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Founders must show investors that sustainability is more than lip service

By Walter Thompson
Todd Klein Contributor
Todd Klein is a partner at Revolution Growth, a VC fund that invests in growth-stage companies. During his 20-year career, Todd has been involved in financing and building over 150 venture and growth-stage companies in the media, consumer, technology, education and healthcare sectors.

Ending years of debates over environmental sustainability, the United States officially declared a climate crisis earlier this year, deeming climate considerations an “essential element” of foreign policy and national security. After recommitting the U.S. to the Paris Agreement, President Joseph R. Biden announced an aggressive new goal for reducing U.S. greenhouse gas emissions and pushed world leaders to collectively “step up” their fight against climate change.

At the same time, consumers are increasingly looking to do business with brands that align with their growing environmental values, rather than ignoring the climate consequences of their consumption. Even without regulation as a stick, consumer demand is now serving as a carrot to increase sustainability’s impact on public companies’ agendas.

Startups have already followed suit. Investors today view sustainability as an important pillar of any business model and are looking for entrepreneurs who “get it” from the beginning to build and scale next-generation companies. Startups interested in thriving cannot treat sustainability as an afterthought and should be prepared to enter the public eye with a plan for sustainable growth.

Today, companies of all sizes are being held to a higher standard by consumers, employees, potential partners and the media.

So what exactly do founders need to put in place to demonstrate that they’re on the right track when it comes to sustainability? Here are five attributes that investors are looking for.

1. A truly customer-centric feedback loop

It’s fairly easy for any company to claim that it understands customers’ wants and needs, but it’s challenging to have the tech stack in place to prove a company actually listens to customer feedback and meets those expectations.

Investors now expect startups to have both platforms and solutions — social listening channels, relationship management tools, surveying programs and review forums — that allow them to hear and act on the needs of their customers. Without the proper communications tools and actual people using them, your eco-friendly efforts will likely appear to be merely lip service.

Take the example of TemperPack, which manufactures recyclable insulated packaging solutions for shipments of cold, perishable foods and pharmaceuticals. The direct relationship between a packager like TemperPack and the end consumer is often invisible. But as we were looking into investing in the company, some of its life sciences customers told us about comments they had received from end users — people who were receiving medicine twice per day. Another supplier’s packaging required them to visit a recycler for disposal, a real-world pain point that was causing them to consider switching to a different medication.

Revolution Growth decided to add TemperPack as a portfolio company after directly seeing its customer feedback loop in action: End-user requests informed product development, proving both a market need and customer demand on the sustainability front. This firsthand example demonstrates how an investor, a packaging maker, a life sciences company and an end user are now interconnected in one relationship while underscoring how end-user feedback can connect the dots for sustainable product development.

2. Public commitment to sustainability goals

Over the past several years, we have seen millennials and Gen Z consumers demand transparency in sustainability efforts. As these generations grow in purchasing power, investors will look for startups that make their commitments to eco-friendly goals as transparent as possible to satisfy shrewd consumer needs.

For many VCs, making public commitments to sustainability goals is a sign that your startup is working toward becoming a next-generation company. Investors will look for goals that are thoughtful, with a clear understanding of where your company will have agency and influence, and that are S.M.A.R.T (Specific, Measurable, Achievable, Realistic and Timely). They will also expect regular reports on progress.

Although a company’s management establishes these goals, its board should play a behind-the-scenes role in driving the goals forward, keeping leadership on track and setting the playing field so executives understand that they’re being evaluated on criteria transcending positive EBIDTA.

Taking these steps will ensure goals are responsible and ambitious while also holding the company accountable to consumers and stakeholders to see the initiatives through to completion.

3. Purpose-driven culture

Even the best-laid sustainability goals will go unmet without a strong culture designed to guarantee leadership and employee alignment. Sustainability must be ingrained in a startup’s culture — from the top down and bottom up — and there’s a lot at stake if it’s not.

Another Revolution Growth portfolio company, the global fintech-revolutionizing startup Tala, demonstrates how young companies can imbue their cultures with purpose-driven values. While Tala’s mission is to provide credit to the unbanked, the company believes that the consumer’s best interests should always come first. During 2019’s holiday season, Tala contrasted with businesses fueling consumption by instead urging customers in Kenya to not take out loans, protecting them from predatory unregulated lenders amid a lack of functioning credit bureaus and loan-stacking databases. This forward-looking approach ultimately safeguarded Tala’s customers and its vibrant digital lending industry.

Beyond determining what they stand for, many of our portfolio companies face challenges securing talent. People have choices about where they want to work, and those with intrinsic motivations — such as concerns about the environment — will feel uncomfortable if their employers do not share their values. Regulatory risks and customer attrition pale in comparison to the human cost of losing star performers who seek other work cultures that better align with their values.

A clear values system should embed sustainability into the decision-making process, make obvious imperatives and empower employees to follow through.

4. Accountability

Companies aren’t only judged by their own initiatives — they’re also judged by their partners. As startups build new relationships or expand to work with new suppliers, investors will be keen to know that these outside parties align with their stated sustainability philosophies.

Before becoming publicly involved with another company, a startup should gauge each new supplier’s reputation, including insights into their employment practices. Take leading Mediterranean fast-casual restaurant Cava or healthy-inspired salad-centric chain Sweetgreen, both Revolution Growth portfolio companies; neither will source proteins from farms with inhumane policies. If companies are not aware of these factors, their customers will eventually let them know, and likely hold them accountable for the oversight.

Think of it this way: If a diagram of your partnerships and supplier relationships was printed on the front page of The New York Times, would you be comfortable with what it shows the world? Today, companies of all sizes are being held to a higher standard by consumers, employees, potential partners and the media. It’s no longer possible to fly under the radar with relationships that are antithetical to a company’s sustainability goals. So take a hard look at your supplier and partner ecosystem, and make clear that you are bringing your green vision to life through every extension of your business.

5. Financial realism

Financial realism acknowledges that a company can want to do good, but unless they have the economics, they won’t survive to make an impact. For most startups, beginning with financial realism as a mindset and incrementalism as an approach will be key to success, enabling all businesses to contribute to a more resilient planet. For startups that prioritize environmentally friendly business practices alongside a product or service, this strategy can prevent goodness from becoming the enemy of greatness. Founders in this position can commit to a stage-by-stage sustainability plan, rather than expecting an overnight transformation. Investors understand the delicate balance between striving to meet green goals and keeping the lights on.

Entrepreneurs looking to build a business that not only adopts eco-friendly practices but also has sustainability at its heart may have to consider starting in a niche industry or market that is less price-sensitive and ready for a solution today. Once that solution is firmly established, the business can build upon what they’ve created, rather than going big with something that doesn’t scale — and failing fast. Without an initial set of customers that value and love what you’re doing, you won’t get to the bigger play.

As the public and private sectors continue to address the climate crisis, sustainability will increasingly become a mandate rather than an option, and funding will increasingly flow to startups that have addressed potential environmental concerns. Unfortunately, pressure for companies to meet sustainability demands has led to “greenwashing” — the deceptive use of green marketing to persuade consumers that a company’s products, aims and policies are environmentally friendly.

Greenwashing has forced investors to look beyond mere words for action. As we move toward a more sustainable future, startups pursuing VC funding will need to prove to investors that sustainability is a priority across their entire organizations, aligning their outreach, public commitments and cultures with accountability and concrete examples of sustainable activities. Even if those examples are just steps toward larger goals, they will show investors and customers that startups are ready today to contribute to a greener and better tomorrow.

6 career options for ex-founders seeking their next adventure

By Ram Iyer
David Teten Contributor
David Teten is founder of Versatile VC and writes periodically at teten.com and @dteten.

Hey, founders between gigs: What now?

If you exited your last company for airplane money and are now independently wealthy, congratulations! If you want to build another company, just self-fund. If you want outside capital, VCs will chase after you to invest.

Unfortunately, most founders are not in that position: nine out of 10 startups fail. Even if you achieve a high valuation, you might end up like FanDuel’s founders: Their investors got the benefit of a $465 million exit; the founders got zero.

As someone with “founder” on your resume, you face a greater challenge when trying to get a traditional salaried job. You’ve already shown that you really want to lead a company and not just rise up the ladder, which means some employers are less likely to hire you. One research paper found:

[F]ormer founders receive fewer callbacks than non-founders; however, all founders are not disadvantaged similarly. Former founders of successful ventures receive even fewer [emphasis added] callbacks than former founders of failed ventures. Through 20 interviews with technical recruiters, we highlight the mechanisms driving this founder-experience discount: concerns related to the applicant’s capability and ability to fit into and remain committed to the wage employment and the hiring firm.

At my prior firm, ff Venture Capital, we invested in a company co-founded by Nate Jenkins, who had a successful exit, but not quite enough to buy a private plane. He’s now researching his next opportunity and interviewing for some jobs. At the end of a recent interview, the interviewer summarized, “I’ll hire you, but is this what you really want to do?”

That said, Samuel Sabin, CEO of HireBlue, observed, “Some founders who work better with more resources at their disposal may be tapped for intrapreneurship roles. Also, some companies value a self-starter mentality.”

So what should you do? Especially if your life partner and/or bank account are burnt out on the income volatility of startups?

I’ve been in this situation myself when I shut down one startup and exited two others. I think you have six main options:

Full-time initiatives

  1. Launch a new company.
  2. Get a job.

Part-time activities

  1. Angel investing, venture capital and mentoring.
  2. Consulting.
  3. Sell information products.
  4. Education and self-improvement.

At Versatile VC, our new VC fund, we’re creating an online community just for founders who are in transition, Founders’ Next Move. We hope you will join us!

Full-time initiatives

Launch a new company

If you want to work on your startup idea, the bar for starting a company should always be very high. VCs have a diversified portfolio and most of their investments die. You don’t have a diverse portfolio and so you’re taking far more risk than the VCs. For free resources to help research your ideas, see What startup will you build? Identifying market white space.

