, which can all make a big impact on the company’s bottom line.

Challenges of data compliance for startups

Data compliance is not only critical to a company’s daily functions; if done wrong or not done at all, it can be quite costly for companies of all sizes. For example, Vodafone Spain was recently fined $9.72 million under GDPR data protection failures, and enforcement trackers show schools, associations, municipalities, homeowners associations and more are also receiving fines.

GDPR regulators have issued $332.4 million in fines since the law was enacted almost two years ago and are being more aggressive with enforcement. While California’s attorney general started CCPA enforcement on July 1, 2020, the newly passed California Privacy Rights Act (CPRA) only recently created a state agency to more effectively enforce compliance for any company storing information of residents in California, a major hub of U.S. startups.

That is why in this age, data privacy compliance is key to a successful business. Unfortunately, many startups are at a disadvantage for many reasons, including:

  • Fewer resources and smaller teams — This means there are no designated data privacy officers, privacy attorneys or legal counsel dedicated to data privacy issues.
  • Lack of planning — This might be characterized by being unable to handle data privacy information requests (DSARs, or “data subject access requests”) to help fulfill the customer’s data rights or not having an overall program in place to deal with major data breaches, forcing a reactive instead of a proactive response, which can be time-consuming, slow and expensive.

Billion-dollar B2B: cloud-first enterprise tech behemoths have massive potential

More than half a decade ago, my Battery Ventures partner Neeraj Agrawal penned a widely read post offering advice for enterprise-software companies hoping to reach $100 million in annual recurring revenue.

His playbook, dubbed “T2D3” — for “triple, triple, double, double, double,” referring to the stages at which a software company’s revenue should multiply — helped many high-growth startups index their growth. It also highlighted the broader explosion in industry value creation stemming from the transition of on-premise software to the cloud.

Fast forward to today, and many of T2D3’s insights are still relevant. But now it’s time to update T2D3 to account for some of the tectonic changes shaping a broader universe of B2B tech — and pushing companies to grow at rates we’ve never seen before.

One of the biggest factors driving billion-dollar B2Bs is a simple but important shift in how organizations buy enterprise technology today.

I call this new paradigm “billion-dollar B2B.” It refers to the forces shaping a new class of cloud-first, enterprise-tech behemoths with the potential to reach $1 billion in ARR — and achieve market capitalizations in excess of $50 billion or even $100 billion.

In the past several years, we’ve seen a pioneering group of B2B standouts — Twilio, Shopify, Atlassian, Okta, Coupa*, MongoDB and Zscaler, for example — approach or exceed the $1 billion revenue mark and see their market capitalizations surge 10 times or more from their IPOs to the present day (as of March 31), according to CapIQ data.

More recently, iconic companies like data giant Snowflake and video-conferencing mainstay Zoom came out of the IPO gate at even higher valuations. Zoom, with 2020 revenue of just under $883 million, is now worth close to $100 billion, per CapIQ data.

Graphic showing market cap at IPO and market cap today of various companies.

Image Credits: Battery Ventures via FactSet. Note that market data is current as of April 3, 2021.

In the wings are other B2B super-unicorns like Databricks* and UiPath, which have each raised private financing rounds at valuations of more than $20 billion, per public reports, which is unprecedented in the software industry.

Do you fit the mold for the next generation of values-driven VCs?

More individuals than ever are donning the investor cap. Almost a fifth of U.S. equity trading in 2020 was driven by mom-and-pop investors — up from around 15% in the previous year. With such impressive returns to be made, many are deciding to set up a full-fledged investment business.

With the fundraising world becoming more democratic and accessible, we should help people find the right path to setting up a venture capital firm and also make sure the right people are entering the VC sphere. Startups are changing, and any new investment manager will have to adapt to the shifting landscape. VCs today have to provide more than money to get the best portfolio, and they must have a strong focus on impact to get the best institutional investors into their funds.

Startup investors can be the financial backbone for mass disruption. That’s why, at Founder Institute, we believe in the need for more VCs with strong values: Because they will prop up the companies that will build a brighter future for humanity. We’re not the only ones — our first “accelerator for ethical VCs” was oversubscribed.

VCs today have to provide more than money to get the best portfolio, and they must have a strong focus on impact to get the best institutional investors into their funds.

So if you want to lead your own VC fund in 2021, here are the main questions aspiring investors need to ask themselves.

Are you doing this for the right reasons?

Investing in startups is not just about making money. In selecting the startups that will become future industry leaders, VCs have a lot more power than most to do good (or harm). If you’re only interested in money, you likely won’t go too far. Identifying the greatest businesses means seeing beyond their capital into the longevity of their vision, their real-life impact on society, and how much consumers will love or hate them.

