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The blogged wandering of Robert W. Anderson

National Bankruptcy Day Averted?

In December, I blogged about National Bankruptcy Day.  That was the term coined for today, February 10th, 2009.  Why?  Because of a piece of very bad – and according to these claimants, illegal – legislation:  the Consumer Product Safety Improvement Act (CPSIA).  A law intended to make our children safe by requiring companies to test all children’s products to prove they are free of lead and phthalates. 

The problem with the law is mainly that the tests are unnecessary in so many cases and the tests themselves are expensive and produce hazardous waste.  Lead in metal toys?  Reasonable to test.  Lead in fabric clothing and linens?  Unreasonable.

A great many businesses are already endangered in this economy, but these extra costs would drive many under.

Good news?

On January 31st, a stay of enforcement was granted (Stay of Enforcement of Testing and Certification Requirements).  This is because the CPSC has recognized that this law is a bad one and that they need to spend the next year providing guidance for a reasonable implementation of the law.

It is clear that the CPSC is attempting to provide clarification to and a reasonable framework around this whole issue.  Further clarification of the current policy was released yesterday.

So, no National Bankruptcy Day?

The answer is mixed.  Much damage has already been done.   The confusion created by this law and the CPSC’s poor handling of it has already hurt many small businesses.  In some cases this is merely the loss of productivity while the founders divert most of their attention to compliance.  In other cases, companies have already chosen to close their doors.

So, today is significant in that the law does go into effect today.  The limits are in place, egregious violators can be punished.  All good, but there has been much collateral damage along the way.

So I’ll say yes, today is still National Bankruptcy Day.  The new, as yet undrafted, policies will go into effect and be enforced on February 10th, 2010 – and they may be just as unreasonable as the current ones.

You can celebrate by giving a giant air-quoted thank you to the politicians and environmentals who rushed this terrible law into being.  I’ll keep my invectives to my self.

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National Bankruptcy Day

Note: While not about technology, this post is relevant to startups. 

H.R. 4040, the Consumer Product Safety Improvement Act (CPSIA) was signed into law late 2008.  The intention is to protect children by outlawing the sale of children’s products containing lead and other harmful substances. 

Sounds good, right?

Unfortunately, the law is going to force a lot of small companies selling safe products to shutter on or before February 10th.  Welcome to National Bankruptcy Day.  From the site:

February 10, 2009 untold numbers of children’s products manufacturers and retailers will be closing their doors.

The problem is that the law was put together very hastily and has a completely infeasible implementation timeframe.  Oh yeah, and requires unreasonable testing to boot:

Not enough time:  The law was signed in August and goes into effect on February 10th.  So every kids product sold in the US has to be tested in the next 52 days?  That is impossible.

Unreasonable requirements:  Every component of every SKU has to be tested separately even if that component is used in multiple products.  For example, imagine a tag or button that is shared across ten SKUs.  That same button has to be tested ten times. 

Unreasonable cost:  Each test is expensive.  For example, one company has quoted each test at $500.  Continuing with the above example, imagine your ten SKUs with the buttons have 4 other components.  You would have to pay 10 x 5 x 500 = $25,000 to a testing company.

No allowance for existing tests:  Some companies have already had their products tested for harmful substances (e.g., kukunest is Oko-Tex certified).  That should count.

I am all for safe products and accountability, but this is really a draconian measure.  It will punish companies and people with an unreasonable set of rules and penalties. 

If this doesn’t get fixed soon, companies will go out of business, founders and innovators will lose their dreams.  Innovation in children’s products will be all but dead here in the United States.

It will happen unless the US Consumer Product Safety Commission and the US legislature do something to stop it. 

Call to action

Sign this petition: http://www.ipetitions.com/petition/economicimpactsofCPSIA/index.html

Contact your Congressperson and ask them to fix H.R.4040 now, before more damage is one.

Disclaimer:  Do I have a vested interest in this issue?  Definitely.  My wife is the co-founder of kukunest, a company that designs and sells children’s bedding and other products.  I’m a parent and don’t want to see our schools unable to get the products they need because the suppliers dry up.  And I’m an entrepreneur believing that reasonable laws can protect people and protect innovation and business interests.

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Defending Pragmatism

On the recent Gillmor Gang (MidTail Gang), you can catch me disagreeing with Jason Calacanis on rollups. He argues that only “loser” entrepreneurs sell their companies into rollups.