The hidden benefits of adding a CTO to your board

By Ram Iyer
Abby Kearns Contributor
Abby Kearns, chief technology officer at Puppet, has more than 20 years of experience scaling growth for numerous Fortune 500 and startup companies.

The pandemic forced companies around the world to adjust to a “new normal,” which caused many leaders to pivot their business strategies and adopt new technologies to continue operations. In a time of chaos and change, there is no senior leader that can navigate this sort of change better than a CTO.

Not only do CTOs understand the ever-changing tech landscape, they also provide invaluable insights to help organizations go beyond traditional IT conversations and leverage technology to successfully scale businesses.

Boards are facing pressure to be strategic and thoughtful on how to evolve in the rapidly iterating world of technology, and a CTO is uniquely positioned to address specific challenges.

There are now more reasons than ever to consider adding a CTO to your board. As a CTO myself, I know how important and impactful it can be to have technical-minded leaders on a company’s board of directors. At a time when companies are accelerating their digital transformation, it’s critical to have diverse technical perspectives and people from varying backgrounds, as transformations are a mix of people, process and technology.

Drawing on my experience on Lightbend’s board of directors, here are five hidden benefits of making space at the table for a CTO.

A unique mind (and skill) set

Currently, most boards of directors are composed of former CEOs, CFOs and investors. While such executives bring vast experience, they have very specific expertise, and that frequently does not include technical proficiency. In order for a company to be successful, your board needs to have people with different backgrounds and expertise.

Inviting different perspectives forces companies out of the groupthink mentality and find new, creative solutions to their problems. Diverse perspectives aren’t just about the title –– racial ethnicity and gender diversity are clearly a play here as well.

Deep understanding of tech

For a product-led company, having a CTO who has been close to product development and innovation can bring deep insights and understanding to the boardroom. Boards are facing pressure to be strategic and thoughtful on how to evolve in the rapidly iterating world of technology, and a CTO is uniquely positioned to address specific challenges.

It’s time for security teams to embrace security data lakes

By Annie Siebert
Dan Schoenbaum Contributor
Dan Schoenbaum is a two-time CEO and a two-time COO in cybersecurity. Today, he is a managing partner at High Tide Advisors, a boutique consulting firm helping companies achieve greater success through go-to-market strategies and execution.

The average corporate security organization spends $18 million annually but is largely ineffective at preventing breaches, IP theft and data loss. Why? The fragmented approach we’re currently using in the security operations center (SOC) does not work.

Here’s a quick refresher on security operations and how we got where we are today: A decade ago, we protected our applications and websites by monitoring event logs — digital records of every activity that occurred in our cyber environment, ranging from logins to emails to configuration changes. Logs were audited, flags were raised, suspicious activities were investigated, and data was stored for compliance purposes.

The security-driven data stored in a data lake can be in its native format, structured or unstructured, and therefore dimensional, dynamic and heterogeneous, which gives data lakes their distinction and advantage over data warehouses.

As malicious actors and adversaries became more active, and their tactics, techniques and procedures (or TTP’s, in security parlance) grew more sophisticated, simple logging evolved into an approach called “security information and event management” (SIEM), which involves using software to provide real-time analysis of security alerts generated by applications and network hardware. SIEM software uses rule-driven correlation and analytics to turn raw event data into potentially valuable intelligence.

Although it was no magic bullet (it’s challenging to implement and make everything work properly), the ability to find the so-called “needle in the haystack” and identify attacks in progress was a huge step forward.

Today, SIEMs still exist, and the market is largely led by Splunk and IBM QRadar. Of course, the technology has advanced significantly because new use cases emerge constantly. Many companies have finally moved into cloud-native deployments and are leveraging machine learning and sophisticated behavioral analytics. However, new enterprise SIEM deployments are fewer, costs are greater, and — most importantly — the overall needs of the CISO and the hard-working team in the SOC have changed.

New security demands are asking too much of SIEM

First, data has exploded and SIEM is too narrowly focused. The mere collection of security events is no longer sufficient because the aperture on this dataset is too narrow. While there is likely a massive amount of event data to capture and process from your events, you are missing out on vast amounts of additional information such as OSINT (open-source intelligence information), consumable external-threat feeds, and valuable information such as malware and IP reputation databases, as well as reports from dark web activity. There are endless sources of intelligence, far too many for the dated architecture of a SIEM.

Additionally, data exploded alongside costs. Data explosion + hardware + license costs = spiraling total cost of ownership. With so much infrastructure, both physical and virtual, the amount of information being captured has exploded. Machine-generated data has grown at 50x, while the average security budget grows 14% year on year.

The cost to store all of this information makes the SIEM cost-prohibitive. The average cost of a SIEM has skyrocketed to close to $1 million annually, which is only for license and hardware costs. The economics force teams in the SOC to capture and/or retain less information in an attempt to keep costs in check. This causes the effectiveness of the SIEM to become even further reduced. I recently spoke with a SOC team who wanted to query large datasets searching for evidence of fraud, but doing so in Splunk was cost-prohibitive and a slow, arduous process, leading the team to explore alternatives.

The shortcomings of the SIEM approach today are dangerous and terrifying. A recent survey by the Ponemon Institute surveyed almost 600 IT security leaders and found that, despite spending an average of $18.4 million annually and using an average of 47 products, a whopping 53% of IT security leaders “did not know if their products were even working.” It’s clearly time for change.

The rise of cybersecurity debt

By Ram Iyer
Howard Boville Contributor
Howard Boville is head of IBM Hybrid Cloud. He leads the global cloud business at IBM and helps develop market-leading capabilities to drive digital transformation for enterprises.

Ransomware attacks on the JBS beef plant, and the Colonial Pipeline before it, have sparked a now familiar set of reactions. There are promises of retaliation against the groups responsible, the prospect of company executives being brought in front of Congress in the coming months, and even a proposed executive order on cybersecurity that could take months to fully implement.

But once again, amid this flurry of activity, we must ask or answer a fundamental question about the state of our cybersecurity defense: Why does this keep happening?

I have a theory on why. In software development, there is a concept called “technical debt.” It describes the costs companies pay when they choose to build software the easy (or fast) way instead of the right way, cobbling together temporary solutions to satisfy a short-term need. Over time, as teams struggle to maintain a patchwork of poorly architectured applications, tech debt accrues in the form of lost productivity or poor customer experience.

Complexity is the enemy of security. Some companies are forced to put together as many as 50 different security solutions from up to 10 different vendors to protect their sprawling technology estates.

Our nation’s cybersecurity defenses are laboring under the burden of a similar debt. Only the scale is far greater, the stakes are higher and the interest is compounding. The true cost of this “cybersecurity debt” is difficult to quantify. Though we still do not know the exact cause of either attack, we do know beef prices will be significantly impacted and gas prices jumped 8 cents on news of the Colonial Pipeline attack, costing consumers and businesses billions. The damage done to public trust is incalculable.

How did we get here? The public and private sectors are spending more than $4 trillion a year in the digital arms race that is our modern economy. The goal of these investments is speed and innovation. But in pursuit of these ambitions, organizations of all sizes have assembled complex, uncoordinated systems — running thousands of applications across multiple private and public clouds, drawing on data from hundreds of locations and devices.

Complexity is the enemy of security. Some companies are forced to put together as many as 50 different security solutions from up to 10 different vendors to protect their sprawling technology estates — acting as a systems integrator of sorts. Every node in these fantastically complicated networks is like a door or window that might be inadvertently left open. Each represents a potential point of failure and an exponential increase in cybersecurity debt.

We have an unprecedented opportunity and responsibility to update the architectural foundations of our digital infrastructure and pay off our cybersecurity debt. To accomplish this, two critical steps must be taken.

First, we must embrace open standards across all critical digital infrastructure, especially the infrastructure used by private contractors to service the government. Until recently, it was thought that the only way to standardize security protocols across a complex digital estate was to rebuild it from the ground up in the cloud. But this is akin to replacing the foundations of a home while still living in it. You simply cannot lift-and-shift massive, mission-critical workloads from private data centers to the cloud.

There is another way: Open, hybrid cloud architectures can connect and standardize security across any kind of infrastructure, from private data centers to public clouds, to the edges of the network. This unifies the security workflow and increases the visibility of threats across the entire network (including the third- and fourth-party networks where data flows) and orchestrates the response. It essentially eliminates weak links without having to move data or applications — a design point that should be embraced across the public and private sectors.

The second step is to close the remaining loopholes in the data security supply chain. President Biden’s executive order requires federal agencies to encrypt data that is being stored or transmitted. We have an opportunity to take that a step further and also address data that is in use. As more organizations outsource the storage and processing of their data to cloud providers, expecting real-time data analytics in return, this represents an area of vulnerability.

Many believe this vulnerability is simply the price we pay for outsourcing digital infrastructure to another company. But this is not true. Cloud providers can, and do, protect their customers’ data with the same ferocity as they protect their own. They do not need access to the data they store on their servers. Ever.

To ensure this requires confidential computing, which encrypts data at rest, in transit and in process. Confidential computing makes it technically impossible for anyone without the encryption key to access the data, not even your cloud provider. At IBM, for example, our customers run workloads in the IBM Cloud with full privacy and control. They are the only ones that hold the key. We could not access their data even if compelled by a court order or ransom request. It is simply not an option.

Paying down the principal on any kind of debt can be daunting, as anyone with a mortgage or student loan can attest. But this is not a low-interest loan. As the JBS and Colonial Pipeline attacks clearly demonstrate, the cost of not addressing our cybersecurity debt spans far beyond monetary damages. Our food and fuel supplies are at risk, and entire economies can be disrupted.

I believe that with the right measures — strong public and private collaboration — we have an opportunity to construct a future that brings forward the combined power of security and technological advancement built on trust.

For SaaS startups, differentiation is an iterative process

By Ram Iyer
Jason VandeBoom Contributor
Jason VandeBoom is founder and CEO of ActiveCampaign, a customer experience automation (CXA) company.