After all: Most startup founders pour their blood, sweat and tears into building a business not just to make money, but also to make an impact on the world and build products that align with their mission. Any new venture capitalist looking to attract the best founders needs to think about the vision and mission of their fund in the same terms.

Although VC firms have been slow on the uptake when it comes to environmental, social and governance (ESG) goals, there are signs that times are changing. Some firms are forming a community around implementing ESG, not only because of the external impact but because it furthers their business goals. To help accelerate this trend, we asked our VC Lab participants to take The Mensarius Oath (Latin for “banker” or “financier”), a professional code of conduct for finance professionals to create an ethical, prosperous and healthy world.

What value do you bring to the table?

The number of VCs are growing and the industry is increasingly becoming concentrated. This means that simply offering large sums of money won’t get you traction with the best startups. Founders are looking for value over volume — they usually want mission alignment, connections, value-added services and industry expertise more than a blank check.

Remember that the best founders get to choose their VCs from a menu of options, not the other way around. To convince them that you’re the right match, you’ll need a proven track record in the same industry (or transferable experience from another industry) and referrals from credible people. You’ll also need a strong value proposition or niche that sets you apart from other funds. For example, Untapped Capital invests in “unexpected” and “undernetworked” founders, while R42 Group invests in AI and longevity-focused businesses.

If you don’t think you’ve got the profile to offer value to founders just yet, it’s worth taking some time to lay out exactly who you are. That is: what you hope to achieve as a fund manager, the vision you have for your portfolio companies and how you alone can help them get there.

What’s your secret sauce?

As a new VC fund without historical data points, limited partners (LPs) will naturally be cautious to invest in your fund. So, you have to build a brand that tells your story and proves your reputation.

Go back to the basics and pinpoint exactly what your strengths are. If you’re having trouble finding inspiration, use statements like, “I can get the best deal because I have X,” or, “I help grow my portfolio companies by X” to get the ball rolling. Be wary of saying that the amount of money you have is your strength — at this stage, your bank balance isn’t your competitive edge. Focus instead on what makes you unique, credible and relevant. Having a high number of strategic contacts, extensive industry experience or a backsheet of successful exits could be your secret ingredients. For extra guidance, check out this resource my team put together to help fund managers consolidate their niche in an “investment thesis.”

Once you have a list, choose your top three strengths and write a followup sentence detailing how each of them can be enriched by your network and expertise. Ideally, share these with a test group (friends, family or fellow entrepreneurs) and ask them which is the most compelling. If there’s a general consensus toward one point, you know to make that a large chunk of your VC fund’s thesis.

Do you have a solid network?

Who you know is just as important as what you know, and the most prominent VCs tend to be in the middle of a flow of information and people. Your network tells founders that you’re respected and reassures them that they will probably be brought into the fold to connect with future mentors, customers, investors or hires.

If you’re a thought leader, the alumni of a well-known company like Uber or PayPal, or if you’ve started a community around an emerging vertical, you’re more likely to form a positive deal flow. But this status and these relationships have to be established before you launch your fund — if you try to network from zero, you’ll be spinning too many plates and won’t have the social proof to back yourself up.

Don’t just rely on your gut to tell you whether your network is satisfactory. Map out your personal ecosystem, sorting people based on familiarity (close contacts or acquaintances) and defining characteristics (consumers, finance, ex-CEOs, etc.). That “map” can be as basic as an Excel sheet with a column for each category, or you could use more attractive visual tools like Canva — great for sharing with your future team and encouraging them to fill any network gaps.

What size fund do you want to launch?

A VC fund runs like any other business — you have to develop a vision, recruit a team, form an entity, raise money, deliver value and report to stakeholders. To kick things off, you need to consider what size fund you want, and then secure significant commitments from LPs — at least 10% of your total fund. LPs can be corporations, entrepreneurs, government agencies and other funds.

Also keep in mind that most LPs will want you to personally invest at least 1% of the total fund size so that you have “skin in the game.”

For that reason especially, it’s best to start small, somewhere between $5 million and $20 million, and use this “training fund” to demonstrate returns and create a launchpad for bigger raises to follow.

Can you help founders from launch to exit?

Your partnership with companies will be for the long haul, so you can’t rely just on offering value when you wire the money. Founders need consistent support across the full startup lifecycle, meaning you need to be conscious not to overpromise and fail to deliver. Think of the startups you’d most like to work with: How could you help them now? How could you help them in the future? And how could you help them exit?