I argued that this is simplistic — that sometimes a rollup is the best choice for a company to make. He conceded that in a weak market (and again, if you are a loser), this might be the way to go.

Interesting that Jason articulates his point purely in terms of the entrepreneur: if you are strong, you find a way to win or fail trying.

Failure is a part of being an entrepreneur, but successful companies are made up of more than just the entrepreneur(s).

What about other stakeholders? What if the options are: “fail” or “rollup”? Your employees all get jobs and maybe the investors get to let their money ride.

I think that this will always feel like losing to the entrepreneur. This will never be the grand vision he or she was working towards. But winning and losing is not so black and white.

Am I defending a loser mentality? No, I think I’m just defending pragmatism.

Disclaimer: I have never been a part of a rollup nor am I seeking one out!

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SaaS Lighthouse Program Flickers

From Don Dodge: Microsoft has unveiled the Microsoft SaaS Lighthouse Program.

This program is designed to help SaaS startups with licensing, technical, and marketing assistance.

I have been talking about this hole in Microsoft Partner Programs for sometime — a little on my blog, but mostly in person to Robert Scoble, Sam Ramji, John deVadoss, and many others. Pretty much every Microsoft person I meet. Microsoft has a good program (called Empower) to help the ISV startup and has, up until now, really had nothing for the SaaS startup. Why is the SaaS startup important? Because Web 2.0 companies are essentially all SaaS startups. Why are Web 2.0 companies important? If you don’t know, well . . . stop reading here.

It is obvious that Microsoft is trailing in the Web 2.0 community — this is embodied in the negative perception of Microsoft I found at a TechCrunch party: “anti-Microsoft” is a buzz word?. Most Web 2.0 startups are making use of free tools to build their sites and view Microsoft’s products (primarily Server 2003 and SQL Server) as being too expensive. While the productivity gains attained using these tools trumps licensing costs, Microsoft still needs programs that will help the adoption of their technology in SaaS startups.

Unfortunately, this program isn’t it.

You see, to get into this program, your company must have venture funding. A few problems with this:

  • A venture-backed company can afford the licenses and training. Period.
  • A Web 2.0 startup doesn’t start with venture money. In fact, very few startups begin with venture. So, the Web 2.0 startup gets no help from Microsoft until after VC? Kind of obvious, I know, but the startup has probably already built a service and released it before they get serious interest from a VC.
  • The venture clause is likely a way for Microsoft to get external validation that the startup isn’t wasting their time and money. OK, but that is no way to increase adoption.

Now, I cannot claim that the purpose of this program is to help Web 2.0 startups (or to increase adoption of Microsoft techologies).

Just to be clear: it doesn’t.

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Interested in ASP.NET for your startup?

A question I ask Microsoft people frequently is: what are you doing to promote your tools in the Web 2.0 world / to help SaaS startups use your technologies?
I saw two posts today that, while not answering this question, seem to me like progress:

ASP.NET 2.0 Training Center

Microsoft (and CMP and O’Reilly and Dr. Dobb’s) have rolled out the ASP.NET 2.0 Training Center. This is to help PHP / JSP / ColdFusion developers learn about .NET. This looks like a great resource for developers to learn about the capabilities of .NET. If you are a developer using one of these other technologies, check it out. There is a free copy of Visual Studio 2005 Standard in it for you if you view 3 webinars.

Obviously, this is a great tactic to get non-.NET users to see what ASP.NET has to offer — I’m sure they’ll get plenty of free-riders too 😉

I found out about this from an O’Reilly post (see ASP.Net on a Roll). According to them, ASP.NET 2.0 is gaining leverage (as measured by book sales). Good news for Microsoft and for developers. ASP.NET is really a great way to build Web sites and services. I personally much prefer this to PHP, for example. Scripting languages are fine, but I’m in the strong-typing camp. And now since ASP.NET 2.0 can recompile your code on the server, it takes away a major scripting advantage.

Microsoft Startup Zone

In Microsoft Startup Zone Launches, Don Dodge announces the new Microsoft Startup Zone, sort of a portal into Microsoft’s Emerging Business Team. This site is full of resources for startup companies. While I still would like to see a partner program for SaaS startups, this site is worth a visit if you want to see what Microsoft has to offer emerging companies.

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