Software as a service has been thriving as a sector for years, but it has gone into overdrive in the past year as businesses responded to the pandemic by speeding up the migration of important functions to the cloud. We’ve all seen the news of SaaS startups raising large funding rounds, with deal sizes and valuations steadily climbing. But as tech industry watchers know only too well, large funding rounds and valuations are not foolproof indicators of sustainable growth and longevity.

To scale sustainably, grow its customer base and mature to the point of an exit, a SaaS startup needs to stand apart from the herd at every phase of development. Failure to do so means a poor outcome for founders and investors.

As a founder who pivoted from on-premise to SaaS back in 2016, I have focused on scaling my company (most recently crossing 145,000 customers) and in the process, learned quite a bit about making a mark. Here is some advice on differentiation at the various stages in the life of a SaaS startup.

Launch and early years

Differentiation is crucial early on, because it’s one of the only ways to attract customers. Customers can help lay the groundwork for everything from your product roadmap to pricing.

The more you know about your target customers’ pain points with current solutions, the easier it will be to stand out. Take every opportunity to learn about the people you are aiming to serve, and which problems they want to solve the most. Analyst reports about specific sectors may be useful, but there is no better source of information than the people who, hopefully, will pay to use your solution.

The key to success in the SaaS space is solving real problems. Take DocuSign, for example — the company found a way to simply and elegantly solve a niche problem for users with its software. This is something that sounds easy, but in reality, it means spending hours listening to the customer and tailoring your product accordingly.

3 lessons we learned after raising $6.3M from 50 investors

By Annie Siebert
Henry Shapiro Contributor
Henry Shapiro is the co-founder of Reclaim.ai, an intelligent calendar assistant platform used daily by over 4,000 companies. Prior to founding Reclaim, Henry led product and marketing at New Relic.

It was August 2019, and the fundraising process was not going well.

My co-founder and I had left our product management jobs at New Relic several months prior, deciding to finally plunge into building Reclaim after nearly a year of late nights and weekends spent prototyping and iterating on ideas. We had bits and pieces of a product, but the majority of it was what we might call “slideware.”

When you can’t raise big on the vision, you need to raise big on the proof. And the proof comes from building, learning, iterating and getting traction with your first few hundred users.

When we spoke to many other founders, they all told us the same thing: Go raise, raise big, and raise now. So we did that, even though we were puzzled as to why anyone would give us money with little more than a slide deck to our names. We spent nearly three months pitching dozens of VCs, hoping to raise $3 million to $4 million in a seed round to hire our founding team and build the product out.

Initially, we were excited. There was lots of inbound interest, and we were starting to hear a lot of crazy numbers getting thrown around by a lot of Important People. We thought for sure we were maybe a week away from term sheets. We celebrated preemptively. How could it possibly be this easy?

Then in July, almost in an instant, everything started to dry up. The verbal offers for term sheets didn’t materialize into real offers. We had term sheets, but they were from investors that didn’t seem to care much about what we were building or what problems we wanted to solve. We quickly realized that we hadn’t really built momentum around the product or the vision, but were instead caught up in what we later learned to be “deal flow.”

Basically, investors were interested because other investors were interested. And once enough of them weren’t, nobody was.

Fortunately, as I write this today, Reclaim has raised a total of $6.3 million on great terms across a group of incredible investors and partners. But it wasn’t easy, and it required us to embrace our failure and learn three important lessons that I believe every founder should consider before they decide to go out and pitch investors.

Lesson 1: Build big before you raise big

In 2019, we were hunting for what some referred to as a “mango seed” — that is, a seed round that was large enough that it was perceptibly closer to a light Series A financing. Being pre-product at the time, we had to lean on our experience and our vision to drive conviction and urgency among investors. Unfortunately, it just wasn’t enough. Investors either felt that our experience was a bad fit for the space we were entering (productivity/scheduling) or that our vision wasn’t compelling enough to merit investment on the terms we wanted.

When we did get offers, they involved swallowing some pretty bitter pills: We would be forced to take bad terms that were overly dilutive (at least from our perspective), work with an investor who we didn’t think had high conviction in our product strategy, or relinquish control in the company from an extremely early stage. None of these seemed like good options.

For startups, trustworthy security means going above and beyond compliance standards

By Annie Siebert
Oren Yunger Contributor
Oren Yunger is an investor at GGV Capital, where he leads the cybersecurity vertical and drives investments in enterprise IT, data infrastructure, and developer tools. He was previously chief information security officer at a SaaS company and a public financial institution.

When it comes to meeting compliance standards, many startups are dominating the alphabet. From GDPR and CCPA to SOC 2, ISO27001, PCI DSS and HIPAA, companies have been charging toward meeting the compliance standards required to operate their businesses.

Today, every healthcare founder knows their product must meet HIPAA compliance, and any company working in the consumer space would be well aware of GDPR, for example.

But a mistake many high-growth companies make is that they treat compliance as a catchall phrase that includes security. Thinking this could be an expensive and painful error. In reality, compliance means that a company meets a minimum set of controls. Security, on the other hand, encompasses a broad range of best practices and software that help address risks associated with the company’s operations.

It makes sense that startups want to tackle compliance first. Being compliant plays a big role in any company’s geographical expansion to regulated markets and in its penetration to new industries like finance or healthcare. So in many ways, achieving compliance is a part of a startup’s go-to-market kit. And indeed, enterprise buyers expect startups to check the compliance box before signing on as their customer, so startups are rightfully aligning around their buyers’ expectations.

One of the best ways startups can begin tackling security is with an early security hire.

With all of this in mind, it’s not surprising that we’ve witnessed a trend where startups achieve compliance from the very early days and often prioritize this motion over developing an exciting feature or launching a new campaign to bring in leads, for instance.

Compliance is an important milestone for a young company and one that moves the cybersecurity industry forward. It forces startup founders to put security hats on and think about protecting their company, as well as their customers. At the same time, compliance provides comfort to the enterprise buyer’s legal and security teams when engaging with emerging vendors. So why is compliance alone not enough?

First, compliance doesn’t mean security (although it is a step in the right direction). It is more often than not that young companies are compliant while being vulnerable in their security posture.

What does it look like? For example, a software company may have met SOC 2 standards that require all employees to install endpoint protection on their devices, but it may not have a way to enforce employees to actually activate and update the software. Furthermore, the company may lack a centrally managed tool for monitoring and reporting to see if any endpoint breaches have occurred, where, to whom and why. And, finally, the company may not have the expertise to quickly respond to and fix a data breach or attack.

Therefore, although compliance standards are met, several security flaws remain. The end result is that startups can suffer security breaches that end up costing them a bundle. For companies with under 500 employees, the average security breach costs an estimated $7.7 million, according to a study by IBM, not to mention the brand damage and lost trust from existing and potential customers.

Second, an unforeseen danger for startups is that compliance can create a false sense of safety. Receiving a compliance certificate from objective auditors and renowned organizations could give the impression that the security front is covered.

Once startups start gaining traction and signing upmarket customers, that sense of security grows, because if the startup managed to acquire security-minded customers from the F-500, being compliant must be enough for now and the startup is probably secure by association. When charging after enterprise deals, it’s the buyer’s expectations that push startups to achieve SOC 2 or ISO27001 compliance to satisfy the enterprise security threshold. But in many cases, enterprise buyers don’t ask sophisticated questions or go deeper into understanding the risk a vendor brings, so startups are never really called to task on their security systems.

Third, compliance only deals with a defined set of knowns. It doesn’t cover anything that is unknown and new since the last version of the regulatory requirements were written.

For example, APIs are growing in use, but regulations and compliance standards have yet to catch up with the trend. So an e-commerce company must be PCI-DSS compliant to accept credit card payments, but it may also leverage multiple APIs that have weak authentication or business logic flaws. When the PCI standard was written, APIs weren’t common, so they aren’t included in the regulations, yet now most fintech companies rely heavily on them. So a merchant may be PCI-DSS compliant, but use nonsecure APIs, potentially exposing customers to credit card breaches.

Startups are not to blame for the mix-up between compliance and security. It is difficult for any company to be both compliant and secure, and for startups with limited budget, time or security know-how, it’s especially challenging. In a perfect world, startups would be both compliant and secure from the get-go; it’s not realistic to expect early-stage companies to spend millions of dollars on bulletproofing their security infrastructure. But there are some things startups can do to become more secure.

One of the best ways startups can begin tackling security is with an early security hire. This team member might seem like a “nice to have” that you could put off until the company reaches a major headcount or revenue milestone, but I would argue that a head of security is a key early hire because this person’s job will be to focus entirely on analyzing threats and identifying, deploying and monitoring security practices. Additionally, startups would benefit from ensuring their technical teams are security-savvy and keep security top of mind when designing products and offerings.

Another tactic startups can take to bolster their security is to deploy the right tools. The good news is that startups can do so without breaking the bank; there are many security companies offering open-source, free or relatively affordable versions of their solutions for emerging companies to use, including Snyk, Auth0, HashiCorp, CrowdStrike and Cloudflare.

A full security rollout would include software and best practices for identity and access management, infrastructure, application development, resiliency and governance, but most startups are unlikely to have the time and budget necessary to deploy all pillars of a robust security infrastructure.

Luckily, there are resources like Security 4 Startups that offer a free, open-source framework for startups to figure out what to do first. The guide helps founders identify and solve the most common and important security challenges at every stage, providing a list of entry-level solutions as a solid start to building a long-term security program. In addition, compliance automation tools can help with continuous monitoring to ensure these controls stay in place.

For startups, compliance is critical for establishing trust with partners and customers. But if this trust is eroded after a security incident, it will be nearly impossible to regain it. Being secure, not only compliant, will help startups take trust to a whole other level and not only boost market momentum, but also make sure their products are here to stay.