You can take a skills-centric approach, where you reserve different resources and connections based on marketing, hiring, fundraising and culture-creation that can be applied as the startup grows. Alternatively, you might want to make sprint-like plans, where you check in with founders on a repeating basis and iterate the support you offer based on their progress. Whatever way you chose to structure your support, ensure that you’re realistic about what you can bring to the table, your availability, preferred involvement and how you’ll document it.

The future of VC will be driven by venture capitalists with strong values who have built funds with the new needs of founders in mind. VC may once have been exclusive and mysterious, but 2021 could be the year VC becomes a more open and fair space for businesses and investors alike.

Tech talent can thrive in the public sector but government must invest in it

Building, scaling and launching new tools and products is the lifeblood of the technology sector. When we consider these concepts today, many think of Big Tech and flashy startups, known for their industry dominance or new technologies that impact our everyday lives. But long before garages and dorm rooms became decentralized hubs for these innovations, local and state governments, along with many agencies within the federal government, pioneered tech products with the goal of improving the lives of millions.

Long before garages and dorm rooms became decentralized hubs for innovation, local and state governments, along with many agencies within the federal government, pioneered tech products with the goal of improving the lives of millions.

As an industry, we’ve developed a notion that working in government, the place where the groundwork was laid for the digital assistants we use every day, is now far less appealing than working in the private sector. The immense salary differential is often cited as the overwhelming reason workers prefer to work in the private sphere.

But the hard truth is the private sector brings far more value than just higher compensation to employees. Look no further than the boom in the tech sector during the pandemic to understand why it’s so attractive. A company like Zoom, already established and successful in its own right for years, found itself in a situation where it had to serve an exponentially growing and diverse user base in a short period of time. It quickly confronted a slew of infrastructure and user experience pivots on its way to becoming a staple of work-from-home culture — and succeeded.

That innate ability to work fast to deliver for consumers and innovate at what feels like a moment’s notice is what really draws talent. Compare that to the government’s tech environment, where decreased funding and partisan oversight slow the pace of work, or, worse, can get in the way of exploring or implementing new ideas entirely.

One look (literally, see our graph below) at the trends around R&D spending in the private and government sectors also paints a clear picture of where future innovations will come from if we don’t change the equation.

Chart of Facebook R&D spending vs. DARPA annual budget

Image Credits: Josh Mendelsohn/Hangar

Look no further than the U.S. government’s own (now defunct) Office of Technology Assessment. The agency aimed to provide a thorough analysis of burgeoning issues in science and technology, exposing many public services to a new age of innovation and implementation. Amid a period of downsizing by a newly Republican-led Congress, the OTA was defunded in 1995 with a peak annual budget of just $35.1 million (adjusted for 2019 dollars). The authoritative body on the importance of technology to the government was deemed duplicative and unnecessary. Despite numerous calls for its reinstatement, it has since remained shuttered.

Despite dwindling public sector investment and lackluster political action, the problems that technology is poised to help solve haven’t gone away or even eased up.

From the COVID pandemic to worsening natural disasters and growing societal inequities, public leaders have a responsibility to solve the pressing issues we face today. That responsibility should breed a desire to continuously iterate for the sake of constituents and quality of life, much in the same way private tech caters to the product, user and bottom line.

My own experiences in government have shaped my career and approach to building new technologies more than my time in Silicon Valley. There are plenty of tangible parallels to the private sector that can attract driven and passionate tech workers, but the responsibility of giving government work realistic consideration doesn’t just fall at the feet of talent. The governments that we depend on must invest more capital and pay closer attention to the tech community.

Tech workers want an environment where they can thrive and get to see their work in action, whoever the end user may be. They don’t want to feel hamstrung by the threat of decreased funding or the red tape that comes as a result of government partisanship. Replicating the unimpeded focus of Silicon Valley’s brightest examples is a must if we’re serious about drawing talented individuals into government or public-sector-focused work.

A great example of these ideas in action is one of the most beloved government agencies, NASA. Its continued funding has produced technologies developed for space exploration that are now commonplace in our lives, such as scratch-resistant lenses, memory foam and water filters. These use cases came much later on, only after millions of dollars were invested without knowing what would result.

NASA has continued to bolster its ability to stay nimble and evolve at a rapid pace by partnering with private companies. For talent in the tech sphere, the ability to leverage outside resources in this way, without compromising the product or work, is a boon for ideation and iteration.

