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Capital Factory founder responds to criticism of unpaid internships

(BUSINESS NEWS) Capital Factory founder, Joshua Baer responds to criticism of their recent blog post featuring participating companies’ internship opportunities.

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The center of gravity

Capital Factory is the self-proclaimed “center of gravity” of the tech and entrepreneurial community in Austin, soon to celebrate a decade in operation as an accelerator, incubator, coworking space, and guide for the industry. If you’re in the Austin tech world, you’ve been to one of the many events in their space, from Ignite speaker series, the Austin Diversity Hackathon, Women Epic Office Hours (kind of like speed mentoring), to the Nonprofit Tech Club, or [name any coding language] networking meetup.

In fact, according to founder Joshua Baer, the 40 person team that operates Capital Factory is 75 percent women and is comprised of two lone white males. The opposite of what most tech startups internationally can say.

The scrappy company has endlessly made something out of nothing, so to speak. “We lead by example,” Baer asserts.

Why then is the company currently under fire?

They recently asked all of the companies participating in their program if they had any internships opening up that they could promote for them. Then, they posted the openings, most of which are less than part time. Here is the original internship posting that ignited the debate.

Sounds innocent enough. But some in the Austin community rejected the fact that some of these internships are unpaid.

Ironically, two positions have been commonly taken, both on and off the record. The first is that unpaid internships anywhere exploit people and benefit the company with free labor. The second is that the wealthy are disproportionately advantaged because mommy and daddy can pay their bills while they pad their resume by working for free at a startup.

Baer calls accusations of exploitation “ridiculous” and favoring the rich oxymoronic. He responds by challenging anyone to find an unpaid intern from any of these startups that feels exploited.

Whichever opposing viewpoint you may subscribe to (it exploits people or favors the rich), the ethics are subjective.

What is not subjective is the law

Lawyers tell us the internship postings aren’t clearly illegal, nor are they clearly legal. Baer said that they did not review the listings for legality, but that Capital Factory pays their interns, again, leading by example.

When asked if the tone of the job postings could be the source of the ire, given that they failed to focus on what an intern would learn, rather on what their required skills and duties at the company would be, Baer called this a “learning moment.” As their role is to guide, not operate these companies, he said that perhaps they can help guide their entrepreneurs to write better job descriptions in the future.

What the federal law boils down to is that unpaid interns may not benefit the company financially, and that it cannot be unpaid unless it passes the stringent Department of Labor test of six criteria:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

The DoL goes on to say, “If all of the factors listed above are met, an employment relationship does not exist under the FLSA, and the Act’s minimum wage and overtime provisions do not apply to the intern.” Meanwhile, unpaid internships are pretty kosher in Texas, but they point back to the restrictive federal laws.

Baer calls the whole exercise a “waste of time,” noting that “the Department of Labor isn’t going to enforce this, it’s a waste of their time, they have bigger fish to fry, so it’s not going to change,” several times alluding to the DoL’s focus being on larger companies like IBM, not such tiny early stage startups.

CF also under fire for not enough melanin

Also part of the internship posting are pictures of the teams, most of which are two to 10 people large. Although not exclusively all white males, many complained that the pictures were revealing of the startups present in the Capital Factory ecosystem.

In response, Baer reiterated that they lead by example by being one of the most diverse teams in town, working hard to “combat brogrammer culture.”

Some believe the negative response about diversity is a knee-jerk reaction that every event host is familiar with (there are more men on the panels than women, you sexists!), and every startup has heard (there are no black people on the team, you racists!). Others believe pointing out a lack of diversity is critical in impacting change.

“The Austin startup scene is becoming a parody of itself,” Redditor Travis_Williamson commented. “All of the upper middle class white guys in those photos are just creating shit for themselves at this point.”

Skin and pay aside, what’s the real issue?

The troubling undertone of public and private conversations surrounds the nature of Capital Factory. Since their inception, they’ve been an unquestionable force in the Austin tech world, unavoidable even. Success breeds jealousy and they’re often the victim of vague criticism for that reason.

But this line of conversation is different, more venomous. More substantial.

The legitimacy of the startups in the internship posting is under heavy fire. Mean-spirited comments about their model permeate communities like Reddit where Baer is accuse of being “less of a keen startup motivator and more of a rent queen,” with others saying that if the CF ecosystem is so hot, the companies should be able to at least afford minimum wage, not just an honor badge.

Baer, used to being a target, says the online commenters are “complainers” and brushes off the entire critique.

Baer insists they teach entrepreneurs how to be “resourceful,” and “scrappy,” reiterating that an unpaid intern won’t be the only unpaid person on some of these teams that are being guided to make something out of nothing. It is also important to remember here that Capital Factory doesn’t own or operate these companies, they’re an incubator/accelerator designed to incubate/accelerate.