So instead of equating compliance with security, I suggest expanding the equation to consider that compliance and security equal trust. And trust equals business success and longevity.

The exit effect: 4 ways IPOs and acquisitions drive positive change across the global ecosystem

By Annie Siebert
Laura González-Estéfani Contributor
Laura González-Estéfani is the founder and CEO of TheVentureCity, an international, operator-led venture acceleration model designed to make the global entrepreneurial ecosystem more diverse, international and accessible to fair capital.

For many VCs, the exit is the endgame; you cash in and move on. But as we know, the startup world is evolving, and that means the impact of investment is no longer limited to how much money is made.

As investors, we’re looking further into what each investment means to human beings, at interlinking our mission with our money. And yet, one of the events that generates the most momentum for long-term impact — the successful exit of a portfolio company — is not being harnessed.

When leveraged properly, an exit can be the beginning of a firm’s true impact, especially when we’re talking about giving all founders equal opportunities and empowering the best ideas. The investment sphere is slowly shaking off its “America first” approach as foreign products take the world by storm and international businesses become the norm.

When leveraged properly, an exit can be the beginning of a firm’s true impact, especially when we’re talking about giving all founders equal opportunities and empowering the best ideas.

Investors will be driving forces in enabling the highest-potential companies to build products that countries everywhere will benefit from — no matter where they were conceived. The way they play the game can transform the industry into one in which a founder from across the ocean has as much of a chance to change the world as one from next door.

We know the basics of how to do this with cash: Investing in underrepresented founders is a necessary first step. But who’s talking about the power of exits to change the playing field for diverse founders? We must consider the psychological motivation of seeing a huge buyout on other entrepreneurs, what that startup’s ex-team members go on to build, and what the achievements of one citizen does for that nation’s reputation.

Last year, 41 venture-backed companies saw a billion-dollar exit, totaling over $100 billion, the highest numbers in a decade. We have an unprecedented amount of clout to do something with those power moves and four ways to turn them into a domino effect.

1. Competitor effect

When a foreign entrepreneur raises money from U.S. firms and sells to a U.S. company, other immigrants see that. Regardless of how groundbreaking their product idea might be, immigrant Americans will always be more wary of putting their eggs into the entrepreneurship basket, at least as long as 93% of all VC money continues to be controlled by white men.

This, despite research suggesting that immigrants contribute 40% more to innovation than local inventors.

What these foreign entrepreneurs most need is confidence, role models and success stories proving other people who look like them have made it, especially when those founders are making waves in the same industry as them.

So a big, well-publicized exit will create momentum in the industry for other foreign founders to give fuel to their venture and seek to take it to the next stage. Not only that, it will instill more self-assurance when it comes to fundraising, and investors will value that.

I was inspired to write this column after Returnly, a fintech founded by a fellow immigrant from Spain based in San Francisco — which, for full transparency, I invested in as an angel investor, and then for Series B and C via my fund — was acquired for $300 million by Affirm.

While there was undoubtedly a personal financial gain worth celebrating, the success of a foreign founder who persevered against the odds in such a competitive ecosystem as Silicon Valley, raised large rounds from U.S.-based investors, and was finally acquired by a U.S. company served as a moment of inspiration for other diverse founders around the world. We saw this in the amount of media attention it received in both business and mainstream press in Spain and the floods of connect requests and congratulations that followed on LinkedIn.

The impact of an exit is greater when it shows foreign entrepreneurs that there are globally minded organizations helping startups like theirs get equal access to funding. That means having VC firms that spotlight international entrepreneurship and foster global expert networks.

As investors, we can maximize the impact of our exits in the industry by highlighting the foreign origins of our founders in a big way when it comes to promoting the exit, including narrating the challenges and opportunities they encountered on their journey. We can use the victory to drive the point home to our fellow investors that diverse and international entrepreneurship is an undervalued gem. We can personally take the win to boost our brand as one that empowers foreign entrepreneurs in that niche, attracting more to seek funding with us in a positive reinforcement cycle.

2. Wealth effect

The windfall from a big exit puts all previous investors in a privileged position, and it’s unlikely that money will sit around for long. They’ll look to reinvest in other high-potential companies — probably ones that look a lot like the one that was just sold.

But in addition to those investors multiplying the positive impact in their own portfolio, they will rally other investors to behave in a similar way.

Each exit — good or bad — sets a precedent for that niche and that type of company. Other investors will follow suit if they sense that one of their peers is onto a cash cow. Because foreign and ethnic minority founders are still underrepresented in startup funding, it makes this field less competitive while harboring huge potential. VCs who have an eye out for unique opportunities will spot when an investor has made a hefty profit from an unconventional startup, especially if they continue to invest in others in that same field.

To help this along, angels and VCs who’ve been behind a recent exit and are reinvesting in similar founders should publicize those knock-on investments, explaining how their previous success motivated them to support similar ventures. They can also be vocal within their network about their decision to raise up certain entrepreneurs because they’ve seen it works.

Returnly’s founder recently offered to put some of his earnings back into our fund, enabling more foreign entrepreneurs like himself to access capital. If as investors we foster meaningful relationships with our funders and truly care about empowering diverse entrepreneurs, we’ll see more of that wealth circle back into our mission.

3. Team effect

The PayPal Mafia is a set of former PayPal executives and employees — such as Elon Musk, a South African, and Peter Thiel, a German American — who have gone on to seriously disrupt not one but multiple industries across tech. Among the companies they’ve founded are YouTube, LinkedIn, Yelp and Tesla, and they’ve even been named U.S. ambassadors. That’s just one company. Imagine what other diverse and driven teams can do with the influx of cash and inspiration that comes with a big exit. There will be a ripple effect of team members eager to start out on their own who feel empowered by the success of someone who believed in them.

Their ventures will be more likely to “pass it on” when it comes to giving equal opportunities to people regardless of origin and will generate more jobs for people with their mission. Take Thiel, who has to date backed over 40 companies in Europe alone.

As VCs, we can capitalize on this team effect by keeping our eye on any spinoff ventures that arise and supporting them when possible (with experience and contacts, if not with capital). But beyond this, you can also consider encouraging these people to join the investment sphere, maybe even within your firm. Many successful startup founders and executives go on to become investors — the PayPal Mafia has contributed to some of the most notorious funds out there today. The origin story of these former team members will make them more prone to supporting underrepresented founders they can get behind. In turn, new entrepreneurs will draw more value from their personal experiences.

4. Reputation effect

Although Returnly is headquartered in San Francisco, its founder is Spanish and many of its employees were based in Spain.

That means that the impact of Returnly’s exit will be felt on the other side of the Atlantic as well as among co-nationals in the United States. The same is true of other notable sales, like AlienVault, which was founded in Spain and had multiple offices there. AlienVault was acquired by U.S. telecommunications giant AT&T for $900 million. Or IPOs — earlier this month, the Spanish-origin payments company Flywire filed for an IPO that could value the company at $3 billion. One startup’s success boosts the reputation of its entire team, and with it other founders and talent with their same country of origin, background, education and drive.

It follows that investors and other stakeholders will be more inclined to back opportunities among founders from the same home country if it says something about the mission, expertise and culture they bring to their startup.

At the same time, growing startups will be more interested in hiring the talent of evidently successful teams. That doesn’t just mean hiring more foreign experts in the United States, but seeking to outsource farther afield. We’re already becoming far more comfortable with remote teams, and it’s more capital-efficient for one half of the team to be working while the other half sleeps. But founders will always gravitate more to countries where local talent and innovation is already seen to be thriving. Open up that conversation with your portfolio companies.

VCs have the power to change an industry forever, to connect startup ecosystems across continents and to see startups expand worldwide. But this is about staying relevant as an investor as much as it’s about ensuring this next stage in the startup world is a positive one.

Investors who don’t recognize that the future of startups is global and diverse in nature won’t be in sync with the best opportunities — and won’t be selected by the best founders. Rather than trying to play catchup, help build that ecosystem.

SaaS needs to take a page out of the crypto playbook

By John Chen
John Chen Contributor
John is a principal at Fika Ventures in Los Angeles.

By the time I joined Box in late 2012, the “consumerization of the enterprise” movement was well underway. The playbook was clear: The lessons and tactics from the rise of consumer apps — viral loops, social referrals, frictionless onboarding — could be distilled, packaged and ported over to enterprise.

And the promise was subversive — great products could galvanize a loyal user base and wrest free the fates of multimillion-dollar contracts from suited salespeople peddling unusable software behind closed doors.

While the consumerization of SaaS has taught us how to more effectively get in front of users, this next decade will be about how to properly incentivize them to do the necessary work to have the right product experience.

A decade later, this promise has largely proven true. The consumer playbook contributed to the meteoric rise of Slack, Zoom, Airtable and others, specifically around user acquisition and onboarding. They are beautiful products that are discovered from the bottom up, self-serve, free to start and pay as you grow.

But while this might seem like one of the best times to build a SaaS company, one look at Product Hunt might paint a different story. For every success story like Airtable, there are a dozen lookalikes employing the same consumer-inspired playbook that are getting drowned out.

And for any first-mover startup in a new category thinking they’re reaching escape velocity, there are a dozen copycats in YC waiting around the corner, complete with their beautifully designed apps, and the promise of being “blazingly fast and delightfully simple.”

Image Credits: Fika Ventures

Conventional wisdom suggests that many of these newcomer apps will fall short because they don’t clearly communicate their differentiation, or their signup process isn’t streamlined enough, or they have poor documentation and tutorial videos, or they haven’t courted the right influencers on Twitter, or just plain poor execution.

While some (or all) of these might be true on the individual app level, there is something bigger happening on the aggregate level, and it comes back to one insidious assumption carried over from the consumer playbook: the myth of frictionless onboarding.

The reality is that onboarding is never frictionless. In fact, it’s quite the opposite — it demands that the user uproot their old habits and switch to this new way of being or doing. Just like with a new fitness program, participants feel good after completing the workout, but it takes a lot of activation energy to start and hard work to get there. Similarly, it takes work on the user’s part to get results, and most apps expect users to do this work for free.

