Why The Senate's Plan To Tax Employee Options At Vesting Is Bad For Startups

Startups are the envy of the world for how innovative and fast moving they can be. However, they often lack the amount of cash in the bank required to pay employees a salary that is competitive with the top tech companies such as Google, Facebook, Amazon, etc. To compensate for this, they give their employees an equity ownership in the company. Typically that equity vests monthly or quarterly over the span of four years. Here is a quick primer for anyone that wants to get brought up to speed on how "Startup Equity & Vesting" works. 

When an employee is given stock options, those options are illiquid. Meaning they can not be sold or transferred for money until the company has a liquidable event (e.g., an exit such as an acquisition or going public). So when employees receive options they usually have to wait years before being able to turn them into cash.

At this moment there are new Tax Reform plans proposed in both the House of Representatives and the Senate. The current proposal in the Senate plans to tax employee stock options at the moment of vesting, instead of when they are exercised, as is currently done.  The House of Representatives has already removed this provision from their proposal.

What is the tangible effect?  If passed, startup employees would be forced to pay taxes on these equity options, regardless of any realization of actual value.  

As Fred Wilson said, "Taxing equity compensation upon vesting makes no sense. If this provision becomes law, startup and growth tech companies will not be able to offer equity compensation to their employees. We will see equity compensation replaced with cash compensation and the ability to share in the wealth creation at your employer will be taken away."

Passing this law will make it extremely difficult for startups to compete with bigger corporations for high-quality talent. I am personally signing on to a letter addressed to Sen. Orrin Hatch, Chair of the Senate Finance Committee, to oppose the proposed new plan and ask that Section III(H)(1) be removed from the Senate bill. If you would like to speak up as well (with your local representative), you can find your senators here and your representative here, along with the phone number to their office. 

Protecting The United States International Entrepreneur Rule

Immigrant Entrepreneurs: Elon Musk, Arianna Huffington, Sergey Brin, Vinod Khosla, And Phil Libin 

After being officially passed in January, the "International Entrepreneur Rule" was set to take effect July 17th, 2017 in the United States. This week though, the new rule was delayed by the Department of Homeland Security. 

The International Entrepreneur Rule is a critical effort to ensure that the best and the brightest foreign-born entrepreneurs could more easily grow the companies that will create American jobs here in the U.S. while expanding our economy. The delay by the DHS is unquestionably a setback for the United States in the global race for talent. We should be encouraging innovators to bring their new ideas, expertise, and unique skills to our country, rather than incentivizing them to put their talents to work for our competitors abroad.

As the Managing Director of the Founder Institute in New York I can say from first-hand experience the proposed International Entrepreneur Rule would be a big step forward for America. Time after time I have watched as prospective international founders come to Founder Institute New York to start a high-growth tech-enabled company, only to be stopped from incorporating and progressing the new company by the limitations of current immigration laws.

With an estimated 3,000 international entrepreneurs expected to apply per year to start companies within the US, the impact of this reform will have an immediate positive impact as well as create a long-term attraction for global entrepreneurs to build their companies right here in America.

A reform to immigration such as the proposed International Entrepreneur Rule will undoubtedly increase the amount of technological innovation, job creation, and economic value in the United States of America.

Starting now, people can submit public comment on the Federal Register's site. I strongly encourage you to use it as an opportunity to send a strong message to the administration that people are paying attention and we are not happy about the decision to rescind the International Entrepreneur Rule.

Lessons Howard Love Learned While Sitting On Both Sides Of The Table

HOWARD LOVE

Over the last 30 years Howard Love has founded 15 companies and invested in over 50 early stage startups. His new book "The Startup J Curve" organizes his experience into the 6 phases startups go through as they grow. Howard also is the Founder & CEO of LoveToKnow, a digital publishing firm with over 30 million monthly visitors.

With coal magnates and aviators as his ancestors, entrepreneurship has been in Howard's bloodline for generations. In this episode, Kevin speaks to Howard about what he has learned from sitting on both sides of the table, both as a founder and an investor. We also discuss the 6 phases all startups go through according to Howard's new book The Startup J Curve. We also hear about the value of getting a formal education versus learning directly from the real world and much more:

• Growing up in a family that encourages and breeds entrepreneurial spirit.

• Dropping out of college to get real world experience.

• Being resourceful in the startup space.

• The grit it takes to get your company off the ground.

• The knowledge and insight gained from writing a book.

• Advancing the dialogue of startup culture through understanding of the J-curve.

• The phases of a company: create, release, morph, model, scale, and harvest.

Ambition Today Question of the Day™:

"When you think about the younger version of yourself, how do you reconcile where you are now, and where you thought you would be?"

Links from this episode:

• Howard Love on Twitter

• Howard Love on Facebook

• HowardLove.com

• The Startup J Curve

• Founder Institute New York

• Audible

• Toptal

Thank you so much for listening and applying these useful tips and strategies to your life! If you have a chance, please drop by and leave a review for the show on iTunes by clicking here. Also, who should I interview next? Please let me know on Twitter or in the comments. Do you enjoy this podcast? If so, please leave a short review in the comments below. It keeps me going…

Be sure to listen and subscribe to Ambition Today in the iTunes Store for iOS, on Google Play Music or Stitcher for Android. 

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I Just Voted. You Should Too.

I just voted and you should too.

I am not going to remind you to take action or that voting is the patriotic thing to do. 

I am just going to briefly stress to you of the importance of this election. I am going to ask you to take a step back from all the noise and distractions around this election. To find even three to five quiet minutes today to stop what your doing and think clearly about what you really want our country to be over the next four years and beyond. Use those quiet moments to find some clarity using both your heart and your brain. Not just one or the other. Apply empathy to your perspective. 

