A Startup Goes to Washington: How Motaavi Lobbied for Its Right to Survive

By Erin Griffith , written on March 27, 2012

From The News Desk

It takes some balls to pack up your belongings over a weekend, move to DC, and walk directly into a Capitol Hill building in hopes of talking to a Senator.

That's what Motaavi co-founder Melanie Plageman did in November, three days after she'd learned about the JOBS Act. The implications for her crowdfunding startup were too big for her to sit idly by while Congress weighed the bill.

Today, she can take satisfaction in the fact that she, a founder with zero political experience, helped push the JOBS Act through a divided Congress and onto the desk of a supportive President.

Plageman's startup, Motaavi, is a crowdfunding platform. She'd begun work on it in early 2011 with the aim of operating in the UK, where crowdfunding is legal. "We were frustrated by the disconnect between really good ideas and capital," Plageman said.

But she and co-founders (Nick Bhargava, Alex Zhang and Kaiting Chen) live in Durham, North Carolina. Once they learned of the JOBS Act, they knew they must do everything in their power to get crowdfunding, the term for crowdsourcing funds for startups, included in the bill and legalized in the US. The success of their startup would depend on it.
She showed up wearing jeans and a messenger bag, a wardrobe that's more than a little frowned upon on the Hill, at the Rayburn building, which she'd heard was one of the main four buildings. Her only technique was to ask random important-looking people how she could talk to someone -- anyone -- who'd be influential in passing the JOBS Act. "I didn't get it all all," she said.

She was told first to buy a suit. Then, to prepare some supporting research. Then maybe someone might consider meeting with her.

In the process of lurking around the halls of the various Capitol Hill buildings, Plageman met people from companies like SecondmarketGate Technologies and a variety of people from the tech world, including Google's lobbying force.  Some of them, like Gate, were there specifically for the crowdfunding provision; others like Secondmarket lobbied for different aspects of the JOBS act, including the 500 shareholder rule. Over time the techies on the Hill worked in support of each others' causes.

Almost through osmosis, Plageman turned herself into a lobbyist. She had no choice. She snooped around to learn the right staffers to get in front of. She hung around cafeterias and the right coffee shops. She distributed research reports she'd spent days on. She bought a suit. Through sheer force of persistence, she got in front of the right representatives and committees. She even prepared her co-founder to testify in front of the Senate, though he ultimately didn't need to. She worked with Senators Jeff Merkley (D-Ore.), Michael Bennet (D-Colo.), and Scott Brown (R-Mass.) and developed close relationships with a small handful of staffers working under each. She met with the various branches of lobbying organizations and the Treasury Department.

Her opposition included consumer advocacy groups, and the state securities regulator group, the North American Securities Administrators Association (NASAA). But supporters of crowdfunding were able to win over consumer groups by helping the Senate plug up holes in the House's initial version of the bill. In fact, almost all opposition was assuaged once it was explained to them that crowdfunding would be regulated by the SEC and that crowdfunded companies would be required to disclose lots of information through intermediaries like Motaavi.

"We really tried to explain to people that this is not poking holes in securities regulation. It's amending it with all the scale requirements for startups to raise capital from all kinds of investors," Plageman said.

Spoken like a true lobbyist.

Not everyone got on board: Senator Carl Levin (D-Mich.) had been particularly vocal about his concerns over investor protection, even though he supported the crowdfunding part of the JOBS Act. He and just 26 other Senators voted ultimately against the bill.

Ultimately, the real opposition was process, Plageman said. "The Senators who opposed the crowdfunding amendment were concerned that introducing differences to the House language would delay implementation of the act," she said.

Last week, after five months of lobbying, Plageman has returned home with a win. The Senate voted in support last week, and this afternoon, the House rubber-stamped a version of the JOBS Act that includes all the amendments the Senate agreed on. Motaavi can now execute on its mission to provide capital from a wide variety of sources to startups, in its home country.

Plageman and Motaavi will continue to work with the friends they made in the process of lobbying for the JOBs Act. Their first project is the innovation database, which they're working to develop in collaboration with the senators behind the Startup Act and those that spoke out against SOPA and PIPA.

The database will act as a resource for lawmakers who are working on bills that support tech companies. It'll include data that sorts startups and tech companies in the States by region, type, stage, IP and capital.

Motaavi's next step as a company is to finish development for its platform and allow startups to begin building profiles. The company is already working on partnerships with organizations that represent entrepreneurs and investors, like incubators, accelerators, and university programs. The company is in talks with to under-the-radar groups, Plageman said, "like incubators in Kansas and Virginia and Research Triangle that really show the diversity of the types of startups in this country."

Correction: A prior version of this story stated that Kickstarter was involved in the lobbying in support of crowdfunding; it was not.