But in a crowded marketplace with infinite alternatives, the only way to capture and hold a user’s attention is to directly incentivize them to experience the product, not just be exposed to it. Today’s growth playbook overindexes on spending ad dollars (with diminishing returns) to get premium placement and eyeballs on Google, Facebook or Product Hunt, but very few have tried putting those dollars to work toward ensuring users are actually having the experience they are supposed to.

2019 subscription customer acquisition cost study. Image Credits: Profitwell

To do this, SaaS needs to take a page out of the crypto playbook. So while the past decade of the consumerization of SaaS has taught us how to more effectively get in front of users, this next decade will be about the cryptofication of SaaS and how to properly incentivize users to do the necessary work to have the right experience with your product.

What the ‘nonpolitical’ startup leader teaches us about company culture

By Annie Siebert
Deb Muller Contributor
Deb Muller is founder and CEO of HR Acuity, which creates technology that helps organizations strategically manage employee relations. She has served in executive HR roles at numerous Fortune 500 companies like Honeywell, Citibank, and Marsh and McLennan.

All eyes have recently been on Basecamp, which lost about a third of its workforce at the end of last month after banning “societal and political discussions” at work. Late last year, Coinbase was embroiled in a similar controversy after its CEO declared that political activism at work is a distraction, leading to a smaller but still significant employee exodus.

Before that, controversies erupted at Google, Facebook and other prominent tech firms, leading to virtual employee walkouts and work stoppages. We continue to see headlines that highlight tech company employee revolts over management edicts or perceived policy failures.

These company meltdowns reflect a societal change, and those in the startup community ought to take notice. The strife may be attributable to changing generational expectations in some cases, or an excess of “tech bro” culture in others, but the reality is that things have changed.

A generation ago, it was standard policy to keep politics out of work. Today, it’s virtually impossible to separate the political from the personal, and employees are encouraged to bring their whole selves to work, which includes their backgrounds and belief systems.

Political and societal topics impact the everyday lives of employees and the world is more connected than ever. Startup leaders shouldn’t declare a political void — especially if they’re striving for a diverse and inclusive workforce. We’ve seen what happens when we don’t discuss these issues — systemic racism and workplace discrimination are allowed to go unchecked.

I’m the CEO and founder of a growing tech company, and also served as an HR executive at several Fortune 500 companies, which means I’ve seen all sides of the issues at play here.

That gives me some insight on the cultural problems gripping many tech businesses — and some thoughts on solutions. While companies have every right to create rules and policies on employee conduct and internal use of technology, leaders get better results when they approach these issues intentionally and transparently. As we’ve seen with Basecamp and others, banning political activities and discussions outright can result in unintended consequences.

How to change policies without all the drama

It’s impossible to know exactly what caused some of the recent tech company exoduses unless you were there. But most of us have experienced toxic workplace cultures, and having studied the issue extensively as an HR professional and then as a founder, my educated guess is that the recent employee actions that attracted negative media attention are symptoms of a situation that has been simmering for a long time.

If you’re a startup leader who wants to avoid similar controversies, how can you create or change policies without all the drama? Here are some tips to consider:

  • Look in the mirror and analyze culture. People who found successful companies build a culture whether they consciously set out to do that or not. One explanation for cultural growing pains at startups is that many companies unconsciously create a monoculture populated by employees of similar backgrounds, skill sets, attitudes and life experiences. As the company grows, you bring in people with different backgrounds and perspectives to join the group and strengthen the business. But it’s important to remember that company culture and policies need to evolve and mature as the organization grows as well, or conflict will inevitably arise. Leaders can avoid that by being thoughtful about every aspect of the policies they create and adjusting the culture to support all employees, not just those who started on day one.
  • Get help as your company scales. CEOs set the tone, and for an early-stage startup, policies tend to be less formal and arise directly from company values. But as the organization matures, you may need to codify practices, such as how you handle time off, parental leave and pay structures. Just as you’d turn to the board for financial advice, it’s best to turn to HR and employee relations experts for workplace guidance. Get counsel from HR on how to avoid unintended consequences and communicate changes appropriately. Depending on what kind of policies you’re putting in place, it might also be a good idea to get input from employees.
  • Use employee feedback to understand impact. It’s important to understand what’s going on in your organization before you make policy changes and take other actions that shape the company culture. Collecting employee feedback through surveys and open discussions will allow you to gain visibility into employee priorities and concerns and proceed with greater transparency and decisiveness. Consulting employees before making changes, and even after a policy change, will help you build trust and see if adjustments are needed.Some decisions must be made without staff input; workplaces are not democratic. If possible, try to understand where employees stand so you can better anticipate the impact. One caveat is to not take silence as approval. Just because employees stay after a controversial policy change doesn’t mean they are necessarily OK with it. Many startups put employees in golden handcuffs with benefits or stock options so attractive they “put up with it” for the future payoff. Anonymous surveys will help you understand the sentiment.
  • Don’t capitalize on employee policies for press: It’s not unusual for tech company leaders to publicly issue policy changes to create controversy. Just recently, Coinbase announced a new compensation policy that eliminates negotiations, a decision that is attracting scrutiny. Generally speaking, this practice isn’t necessarily a bad thing; some leaders have used their platforms to change calcified industry standards for the better. But leaders owe it to their teams to be judicious about publicly announcing new policies that affect staff. Employees shouldn’t be used as a pawn to garner press coverage.Employees want changes and programs that are driven by authenticity and what is right for the company, not changes spurred by the news of the week. With Basecamp, the company created an employee-run DEI committee when it was the “thing to do,” but the CEO disbanded it as soon as it became uncomfortable. This type of performative employee support is a surefire way to deteriorate employee confidence and morale. Be thoughtful about decisions and be prepared to stick through it even if challenges arise.

Addressing systemic problems requires a systemic approach

“Don’t discuss politics at work” used to be a standard expectation. But employee expectations have shifted, and leaders have to recognize and respond to that. There is more value to be gleaned from encouraging employees to fully be themselves at work, which helps create an inclusive environment, but it’s also important to know you can’t drop these commitments the minute they become inconvenient.

While startup founders play a leading role, it is also on employees and everyone within the startup community to call out bias or inappropriate behaviors in the workforce and at the leadership level. The reality is that most employees at startups are highly skilled in a job market that values technical talent, putting them in a privileged position to take a risk, speak up or just leave when an organization’s culture is toxic or discriminatory. Their voice and actions will speak volumes for millions of workers who don’t have the ability to walk out the door and risk losing their livelihood – and their next paycheck.

The good news is that several Basecamp employees tried to make a change by suggesting a group focused on diversity. When that effort was shut down, they used their feet to send a message. To drive change, those in positions of privilege and power mustn’t stay silent as bystanders — they have to take a stand for others who aren’t in the position to do so themselves. If all of us harness our privilege to support others who are more vulnerable, we will inevitably create more equitable, welcoming workplaces for everyone.

The turmoil some tech companies are experiencing really comes down to culture and ego. We need to recognize that the old-school “no politics” rule led to situations where systemic racism, sexism and other forms of bigotry festered unchecked. We have an obligation to do better.

Company leaders who acknowledge the direct impact politics can have on employees, engage in open discussions with staff, and approach policy changes in a way that reflects the organization’s core values can thrive, even in a divisive political climate.

Poor onboarding is the enemy of good hiring

By Annie Siebert
Daniel Chait Contributor
Daniel Chait is co-founder and CEO of Greenhouse Software, a recruiting software company that automates and simplifies best practices for hiring talent, and co-author of "Talent Makers: How the Best Organizations Win Through Structured and Inclusive Hiring."

The world of hybrid work is here, and the usual 10-minute intro call, swag bag and first-day team lunch are just not enough to make your new employee feel welcome.

While many companies have found a way to interview and select candidates in a fully remote environment, fewer have spent time and resources on aligning the “pre-boarding” and onboarding process for the new hybrid world of work. Many employers still rely on old ways of welcoming new hires, despite our totally changed work environment.

It’s important to capitalize on candidates’ enthusiasm and eagerness from the moment the offer is signed, instead of when they log in on Day One.

In our experience at Greenhouse, where we help companies as diverse as BuzzFeed, HubSpot and Intercom hire talent across their organization, first impressions can make or break a candidate’s chances of staying at a company.

In fact, 69% of employees will stay for more than three years if their onboarding experience is good, while 20% will leave within 45 days if it’s bad. That difference is costly, as it takes, on average, around $4,129 and 42 days to fill a position.

Replacing someone can cost up to 50%-60% of their annual salary. At the same time, 58% of organizations said they were guilty of centering their onboarding processes on administrative and paperwork requirements alone.

Here is how we advise our clients to set up every new hire for success right from the start.

The company’s Day One comes long before the candidate’s Day One

Most of us can remember the excitement (and anxiety) of receiving and signing an offer for a new job. It’s important to capitalize on candidates’ enthusiasm and eagerness from the moment the offer is signed, instead of when they log in on Day One.

7 questions to ask before relocating your startup to Florida

By Annie Siebert
Lakshmi Shenoy Contributor
Lakshmi Shenoy is CEO of Embarc Collective, a nonprofit innovation hub in Tampa that builds bold, scalable, thriving companies. Today, Embarc Collective supports nearly 100 tech startups in Florida.

If it seems like everyone you know is moving to Florida these days, there is evidence to back that up. Recent data from LinkedIn published in Axios put Tampa Bay, Jacksonville, and the Miami-Fort Lauderdale metro area among the top 10 U.S. cities seeing in-migration.

When I relocated from Chicago to Tampa in early 2018, I found myself in a city that countered the stereotypes I’d heard about the state. Since then, I’ve come to appreciate the advantages that came with building my organization in Florida, and I’m often asked how I made the call.