One can also point to the agency when considering the importance of keeping technology research and innovation as apolitical as possible. It’s one of the few widely known public entities to prosper on the back of bipartisan support. Unfortunately, politicians typically do all of us a disservice, particularly tech workers in government, when they too closely connect themselves or their parties to a particular program or platform. It hinders innovation — and the ensuing mudslinging can detract from talented individuals jumping into government service.

There is no shortage of extremely capable tech workers who want to help solve the biggest issues facing society. Will we give them the legitimate space and opportunity to conquer those problems? There’s been some indication that we can. These ambitious and forward-looking efforts matter today more than ever and show all of us in the tech ecosystem that there’s a place in government for tech talent to grow and flourish.

How to choose and deploy industry-specific AI models

As artificial intelligence becomes more advanced, previously cutting-edge — but generic — AI models are becoming commonplace, such as Google Cloud’s Vision AI or Amazon Rekognition.

While effective in some use cases, these solutions do not suit industry-specific needs right out of the box. Organizations that seek the most accurate results from their AI projects will simply have to turn to industry-specific models.

Any team looking to expand its AI capabilities should first apply its data and use cases to a generic model and assess the results.

There are a few ways that companies can generate industry-specific results. One would be to adopt a hybrid approach — taking an open-source generic AI model and training it further to align with the business’ specific needs. Companies could also look to third-party vendors, such as IBM or C3, and access a complete solution right off the shelf. Or — if they really needed to — data science teams could build their own models in-house, from scratch.

Let’s dive into each of these approaches and how businesses can decide which one works for their distinct circumstances.

Generic models alone often don’t cut it

Generic AI models like Vision AI or Rekognition and open-source ones from TensorFlow or Scikit-learn often fail to produce sufficient results when it comes to niche use cases in industries like finance or the energy sector. Many businesses have unique needs, and models that don’t have the contextual data of a certain industry will not be able to provide relevant results.

Building on top of open-source models

At ThirdEye Data, we recently worked with a utility company to tag and detect defects in electric poles by using AI to analyze thousands of images. We started off using Google Vision API and found that it was unable to produce our desired results — with the precision and recall values of the AI models completely unusable. The models were unable to read the characters within the tags on the electric poles 90% of the time because it didn’t identify the nonstandard font and varying background colors used in the tags.

So, we took base computer vision models from TensorFlow and optimized them to the utility company’s precise needs. After two months of developing AI models to detect and decipher tags on the electric poles, and another two months of training these models, the results are displaying accuracy levels of over 90%. These will continue to improve over time with retraining iterations.

Any team looking to expand its AI capabilities should first apply its data and use cases to a generic model and assess the results. Open-source algorithms that companies can start off with can be found on AI and ML frameworks like TensorFlow, Scikit-learn or Microsoft Cognitive Toolkit. At ThirdEye Data, we used convolutional neural network (CNN) algorithms on TensorFlow.

Then, if the results are insufficient, the team can extend the algorithm by training it further on their own industry-specific data.

How we dodged risks and raised millions for our open-source machine language startup

Open-source software gave birth to a slew of useful software in recent years. Many of the great technologies that we use today were born out of open-source development: Android, Firefox, VLC media player, MongoDB, Linux, Docker and Python, just to name a few, with many of these also developing into very successful for-profit companies.

While there are some dedicated open-source investors such as the Apache Software Foundation incubator and OSS Capital, the majority of open-source companies will raise from traditional venture capital firms.

Our team has raised from traditional venture capital firms like Speedinvest, open-source-specific firms like OSS, and even from more hybrid firms like OpenOcean, which was created by the founders and senior leadership teams at MariaDB and MySQL. These companies understandably have a significant but not exclusive open-source focus.

Our area of innovation is an open-source AutoML server that reduces model training complexity and brings machine learning to the source of the data. Ultimately, we feel democratizing machine learning has the potential to truly transform the modern business world. As such, we successfully raised $5 million in seed funding to help bring our vision to the current marketplace.

Here, we aim to provide insights and advice for open-source startups that hope to follow a similar path for securing funding, and also detail some of the important risks your team needs to consider when crafting a business model to attract investment.

Strategies for acquiring open-source seed funding

Obviously, venture capitalists find many open-source software initiatives to be worthy investments. However, they need to understand any inherent risks involved when successfully commercializing an innovative idea. Finding low-risk investments that lead to lucrative business opportunities remains an important goal for these firms.

In our experience, we found these risks fall into three major categories: market risk, execution risk, and founders’ risk. Explaining all three to potential investors in a concise manner helps dispel their fears. In the end, low-risk, high-reward scenarios obviously attract tangible interest from sources of venture capital.