Take that clarity and go vote today for the people on your ballot who you truly believe will make this country a BETTER place for ALL 318.9 million citizens of the United States of America. 

2016 Startup Funding Trends With Adeo Ressi

Adeo Ressi at Valley in Berlin 2016

In 2015 it was all the rage to be a "unicorn", a startup company with a billion dollar valuation. Since then the supposed "startup and tech bubble" has popped and the gold rush is over. But what is really happening with the markets? 

Alex Konrad recently gave us some insight on Ambition Today and now today we have a more in-depth explanation of what is happening from Adeo Ressi, the founder of the Founder Institute. Last month Adeo was in Germany for the "Valley in Berlin Summit" and keynoted a talk around the 2016 Startup Funding Trends we are currently seeing. If you are thinking about fundraising, have a startup, or plan on starting your own company you are going to want to watch the keynote below. 

I Dream That Society Comes Together To Solve Global Problems

I have a dream that before I die I am able to give back to this world and society in a way that it is as much a better place as I can make it during my lifetime. Knowing that about myself I find social entrepreneurship a very attractive ideal and nobel venture. The ability to help others improve the world through manifesting there own visions is also one of the core reasons I am involved with the Founder Institute New York.

As mentioned before, remembering to be thinking 10X and the idea of investing in Moonshoots can be a tough mindset to stay locked into. Sometimes you have to think bigger than what you think big is. I have been making sure to remind myself to think exponentially as best I can for the past few months. One of the biggest problems I see is how can we get society to work together to solve problems. Giant problems. Global problems. Hell, maybe even within our solar system problems (I see you Mars).

January 18th, 2015 celebrates the day that a man named Martin Luther King Jr. saw a problem so large it divided a country and defined other nations. He then attempted to solve it and along the way brought the world closer to a one day resolution. He had a dream to make the world a better place and pursued that dream. I am motivated by that greatness.

There is still more work to be done to resolve racial inequality. There is more work to done to cure cancer. And to turn back climate change, help drug addiction, find clean water, and aid in poverty. The list goes on. All important issues that all need to be solved. Ideally in our lifetime.

The simple fact is that someone or some group of people has to solve them. Nature won't resolve these issues on it's own. I believe that we have the power in 2016 to build tools using technology to help advance progress in each of these specific areas. We as a society have a duty to put the Netflix down and work toward that brighter future. That is why I have started to collect the largest problems we need to improve as a society. Visit here to see the first problems I have collected and also propose any existing solutions you know of for those global problems we face. Feel free to submit anything you feel as missing is as well. Comment below if you have any other ideas on how to tackle such a large endeavor. After all, the world has problems, somebody has to solve them. 

Yahoo's Katie Couric Features Buffalo In "Cities Rising: Rebuilding America"

Katie Couric recently paid a visit to Buffalo New York for her new series "Cities Rising: Rebuilding America". Since visiting the region she now states that "Buffalo Is Back!" with part 1 of her new series. The goal of this six part series is to highlight key cities in America that were once thriving, then fell on hard times during the last 100 years, and are now being rebuilt into the 21st century.

I am really proud of all the great people in the Buffalo region working hard to improve the local startup ecosystem. Some of the people in the Buffalo startup community that I been working to make an impact in the last year include:

• Steve Poland
  • Managing Director of Z80 Labs
• Michael Serotte
  • Immigration Legal Partner at Unshackled Fund
  • Founding Partner at Serotte Law
• Dan Gigante
  • Digital Director, Partner at 19 IDEAS,
  • Founder & President at You and Who
  • Director of Founder Institute Buffalo
• Jon Spitz
  • Director of Development at 43 North
  • Director of Founder Institute Buffalo
• Peter Burkowski
  • Director of Marketing at 43 North
• Oscar Pedrosa and David Brenner
  • Thimble
• And Many More

I know I have written about the surge of entrepreneurship in Buffalo before as well as its incredible past history, but I really am excited for the future of my hometown Buffalo, NY. I am proud to say I am from Buffalo. Be sure to watch part 1 on Buffalo in Katie Couric's series "Cities Rising: Rebuilding America" above.

Watch The World In 2016

I feel it is important to take time to understand global trends and events in order to keep clear the lens through which we view what is happening in our own lives. So take a few minutes and get ready for the world in 2016.

The 2016 Summer Olympics will be in Brazil this August. In November the United States will elect a new President. Meanwhile, Europe will continue to experience one of the largest human migrations in decades. El Nino will continue to disrupt normal weather patterns for months in to the new year. Toxins from oceanic plastic pollution will continue to enter the human food chain as fish that we eat digest the small plastic particulates from the Great Pacific Garbage Patch. Virtual reality will begin to displace other forms of mainstream media consumption. Anxiety disorders will begin to be discussed openly as they now affect 40% of the population. The amount of global wealth belonging to the top 1% is expected to become greater than the amount of global wealth belonging to the other 99% combined this year. 2016 also commemorates 400 years since the death of William Shakespeare and this special anniversary year will be sure to inspire many Shakespeare related themes throughout the year. See for your self below what the Economist predicts for "The World In 2016".    

The Acceleration of Unicorn Startups

CB Insights just made this great infographic to help visualize the rate at which new billion dollar unicorn companies are being created. It seems to be as increasing trend since the start of 2014. There are now 142 total unicorn companies with a total cumulative valuation of $506B. This is up from 30 privately held technology companies worth more than $1B about 18 months ago.

Last month Mark Suster wrote on how he believes this trend is being driven by a fundamental change in the the structure of the Venture Capital industry and how money is entering the market. Let me know what you think is driving this change in the comments.  

You can click to enlarge the infographic below. 

View fullsize