To help you weigh the benefits of relocating your startup to Florida, here are some FAQs I’ve encountered. And if the Sunshine State isn’t on your startup’s shortlist, don’t hesitate to apply these answers to a different destination.

1. What are your company’s needs?

While you may have personal reasons for wanting to relocate to a new state, it’s a good idea to map out your company’s needs as you think through this decision.

Does a move bring you closer to a great pool of talent? Are you looking for a headquarters near a specific material resource or type of infrastructure? Do you need to be local to a target customer base or community?

For example, Florida is a terrific location for companies that stand to benefit from the presence of retired military talent and the prevalence of military bases, which creates a strong market for certain types of tech innovation, including cybersecurity and aviation.

I If you’re a startup leader who is looking to land in a place with a strong, welcoming network, take the time to reach out to local community leaders and other founders like you.

Whatever it is you need to fuel your company’s growth, listing out your company’s requirements will make it easier to compare your needs with what your potential destination has to offer.

2. Which community do you want to be a part of?

If you haven’t found the tech community you’re looking for in your current location, pause to articulate what qualities you’re looking for. With this in mind, you can begin to establish the kinds of local connections you’re hoping to grow before you make any big moves.

I moved to Florida to participate in the diverse tech communities in Tampa and Miami, and I knew I was headed to the right place because I tested the waters before jumping in. As a relative newcomer myself, I’ve found the landscape in Florida to be more open and accessible than in other more established startup hubs, but don’t take my word for it.

If you’re a startup leader who is looking to land in a place with a strong, welcoming network, take the time to reach out to local community leaders and other founders like you. Whether that means sending a tweet to the mayor of Miami or connecting to local startup hubs, these interactions will give you a good sense of the local culture.

Because so many people are migrating down to Florida, we’ve put together a database of recent transplants to make it even easier to connect new residents to the existing tech community.

3. What are the potential benefits of moving your company to Florida?

When I think about what brought me to Florida and why I see other entrepreneurs headed this way, three big things come to mind:

Dear Sophie: Any unique immigration strategies for quick hiring?

By Annie Siebert
Sophie Alcorn Contributor
Sophie Alcorn is the founder of Alcorn Immigration Law in Silicon Valley and 2019 Global Law Experts Awards’ “Law Firm of the Year in California for Entrepreneur Immigration Services.” She connects people with the businesses and opportunities that expand their lives.

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,

I do recruitment for tech startups. With a surge of VC investing, many startups are urgently hiring.

Which visas offer the quickest options for international talent? Are there any unique strategies that you would recommend we explore?

— Maverick in Milpitas

Dear Maverick,

Thanks for reaching out with your questions! We’re seeing the same urgent hiring demand from startups. In my columns, you’ll find a lot of materials to support you regarding the most common options. However, in a recent podcast episode, I discussed a handful of very specialized — and rarely used — temporary work visas that in most situations offer an expedited way to bring international talent to the United States to live and work. The eligibility requirements for these work visas are very specific, but if any prospective candidates qualify, these visas are great, quick options for the startups you work with.

The quickest option for employers is to hire international talent already in the U.S. because many consulates still remain closed to routine visa processing due to the pandemic. What’s more, travel restrictions have been imposed on India and remain in place for Brazil, the U.K., Ireland, 26 other countries in Europe, China and Iran. However, there are some exceptions in the national interest. As always, I recommend consulting with an experienced immigration attorney.

Here are a few uncommon visas and strategies that can offer quick options for startups to recruit international talent:

Click-and-mortar is a better model for healthcare

By Annie Siebert
Richard Lu Contributor
Richard Lu, MBA, is a medical student at Harvard Medical School.
Jennifer Schneider Contributor
Jennifer Schneider, M.D., is an entrepreneur-in-residence at General Catalyst and the former president of Livongo.
Bob Kocher Contributor
Bob Kocher, M.D., is a partner at Venrock and co-founder of Lyra Health.

Until COVID-19, healthcare was either all in-person or all virtual. Patients had to choose. Some patients chose both — an in-person health system for most things and perhaps Livongo for diabetes care or Hinge Health for back pain care.

The problem with this approach is that in-person all the time is inconvenient and a waste of time when all a clinician is doing is looking at a wound or responding to lab results. But all-virtual is not great when things are uncertain or patients need to be examined. While there are few silver linings to the horrendous COVID-19 pandemic, one is that nearly all providers and most patients have experienced virtual care and most have found it useful. This widespread adoption of virtual care, we believe, will lead to hybrid models that we call “click-and-mortar,” which combine the best elements of in-person and virtual care to deliver better outcomes more reliably and efficiently.

The uptake of virtual care in 2020 is stunning: 97% of primary care doctors provided some kind of telehealth care in 2020. Moreover, nearly 44% of Medicare beneficiaries’ primary care visits were provided by telemedicine in 2020, compared with a mere 0.1% the year before.

The notion of virtual care has become so common that Google searches for “doctor online” result in a specialized tool displaying widely available virtual care platforms, such as Teladoc, Amwell, Doctor On Demand and MDLive. Moreover, telemedicine providers like Doctor on Demand, MDLive, Galileo and Firefly have all launched “virtual primary care” services designed to deliver non-urgent longitudinal primary care virtually. While these services may meet the needs of healthier patients, the absence of a physical location for physical examinations, diagnostic tests and procedures may limit their utility.

This widespread adoption of virtual care, we believe, will lead to hybrid models that combine the best elements of in-person and virtual care to deliver better outcomes more reliably and efficiently.

Nonetheless, there are several potential advantages of virtual primary care. The ability to see patients in their homes can contribute new information about safety, social support and social determinants. In cases like behavioral health, they can decrease the stigma associated with accessing care. Virtual care platforms can more easily incorporate remote monitoring data, and virtual visits can occur as groups with teams of caregivers or other specialists simultaneously.

Furthermore, virtual visits may allow for more frequent “microvisits” to monitor how patients are progressing. They also facilitate more rapid treatment adjustments because they eliminate the need to travel to a doctor’s office. Virtual visits also have lower cost for physicians, avoiding brick-and-mortar overhead costs, and for some services offer 24/7 access, which may reduce the need to seek urgent care or emergency department care. Finally, patients may be able to gain expanded access to clinicians who match preferences based on things like ethnicity, LGBTQ orientation and gender, particularly in rural areas where options are limited.

For pure-play virtual care models to work, they need to rely on connected devices and patient cooperation. Using connected blood pressure cuffs, stethoscopes, oximeters, thermometers and scales, it is possible to replicate much of the physical exam. Just like for in-person care, a virtual provider can order lab tests, although it is impossible to do a quick urinalysis or strep test virtually without the supplies on hand.

Virtual providers who work closely with health plans may have more data on cost and quality to inform referrals but perhaps less local knowledge. A possible consequence is that virtual providers may have more transactional relationships with specialists and traditional local brick-and-mortar providers.

Data have shown virtual care delivers better clinical outcomes in certain cases. Virtual care has been shown to reduce emergency department visits and antibiotic overprescribing. Chronic conditions like Type 2 diabetes are examples where virtual care has outperformed in-person care. Virtual physical therapy has generated cost savings and resulted in fewer back surgeries.

Despite these benefits of purely virtual care, we believe that ultimately the most efficacious model of primary care is a hybrid one combining virtual and in-person interaction. We think that the mix of in-person and virtual is probably 80% virtual. We also think that most visits will be triggered by clinicians reaching out to patients in response to a change in remotely monitored data, perhaps a new fever, change in sleep patterns or weight change for a patient with heart failure.

The implications of visits being mostly virtual and largely triggered by changes in data are profound. It means that offices become places for problem-solving and procedures. It means clinicians spend their days responding to signals from patients and probably have their schedules largely unfilled until the night before. It means that patients will need to adopt passively collected and remotely monitored data.

We think this model ultimately will result in more frequent, shorter, virtual interactions that happen nearly continuously over text and be supplemented by email, phone and video. We also think this approach will deliver much better clinical outcomes and more rapid improvement since both the patient and clinician have much more data on how diseases are progressing.

There are risks with this model. It requires patients with mobile phones and devices to engage and respond to clinicians and ensure their remote monitoring devices stay online. Most importantly, patients need to follow the advice of virtual providers and prompts to get in-person labs, diagnostics or care when needed. Further, clinicians will need to be trained to conduct virtual clinical examinations and to incorporate as well as respond to remote monitoring data.

The COVID-19-fueled adoption of virtual care will hopefully create the demand on the part of patients and desire on the part of clinicians to embrace our “click-and-mortar” vision for care. These models have the potential to deliver more proactive, more engaging and, we think, far better care.

For companies that use ML, labeled data is the key differentiator

By Walter Thompson
Sylvain Kalache Contributor
Sylvain Kalache is the co-founder of Holberton, an edtech company training digital talent in more than 10 countries. An entrepreneur and software engineer, he has worked in the tech industry for more than a decade. Part of the team that led SlideShare to be acquired by LinkedIn, he has written for CIO and VentureBeat.

AI is driving the paradigm shift that is the software industry’s transition to data-centric programming from writing logical statements. Data is now oxygen. The more training data a company gathers, the brighter will its AI-powered products burn.

Why is Tesla so far ahead with advanced driver assistance systems (ADAS)? Because no one else has collected as much information — it has data on more than ten billion driven miles, helping it pull ahead of competition like Waymo, which has only about 20 million miles. But any company that is considering using machine learning (ML) cannot overlook one technical choice: supervised or unsupervised learning.

There is a fundamental difference between the two. For unsupervised learning, the process is fairly straightforward: The acquired data is directly fed to the models, and if all goes well, it will identify patterns.

Elon Musk compares unsupervised learning to the human brain, which gets raw data from the six senses and makes sense of it. He recently shared that making unsupervised learning work for ADAS is a major challenge that hasn’t been solved yet.