Ultimately, investment companies want startups to generate enough revenue to reach a valuation exceeding $1 billion. While that number is likely to increase over time, it remains a good starting point for initial funding discussions with investors. Annual revenue of $100 million serves as a good benchmark for achieving that valuation level.

Market risks in open-source initiatives

Market risks for open-source organizations tend to be different when compared to traditional businesses seeking funding. Notably, investors in these traditional startups are taking a larger leap of faith.

Dear Sophie: Help! My H-1B wasn’t chosen!

Here’s another edition of “Dear Sophie,” the advice column that answers immigration-related questions about working at technology companies.

“Your questions are vital to the spread of knowledge that allows people all over the world to rise above borders and pursue their dreams,” says Sophie Alcorn, a Silicon Valley immigration attorney. “Whether you’re in people ops, a founder or seeking a job in Silicon Valley, I would love to answer your questions in my next column.”

Extra Crunch members receive access to weekly “Dear Sophie” columns; use promo code ALCORN to purchase a one- or two-year subscription for 50% off.


Dear Sophie:

My startup registered two H-1B candidates in this year’s lottery. Sadly, neither was selected.

One is my co-founder, the other is on OPT. Help! We can’t afford for them to have to leave the U.S. What are our options?

— Lost in Los Angeles

Dear Lost:

Take a deep breath; I’ve got your back. There are many creative immigration pathways for you, your co-founder and your F-1 OPT employee to explore. We’ll take a look at several options, and you can also check out my recent podcast in which my colleague Nadia Zaidi and I explain them in greater depth.

I hope the below ideas inspire you and fill you with a sense of hope and possibility. As always, I suggest consulting with an experienced immigration attorney who can help you identify the strongest path forward, as well as backup options for your co-founder and employee. The particular immigration strategy that’s best for you is always an individual determination. It’s best identified through a personal consultation with an attorney such as myself based on a variety of factors, including each person’s immigration history and your particular startup’s goals.

Co-founder immigration options

For a funded startup, there’s a great H-1B Plan B: the Cap-Exempt H-1B. Especially if your co-founder has a STEM background (and possibly even for some founders who don’t have this), there’s a wonderful new triple-win option that supports startups, international candidates and even diverse U.S. STEM college students seeking better project-based learning opportunities.

What is this magical rainbow-striped unicorn option, you ask? Well, here’s the legal background: Some employers qualify to petition for an H-1B visa at any time without going through the lottery. These employers — called cap-exempt employers because they are not subject to the annual H-1B cap of 85,000 visas available to for-profit employers — include:

  • Institutions of higher education.
  • Nonprofits tied to institutions of higher education.
  • Nonprofit research organizations.
  • Government research organizations.

If your co-founder can get a part-time H-1B visa through one of these cap-exempt employers, your startup can concurrently sponsor your co-founder for an H-1B regardless of the recent lottery results.

A composite image of immigration law attorney Sophie Alcorn in front of a background with a TechCrunch logo.

Image Credits: Joanna Buniak / Sophie Alcorn (opens in a new window)

To take advantage of this special law, I’m a huge fan of Open Avenues Foundation, which offers a Global Talent Fellowship. In this program, international talent can receive cap-exempt H-1B visas by leading university students for about five hours a week in real-world, project-based work within their field of expertise for the startup that nominated them for the fellowship. The candidate gets to stay in (or come to) the U.S., your startup gets a team of students working on a group project that benefits your company and increases diversity in your hiring pipeline, and U.S. students get the benefit of hands-on high quality STEM learning.

Once your candidate’s first cap-exempt H-1B is in place, your startup can petition for a second, concurrent Cap-Exempt H-1B for direct startup employment.

Interested in variations? If you’re not in STEM but have a university that would host you (free to the university), you can potentially partner with OAF. In addition, many universities in the U.S have global entrepreneur-in-residence programs that can help international co-founders qualify for concurrent Cap-Exempt H-1Bs. Your startup should also consider sponsoring your co-founder for an O-1A visa or change of status.

Another option to consider is for your co-founder to apply for International Entrepreneur Parole (IEP), a new 30-month immigration status in the U.S. The International Entrepreneur Rule (IER) was created by President Barack Obama and is the closest thing the U.S. has right now to a startup visa. The Trump administration tried to eliminate it, but the National Venture Capital Association, led by Jeff Farrah, successfully challenged the administration’s effort in federal court, so IEP remains on the books.

A lot of folks don’t believe it’s an option yet, so I’m currently looking for international startup founders with a strong case to file for IEP to test out this new program and demonstrate its existence to the world. We’re currently seeking global startup founders holding at least 15% equity in a U.S. startup that’s less than five years old and has raised at least $250,000 from U.S. investors. If you want to be on our free interest list, you can fill out this form. If we think you have a strong application, we’ll reach out.