A major part of real-world AI has to be solved to make unsupervised, generalized full self-driving work, as the entire road system is designed for biological neural nets with optical imagers

— Elon Musk (@elonmusk) April 29, 2021

Supervised learning is currently the most practical approach for most ML challenges. O’Reilly’s 2021 report on AI Adoption in the Enterprise found that 82% of surveyed companies use supervised learning, while only 58% use unsupervised learning. Gartner predicts that through 2022, supervised learning will remain favored by enterprises, arguing that “most of the current economic value gained from ML is based on supervised learning use cases”.

Want to double your rate of return? Seek counsel from experienced executives

By Annie Siebert
Rob Olson Contributor
Rob Olson is a partner and head of data strategy at M13, a venture engine focused on investing in the core technologies that are going to drive and change consumer behavior over the next decade.

Does it really take an average of seven to eight years for a successful startup to exit? What can early-stage founders do to accelerate outcomes?

We wanted to know if founding teams can execute faster with a higher degree of success if they’re able to take advantage of relevant executive expertise. After all, that’s the thesis we built our venture model around — we purposefully designed M13 so that early-stage founders get access to experienced executives they wouldn’t otherwise have the money to hire or the time to vet, onboard and manage.

Even if companies are doing everything right, they still reduce time to exit when they have multiple founders with prior relevant experience as a senior leader or operator.

We looked at years of data from hundreds of successful startups. As it turns out, the impact of relevant executive expertise is even greater than we had anticipated — to the tune of doubling the rate of return on a venture investment.

When it comes to measuring leadership experience, information about an individual executive’s experience — for example, how long they’ve been an exec — is publicly available. Unfortunately, there isn’t readily available structured data around a founding team’s seniority and how early the founders bring on people with more experience as an operator or leader.

To find out if leadership experience significantly impacts startups’ success, we analyzed nearly 800 executives at more than 200 companies that reached a sizable exit (greater than or equal to a $500 million valuation) via an IPO on a U.S. exchange or an exit via M&A from 2004-2019. About 70% of the companies in our dataset exited between 2016-2019, including notable IPOs like Spotify, Zoom, Uber and Peloton. We decided to exclude companies in the biotech/life sciences space because these companies follow a different growth trajectory than consumer tech and B2B tech and traditionally exit via IPO or M&A at a much earlier stage.

Here’s what our analysis of startups with successful exits revealed.

Of successful exits, the average actually is 7-8 years

While there are other intangible variables for startup success, the basic equation is the time and capital required to achieve an exit and the size of that exit.

Our dataset validates the widely accepted statement that successful exits take about seven to eight years:

Image Credits: M13

But could a variable like relevant leadership experience actually accelerate the time to exit? We wondered: Beyond time and capital, are there any factors — like experience as a leader or operator — that can have an exponential impact on the exit outcome? And when is the right time for those human capital resources to be introduced to make that impact?

Crypto and blockchain must accept they have a problem, then lead in sustainability

By Annie Siebert
Monica Long Contributor
Monica Long is the GM of RippleX.

As the price of bitcoin hits record highs and cryptocurrencies become increasingly mainstream, the industry’s expanding carbon footprint becomes harder to ignore.

Just last week, Elon Musk announced that Tesla is suspending vehicle purchases using bitcoin due to the environmental impact of fossil fuels used in bitcoin mining. We applaud this decision, and it brings to light the severity of the situation — the industry needs to address crypto sustainability now or risk hindering crypto innovation and progress.

The market cap of bitcoin today is a whopping $1 trillion. As companies like PayPal, Visa and Square collectively invest billions in crypto, market participants need to lead in dramatically reducing the industry’s collective environmental impact.

As the price of bitcoin hits record highs and cryptocurrencies become increasingly mainstream, the industry’s expanding carbon footprint becomes harder to ignore.

The increasing demand for crypto means intensifying competition and higher energy use among mining operators. For example, during the second half of February, we saw the electricity consumption of BTC increase by more than 163% — from 265 TWh to 433 TWh — as the price skyrocketed.

Sustainability has become a topic of concern on the agendas of global and local leaders. The Biden administration rejoining the Paris climate accord was the first indication of this, and recently we’ve seen several federal and state agencies make statements that show how much of a priority it will be to address the global climate crisis.

A proposed New York bill aims to prohibit crypto mining centers from operating until the state can assess their full environmental impact. Earlier this year, the U.S. Securities and Exchange Commission put out a call for public comment on climate disclosures as shareholders increasingly want information on what companies are doing in this regard, while Treasury Secretary Janet Yellen warned that the amount of energy consumed in processing bitcoin is “staggering.” The United Kingdom announced plans to reduce greenhouse gas emissions by at least 68% by 2030, and the prime minister launched an ambitious plan last year for a green industrial revolution.

Crypto is here to stay — this point is no longer up for debate. It is creating real-world benefits for businesses and consumers alike — benefits like faster, more reliable and cheaper transactions with greater transparency than ever before. But as the industry matures, sustainability must be at the center. It’s easier to build a more sustainable ecosystem now than to “reverse engineer” it at a later growth stage. Those in the cryptocurrency markets should consider the auto industry a canary: Carmakers are now retrofitting lower-carbon and carbon-neutral solutions at great cost and inconvenience.

Market participants need to actively work together to realize a low-emissions future powered by clean, renewable energy. Last month, the Crypto Climate Accord (CCA) launched with over 40 supporters — including Ripple, World Economic Forum, Energy Web Foundation, Rocky Mountain Institute and ConsenSys — and the goal to enable all of the world’s blockchains to be powered by 100% renewables by 2025.

Some industry participants are exploring renewable energy solutions, but the larger industry still has a long way to go. While 76% of hashers claim they are using renewable energy to power their activities, only 39% of hashing’s total energy consumption comes from renewables.

To make a meaningful impact, the industry needs to come up with a standard that’s open and transparent to measure the use of renewables and make renewable energy accessible and cheap for miners. The CCA is already working on such a standard. In addition, companies can pay for high-quality carbon offsets for remaining emissions — and perhaps even historical ones.

While the industry works to become more sustainable long term, there are green choices that can be made now, and some industry players are jumping on board. Fintechs like Stripe have created carbon renewal programs to encourage its customers and partners to be more sustainable.

Companies can partner with organizations, like Energy Web Foundation and the Renewable Energy Business Alliance, to decarbonize any blockchain. There are resources for those who want to access renewable energy sources and high-quality carbon offsets. Other options include using inherently low-carbon technologies, like the XRP Ledger, that don’t rely on proof-of-work (which involves mining) to help significantly reduce emissions for blockchains and cryptofinance.

The XRP Ledger is carbon-neutral and uses a validation and security algorithm called Federated Consensus that is approximately 120,000 times more energy-efficient than proof-of-work. Ethereum, the second-largest blockchain, is transitioning off proof-of-work to a much less energy-intensive validation mechanism called proof-of-stake. Proof-of-work systems are inefficient by design and, as such, will always require more energy to maintain forward progress.

The devastating impact of climate change is moving at an alarming speed. Making aspirational commitments to sustainability — or worse, denying the problem — isn’t enough. As with the Paris agreement, the industry needs real targets, collective action, innovation and shared accountability.

The good news? Solutions can be practical, market-driven and create value and growth for all. Together with climate advocates, clean tech industry leaders and global finance decision-makers, crypto can unite to position blockchain as the most sustainable path forward in creating a green, digital financial future.

Leveling the playing field

By David Riggs
Williesha Morris Contributor
Williesha Morris has been a journalist and freelancer off-and-on for over a decade. When she’s not writing, she’s reading, playing video games or chatting about the Marvel Cinematic Universe.

In 2011, a product developer named Fred Davison read an article about inventor Ken Yankelevitz and his QuadControl video game controller for quadriplegics. At the time, Yankelevitz was on the verge of retirement. Davison wasn’t a gamer, but he said his mother, who had the progressive neurodegenerative disease ALS, inspired him to pick up where Yankelevitz was about to leave off.

Launched in 2014, Davison’s QuadStick represents the latest iteration of the Yankelevitz controller — one that has garnered interest across a broad range of industries. 

“The QuadStick’s been the most rewarding thing I’ve ever been involved in,” Davison told TechCrunch. “And I get a lot of feedback as to what it means for [disabled gamers] to be able to be involved in these games.”

Laying the groundwork

Erin Muston-Firsch, an occupational therapist at Craig Hospital in Denver, says adaptive gaming tools like the QuadStick have revolutionized the hospital’s therapy team. 

Six years ago, she devised a rehabilitation solution for a college student who came in with a spinal cord injury. She says he liked playing video games, but as a result of his injury could no longer use his hands. So the rehab regimen incorporated Davison’s invention, which enabled the patient to play World of Warcraft and Destiny. 

QuadStick

Jackson “Pitbull” Reece is a successful Facebook streamer who uses his mouth to operate the QuadStick, as well as the XAC, (the Xbox Adaptive Controller), a controller designed by Microsoft for use by people with disabilities to make user input for video games more accessible. 

Reece lost the use of his legs in a motorcycle accident in 2007 and later, due to an infection, lost the use of his upper body. He says he remembers able-bodied life as one filled with mostly sports video games. He says being a part of the gaming community is an important part of his mental health.

Fortunately there is an atmosphere of collaboration, not competition, around the creation of hardware for gamers within the assistive technology community. 

But while not every major tech company has been proactive about accessibility, after-market devices are available to create customized gaming experiences for disabled gamers.

Enter Microsoft

At its Hackathon in 2015, Microsoft’s Inclusive Lead Bryce Johnson met with disabled veterans’ advocacy group Warfighter Engaged

“We were at the same time developing our views on inclusive design,” Johnson said. Indeed, eight generations of gaming consoles created barriers for disabled gamers.

“Controllers have been optimized around a primary use case that made assumptions,” Johnson said. Indeed, the buttons and triggers of a traditional controller are for able-bodied people with the endurance to operate them. 

Besides Warfighter Engaged, Microsoft worked with AbleGamers (the most recognized charity for gamers with disabilities), Craig Hospital, the Cerebral Palsy Foundation and Special Effect, a U.K.-based charity for disabled young gamers. 

Xbox Adaptive Controller

The finished XAC, released in 2018, is intended for a gamer with limited mobility to seamlessly play with other gamers. One of the details gamers commented on was that the XAC looks like a consumer device, not a medical device.

“We knew that we couldn’t design this product for this community,” Johnson told TechCrunch. “We had to design this product with this community. We believe in ‘nothing about us without us.’ Our principles of inclusive design urge us to include communities from the very beginning.”

Taking on the giants

There were others getting involved. Like many inventions, the creation of the Freedom Wing was a bit of serendipity.

At his booth at an assistive technology (AT) conference, ATMakers‘ Bill Binko showcased a doll named “Ella” using the ATMakers Joystick, a power-chair device. Also in attendance was Steven Spohn, who is part of the brain trust behind AbleGamers.

Spohn saw the Joystick and told Binko he wanted a similar device to work with the XAC. The Freedom Wing was ready within six weeks. It was a matter of manipulating the sensors to control a game controller instead of a chair. This device didn’t require months of R&D and testing because it had already been road tested as a power-chair device. 

ATMakers Freedom Wing 2

Binko said mom-and-pop companies are leading the way in changing the face of accessible gaming technology. Companies like Microsoft and Logitech have only recently found their footing.

ATMakers, QuadStick and other smaller creators, meanwhile, have been busy disrupting the industry. 

“Everybody gets [gaming] and it opens up the ability for people to engage with their community,” Binko said. “Gaming is something that people can wrap their heads around and they can join in.” 

Barriers of entry

As the technology evolves, so do the obstacles to accessibility. These challenges include lack of support teams, security, licensing and VR. 

Binko said managing support teams for these devices with the increase in demand is a new hurdle. More people with the technological skills are needed to join the AT industry to assist with the creation, installation and maintenance of devices. 

Security and licensing is out of the hands of small creators like Davison because of financial and other resources needed to work with different hardware companies. For example, Sony’s licensing enforcement technology has become increasingly complex with each new console generation. 

With Davison’s background in tech, he understands the restrictions to protect proprietary information. “They spend huge amounts of money developing a product and they want to control every aspect of it,” Davison said. “Just makes it tough for the little guy to work with.”

And while PlayStation led the way in button mapping, according to Davison, the security process is stringent. He doesn’t understand how it benefits the console company to prevent people from using whichever controller they want. 

“The cryptography for the PS5 and DualSense controller is uncrackable so far, so adapter devices like the ConsoleTuner Titan Two have to find other weaknesses, like the informal ‘man in the middle’ attack,” Davison said. 

The technique allows devices to utilize older-gen PlayStation controllers as a go-between from the QuadStick to the latest-gen console, so disabled gamers can play the PS5. TechCrunch reached out to Sony’s accessibility division, whose representative said there are no immediate plans for an adaptable PlayStation or controller. However, they stated their department works with advocates and gaming devs to consider accessibility from day one.  

In contrast, Microsoft’s licensing system is more forgiving, especially with the XAC and the ability to use older-generation controllers with newer systems. 

“Compare the PC industry to the Mac,” Davison said. “You can put together a PC system from a dozen different manufacturers, but not for the Mac. One is an open standard and the other is closed.”

A more accessible future

In November, Japanese controller company HORI released an officially licensed accessibility controller for the Nintendo Switch. It’s not available for sale in the United States currently, but there are no region restrictions to purchase one online. This latest development points toward a more accessibility-friendly Nintendo, though the company has yet to fully embrace the technology. 

Nintendo’s accessibility department declined a full interview but sent a statement to TechCrunch. “Nintendo endeavors to provide products and services that can be enjoyed by everyone. Our products offer a range of accessibility features, such as button-mapping, motion controls, a zoom feature, grayscale and inverted colors, haptic and audio feedback, and other innovative gameplay options. In addition, Nintendo’s software and hardware developers continue to evaluate different technologies to expand this accessibility in current and future products.”

The push for more accessible hardware for disabled gamers hasn’t been smooth. Many of these devices were created by small business owners with little capital. In a few cases corporations with a determination for inclusivity at the earliest stages of development became involved. 

Slowly but surely, however, assistive technology is moving forward in ways that can make the experience much more accessible for gamers with disabilities.

 

European AI needs strategic leadership, not overregulation

By Annie Siebert
Mark Minevich Contributor
Mark Minevich is president of Going Global Ventures, an adviser at Boston Consulting Group, a digital fellow at IPsoft and a leading global AI expert and digital cognitive strategist and venture capitalist.

The EU Commission recently proposed a new set of stringent rules to regulate AI, citing an urgent need. With the global race to regulate AI officially on, the EU published a detailed proposal on how AI should be regulated, explicitly banning some uses and defining those it considers “high-risk,” planning to ban the use of AI that threatens people’s rights and safety.

We can all agree with the sentiment of Margrethe Vestager, the European Commission executive vice president, when she said that when it comes to “artificial intelligence, trust is a must, not a nice to have,” but is regulation the most effective and efficient way to secure this reality?

The takeaways from the commission are incredibly in-depth, but the ones that make the most sense to me are those that stress regulated AI should aim to increase human well-being. However, regulation should not overly constrain experimentation and development of AI systems.

High-risk AI systems should always have unalterable built-in human oversight and control mechanisms. AI systems intended to interact with people or to generate content, whether high-risk or not, should be subject to specific transparency obligations. In addition, AI-based remote biometric systems in publicly accessible places shall be only authorized by EU or member state law and serve the objective of preventing, detecting or investigating serious crime and terrorism.

Partnership between AI and humanity

The set of laws and legal framework enacted in Europe will have a profound impact on AI regulation around the world, similar to the effects the GDPR regulations created over the past decade. But will these laws assist us in moving away from the EU-wide haphazard regulatory approach toward a singularity of common classification?

In my opinion, this will cripple AI development in the EU while China and the United States leap forward. It would limit the use cases and innovation of artificial intelligence and put the EU in a technologically inferior position globally. In the U.S, AI is being optimized to maximize corporate profitability and efficiency. In China, AI is being optimized to maximize the government’s grip on the population with the preservation of power. The overly regulated environment in the EU will lead to complete chaos when regulations in various EU bodies start contradicting.

Negative effects on EU entrepreneurship

A lack of investment in AI in the EU is a major factor why the EU is losing the AI race to the U.S. and China. There are currently about 446 million people living in the EU and 331 million people living in the U.S. But in the EU, $2 billion was invested in AI in 2020, while in the U.S., $23.6 billion was invested.

If the EU continues pushing with aggressive regulations and lack of funding, it will enjoy global leadership in AI regulations, but I won’t be surprised if many European entrepreneurs decide to launch their startups in more AI-friendly countries.

To create an EU that is friendly to innovation and entrepreneurs, we must create a collaborative network of AI pioneers to lead the way.

In turn, other nations will take advantage of the EU’s push toward strict regulations by fostering innovation and generating a stronger hold on the future of global technology. A recent World Bank report showed the EU launched 38% of investigations into data compliance in 2019, compared to only 12% in North America. With policies this stringent and burdensome to companies, it should be no surprise if innovators and entrepreneurs begin to move to more business-friendly parts of the globe.

Regulation leads to relegation

The regulation proposal suggests fines of up to €20 million, or up to 4% of total annual turnover of the AI provider for noncompliance. If we consider prior EU legislation and subsequent lack of digital innovation, these proposed regulations will cause chronic stagnation of digital innovation and adoption in the EU bloc.

In short, if these regulations become law, the EU will not become a pioneer but a laggard. The “real” use cases of AI are yet to emerge, uncovering the true potential of AI. The massive bureaucracy for high-risk use cases will undercut any entrepreneurship or bottom-up innovation efforts. With historical markers trending to the EU heading to a recession, now is not the time to stifle innovation.

Put a human face on global AI … and show its value

If AI is to be broadly accepted, we need a human face showing AI helping people solve their problems and challenges. We must highlight engaging stories that are true and showcase the real people behind them. For the population at large to accept the potential of AI, they must see people like themselves benefiting from the goodness of AI.

AI funding means, above all, startup funding. Startups form the bridge between the discovery and development of disruptive technologies to their everyday use by the general public. Europe is already doing a significant amount of planning, but must accelerate.

European venture capital is lagging behind the U.S. model. Fast-growing startups are mostly dependent on American and Asian investors. This requires a rethinking of the investment culture and sensible promotion of a dynamic investment environment; for example, through the targeted relaxation of investment restrictions on the part of institutional investors.

We’re living during the age of “moonshots,” a time when entrepreneurs and scientists are able to go further than ever before. Competing in the next economy requires playing a new innovation game, one whose goal is to boost innovation tenfold.

In order to reach this level, incremental optimizations do not help. The focus needs to pivot to big innovations — moonshots. Taking risk is acceptable and implementation of a large and risky idea should become normal.

To create an EU that is friendly to innovation and entrepreneurs, we must create a collaborative network of AI pioneers to lead the way. Entrepreneurs and data science leaders must use their energies to focus on AI for good to improve the world in the longer term and advocate for deregulation. To accomplish this, we need to set up a global AI pioneers council on AI for good, consisting of participants from leading research institutions, businesses, the public sector and civil society to develop a shared understanding of best practices.

AI is no longer just a tool for optimizing corporate systems and societal infrastructures; its potential reaches much further into solving the various crises facing mankind, from climate change to uncontrolled pandemics. Responsible AI and AI for good application across all the world’s superpowers can address these crises.

The EU cannot afford to be the region of the globe disincentivizing innovation and discouraging entrepreneurship. The EU must move not toward super regulation, but toward strategic leadership of AI based on AI for good. The path of overregulation leads to the depths of stagnation. It is up to the EU to decide what it wants its future to look like.

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