If your co-founder wants to remain permanently in the U.S., consider starting a green card now such as the EB-1A green card for individuals of extraordinary ability or an EB-2 NIW (National Interest Waiver) green card for individuals of exceptional ability. Of these, the EB-1A is the quickest option, but its qualification requirements are tougher than for the EB-2 NIW.

F-1 OPT employee immigration options

If your F-1 OPT employee graduated with a qualified STEM degree, that employee can apply for a 24-month work extension, known as STEM OPT. That will allow the employee to remain in the U.S. to continue working for you. In the meantime, you can register them again next year for the H-1B lottery. If there’s no possibility for STEM, please check out the Cap-Exempt H-1B option explained above.

If your F-1 OPT employee only has a bachelor’s degree, they might want to consider pursuing an advanced degree. Individuals with a master’s or higher degree from a U.S. university have better odds of being selected in the annual H-1B lottery. That’s because 20,000 of the 85,000 H-1B visas available each year are earmarked for individuals with a master’s or higher degree from a U.S. university.

You should be aware, however, that next year’s H-1B lottery will likely shift from the current random selection process to one based on the highest wages. Unless the Biden administration changes the policy, which was devised by the previous administration, employers who pay their H-1B candidates a Level III wage or higher have the best chance of getting selected to file for an H-1B visa.

As you know, sponsoring employers must agree to pay an H-1B candidate the higher of either the actual wage paid for the job or the prevailing wage, which is broken down into four levels based on experience required for the position and location of the position. Level I wage is basically for an entry-level position, while a Level IV wage is for a position requiring the most experience. While this will add greater predictability to the annual H-1B “lottery,” early-stage startups and small businesses may have a difficult time competing against more established companies on salary, particularly because stock options and equity are not included in the salary calculation.

If you need to find alternative visa solutions, you can always consult with an attorney. I hope all of these options help you realize the control and agency you have in this situation. You have choices!

All my best,

Sophie


Have a question for Sophie? Ask it here. We reserve the right to edit your submission for clarity and/or space.

The information provided in “Dear Sophie” is general information and not legal advice. For more information on the limitations of “Dear Sophie,” please view our full disclaimer. You can contact Sophie directly at Alcorn Immigration Law.

Sophie’s podcast, Immigration Law for Tech Startups, is available on all major platforms. If you’d like to be a guest, she’s accepting applications!

What happens to your NFTs and crypto assets after you die?

As consumers build their wealth, assets are typically tangible: cash, investments, property, cars, jewelry, art. But increasingly we’re adding a new type of asset to the mix: digital assets, whether in the form of cryptocurrency or a new asset class, NFTs.

We’re going through the biggest wealth transfer in history right now, with an estimated $16 trillion expected to change hands in the coming decades. While it’s easy to hand over the reins of a physical asset in the event of an emergency or death, it’s not as simple with digital assets.

A new Angus Reid study commissioned by Canadian online will platform Willful finds that only one in four consumers have someone in their life who knows all of their passwords and account details, which begs the question: Will consumers be prepared to pass on digital assets, or will billions in virtual goods be stuck in the digital ether?

While it’s easy to hand over the reins of a physical asset in the event of an emergency or death, it’s not as simple with digital assets.

Digital assets have been dominating the news cycle in 2021. While cryptocurrency isn’t new, it’s attracted a lot of attention in the past year because of its skyrocketing value, promotion from prominent figures like billionaire Elon Musk, and bitcoin offerings from traditional financial firms like Morgan Stanley. If you hold any type of cryptocurrency, the only way to access it is via a private key — typically a 64-digit passcode. No private key, no access to the virtual currency.

There have been many stories reported about people who purchased bitcoin and would be millionaires today if they hadn’t thrown out their hard drive or lost track of their key. One high-profile case is that of Gerald Cotten, the founder of cryptocurrency exchange Quadriga. When Cotten died in 2018, he took with him the private keys to over $250 million in client assets.

Consumers have also been inundated with stories about NFTs, or non-fungible tokens, which are digital assets hosted on the same blockchain that makes cryptocurrency possible. To most, it seems absurd that artist Beeple could sell a $69 million piece of art through a Christie’s auction, or that a virtual home in Toronto could sell for over $600,000, or that people would spend over $200 million trading virtual NBA highlights like we used to trade baseball cards. But this new asset class is proving that digital assets can be as valuable if not more valuable than physical assets — and similar to cryptocurrency, they likely require a private key to access them.

When someone dies, they either have a will that dictates how their assets will be distributed, or, if they die without a will, a government formula outlines how their assets will be divided. While a will outlines who should receive what, it typically doesn’t have an up-to-date asset list, nor does it contain passwords or access keys. There’s an estimated tens of billions in unclaimed assets sitting in banks today as a result of a family or executor not knowing about those accounts following an individual’s death.

But an executor can do due diligence by calling financial institutions to double-check whether the person held accounts and get access to those funds, which typically requires providing copies of the will and/or death certificate. With digital assets, it’s not as simple as calling the bank and finding out a relative had a valuable NFT. There’s no directory or central body that governs NFTs or cryptocurrency — it’s purposely decentralized, which is great for privacy but less than ideal for family members who want to figure out if someone held valuable digital assets.

And it’s not just about knowing digital assets exist — it’s about knowing how to access them. A recent study from the Angus Reid Forum, commissioned by Willful, showed that consumers under 35 are way less likely to have shared account access with loved ones (19% of those under 35 have shared account info, compared with 32% of those over 55). This makes sense, since the younger you are, the less likely you are to think about passing on assets after you die. But this tech-savvy younger demographic may leave their families in the lurch if something happens.

So what can consumers do to ensure their digital assets are protected? First, consider using a password manager like 1Password — which can store all of your account information, logins, private keys to digital assets and any other key information — and share the master access password with your executor or store it with your will.

While this can ensure easy access to your accounts in an emergency, Lee Poskanzer, the founder of Directive Communication Systems, says it can also put your family or executors at risk, highlighting that in many cases, website and app owners explicitly prohibit password sharing in their terms of service, and privacy laws in some jurisdictions prohibit account holder impersonation (in the U.S., that’s covered by the Stored Communications and Electronic Communications Privacy Act). Not to mention, accounts increasingly require two-factor authentication, which may not be easy to confirm if executors don’t have access to the person’s smartphone.

Directive Communication Systems’ platform helps manage the transfer of digital assets upon death, and Poskanzer says they don’t collect passwords for this reason. Instead, they work with the estate to provide content providers (Google, social media platforms, etc.) with required documentation, which can include a death certificate, obituary, ID or other documents. Upon meeting those requirements, which vary by company, content providers provide a data dump of an account’s contents, making them available via the cloud.

Second, consider using a digital wallet or exchange to store your digital assets — if your family has access to that, it may also include access to your private keys, depending on the wallet’s features, or the exchange itself may have a death-management process.

For example, Coinbase clearly outlines what an executor or family member can do to retrieve digital assets in case of the death of the account holder. As a backup, you can store your private key on a physical piece of paper and ensure it’s stored in a safe deposit box, fireproof safe or other safe place your executor can access in the event of your passing.

Third, create an up-to-date list of your assets that your executor and/or key family members have access to — this should include physical and digital assets, and should be reviewed and updated either annually or when you acquire a new asset or change financial institutions. Finally, create a will that clearly outlines how you want your assets to be distributed and provide specific instructions on how you want digital assets to be distributed.

Not only is this best practice to protect your assets of any kind and to appoint key roles like guardians for minor children, it will also likely be required in order to release any account contents (for example, Coinbase requires a copy of the will as part of its process to release funds to an estate).

As we go through this major wealth transfer between generations, it’s likely that banks, fintechs, crypto exchanges, social media platforms and other content providers will create clear death-management processes that make it easier to alert people about digital assets before you die and provide easy access instructions. But until that happens, following these steps means you can ensure your assets go to the people or organizations you want them to — and that they won’t be stuck in digital purgatory.

Three ways VC firms can construct sustainably diverse portfolios

Venture capital has a diversity problem: Data show that Black and Latinx founders received just 2.6% of overall funding in 2020. Women-founded teams received nearly 30% less funding in 2020 than they did in 2019.

For decades, a close-knit community of brilliant but like-minded individuals built a system of pattern recognition. It produced high-growth companies with homogenous leadership teams. They called it meritocracy. Those of us who didn’t fit the profile were told, or were left to assume, that we didn’t have what it takes.

When a founder needs funding but investors don’t think they “have what it takes,” it can quickly become a self-fulfilling prophecy. No matter how good you are and how much product-market fit you achieve, at some point “what it takes” to scale a company is money.

Until recently, the lack of diversity in the ecosystem was largely an issue to those of us directly affected by it. It wasn’t until the groundbreaking #metoo and #BlackLivesMatter movements that the lack of funding for women and minorities became both evident — and evidently problematic — to the rest of the world.

I believe that underrepresented founders are the most undervalued asset class in the U.S. today, and investors are starting to realize that diversity is not charity — it’s economic opportunity.

Just look at the data on women-founded startups, which deliver 63% higher ROI (according to First Round Capital), generate twice as much revenue for every dollar invested (according to BCG), and take one full year less time to exit (according to PitchBook & AllRaise). Founders that have it harder, but persevere, lead to stronger companies with outsized results for their investors.

The good news is that recent events jolted many into action. A flurry of pledges, micro-funds and quick investments in support of Black founders arrived in the wake of George Floyd’s murder last summer. Overnight, these founders were heavily courted for meetings and speaking opportunities from people and firms they didn’t have access to in the past. Some secured investments and built new relationships that will help down the line. For many, the timing was off, and they didn’t benefit materially. In the end, the frenzy quieted down, and only 3% of 2020 VC deal volume went to Black-founded companies.

Ashlee Wisdom, the co-founder and CEO of digital health platform Health in Her HUE, experienced this firsthand.

“Last summer I was overwhelmed with inbounds from investors, which felt great at first,” she said. “But I was new to venture; I didn’t know how to build a strategy around fundraising, and most of those investors were looking for companies at a later stage than mine. No one I spoke to during that time seemed to be willing to invest in my pre-seed round despite our demonstrated traction. On the positive side, I met a lot of great investors who made meaningful introductions to pre-seed and early-stage funds. And some of those later-stage investors are now watching Health In Her HUE’s progress.”

It’s too soon to tell how sustainable the progress made last year will be. But we do have evidence from prior times that small, cosmetic efforts at diversity do not result in lasting change. Just take a look at what’s happened to VC funding for women recently.

In the aftermath of #metoo, investors and corporations were also spurred to act, with some success. For a while, VC investments in women-founded companies increased slowly but steadily. But once COVID hit, and investors retreated to their closest and most trusted referral networks, VC funding for women took a huge step backward. Crunchbase data show more than 800 female-founded startups globally received a total of $4.9 billion in venture funding in 2020, through mid-December, representing a 27% decrease over the same period the prior year.

The lesson is this: Efforts at the periphery of venture capital do not make a difference in the long run. The good news is many have started taking action. To achieve systemic, long-term improvements, VC firms will need to make changes to their core system, building diversity into the primary investing process itself. Results will not be visible immediately, but they will be far more sustainable and, as the data suggest, more profitable over the lifetime of these funds. Here are three specific actions VC firms can take to achieve this:

1. Hire BIPOC and women investors

A recent PitchBook report notes that female investors are twice as likely to invest in companies with female founders and three times as likely in companies with female CEOs. And yet fewer than 10% of all VC partners are women. According to BLCK VC, more than 80% of venture firms don’t have a single Black investor on their team. That makes it less surprising that only 1 percent of venture-funded startup founders are Black.

When you hire from the same communities you want to invest in, and ensure your new hires are set up for success, you unlock dealflow, relationships, and insights into new markets and customer sets. This results in a more diverse portfolio and a stronger investment team, one that serves its entire portfolio of companies better.

2. Measure the top of your funnel

Inputs lead to outputs. VC firms should do everything they can to foster stronger relationships with underrepresented founder communities to enable more diversity at the top of the deal flow funnel.

Partner, sponsor and invest in organizations like Female Founders Alliance, SoGal Foundation, Black Women Talk Tech and more. Go out of your way to attend events, ask for introductions, schedule casual coffee meetings and meet as many founders in those networks as you can — and foster those relationships meaningfully over time. This is how you seed decades of great dealflow.

3. Invest directly in emerging fund managers

There are hundreds of new funds, many of them with less than $50 million in assets under management, with direct access to pockets of talent that you are not currently seeing. These general partners have trusting, authentic relationships with founders who might be wary of mainstream VC. If you are a larger VC fund, you should be actively investing in them. Emerging managers can act as your scouts, and, in return, you will help build the ecosystem itself.

I believe that the lack of diversity in venture capital is a once-in-a-generation opportunity for those willing to make the earliest bets. If we invest in women at the same rate that we invest in men, this could boost the global economy by up to $5 trillion. That is a huge amount of return up for grabs. A homogenous portfolio misses that opportunity.

Most investors I know are aware of the opportunity and genuinely want to do better. The more urgency they feel, the more likely they are to spin up independent initiatives to address inequities directly. While these can be helpful, they’re also not sustainable. The best way to build a sustainably diverse portfolio is to do the slow, hard work of change from the inside out.