So although the internship posting was a simple gesture from the actual Capital Factory team toward the companies in their offices, it triggered numerous online and offline debates about unpaid internships, then about diversity. Baer firmly believes they lead by example with a diverse team and paid interns, but with the postings focused on job duties and not on intern learning opportunities (the core tradoff of unpaid internships), it created a vulnerable moment for CF that the internet jumped on.

The future of unpaid internships at CF companies?

Baer argues that a “three person startup can’t barely even pay payroll and doesn’t really even know what they’re doing and are just trying to figure it out? Yeah, they can have unpaid interns, sorry. I don’t think that’s a problem.”

Will Capital Factory reconsider their position on unpaid internships? Absolutely not.

In fact, Baer doubled down, asserting, “I’m not going to discourage them from doing that. I’m going to encourage them to be creative about finding other ways they can not pay for things, or defer paying for things, and do other things that allow them to create something out of nothing, which is what creates jobs for other people and allows them to eventually pay for them.”

#unpaidinterns

Lani is the Chief Operating Officer at The American Genius and sister news outlet, The Real Daily, and has been named in the Inman 100 Most Influential Real Estate Leaders several times, co-authored a book, co-founded BASHH and Austin Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

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2 Comments

2 Comments

  1. Paul O'Brien

    April 20, 2017 at 4:59 pm

    Interesting. There is much to be said for why and whether or not we should be having to reinvent the wheel of entrepreneurship. The point that startups are 3 person teams without even enough capital to pay themselves is VERY valid. So too is the point that people need to be paid. Someone not getting paid in a startup is part of the team. An intern is there to learn and further paid to work; what I look to in internships if from whom the intern will be learning and if that’s lacking, one has to wonder how an intern can benefit.

    What I find here (In Austin, relatively speaking to my experiences on the coasts) though is that startups are unwilling, discouraged from, or unfamiliar with how to deal in equity (and more importantly – how to ensure that equity is valuable). Owners are neither interns nor employees unless they are too that. I own a piece of a business, that’s why I work on it; AND I am paid by a business, for my position in it.

    There is a real challenge for us to collectively consider when venture capital isn’t prolifically available, funding rounds are relatively smaller, and outcomes average a fraction in size compared to elsewhere, if exits occur at all: equity is both at once more precious and less valuable. Founders want to retain just a bit more, early investors hesitant to relinquish as much, early supporters seeking their ROI. Likewise, Angels press for a little more ownership to offset the relative rate of return.

    What then is available to build good teams?

    By no means an answer or a way forward for us. Just an observation of reality that relatively less capital, less valuable companies, causes the circumstances with which we need to work. Startups can’t succeed without teams, and young professionals will struggle to get the good experience they want/need, and can provide, if businesses can ill afford them. Let’s solve the challenge.

    Business capitalization, valuation, growth, and establishment is NOT remotely easy. We might be experiencing a lot of a cart before horse situation where we think we need more startups to find their way, to get more capital injected, to get interns and executives paid, to drive further outcomes. Maybe we’re going about it wrong and need to work the other way with more leadership and education to drive outcomes, get more executives and interns involved valuably, injecting more capital into the ecosystem, enabling us to fuel more startups.

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Business News

IBM is putting blockchains to work for banks

(BUSINESS NEWS) IBM is putting blockchain tech to work so that they can launch a banking system for international transactions.

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Earlier this year, IBM unveiled its “Blockchain as a Service” based on Hyperledger Fabric, creating a public cloud service for customers to build secure blockchain networks.

Now the tech company announced they’re teaming up with payment company KlickEx Group and blockchain startup Stellar to change up the cross-border payment game.

The team is launching a blockchain-based system for banks, aimed to lower the cost and reduce settlement time for global payments for both businesses and consumers. International transactions typically take days, or even weeks, to complete.

Blockchains could speed things up, minimize errors, and provide more flexibility and transparency to banks. According to IBM, the collaboration “is intended to improve the speed in which banks both clear and settle payment transactions on a single network in near real time.”

In case you forgot what blockchains are, here’s a refresher course. Blockchains are a secure digital ledger of transactions with bits of information stored across multiple nodes in a network.

Since there’s no centralized hub, it’s less vulnerable to hacking.

Any time an action is taken, the ledger updates and that data is available to anyone with access to the blockchain. Additionally, each transaction is secured with digital signatures and encryption, providing transparency and security.

Blockchains can be used to trace and track transactions along every step of the way, providing a handy place to combine all product information besides just financial dealings.

For example, IBM suggested a hypothetical in which their system connects a Samoan farmer with an Indonesian buyer.

In this transaction, they stated, “the blockchain would be used to record the terms of the contract, manage trade documentation, allow the farmer to put up collateral, obtain letters of credit, and finalize transaction terms with immediate payment, conducting global trade with transparency and relative ease.”

Instead of scattered information, blockchains collect all relevant steps in a transaction. Currently, they system is used in twelve currency corridors, including New Zealand and the UK, as well as Australia and the Pacific Islands.

Within the next year, the system is expected to handle 60 percent of the South Pacific’s retail industry’s cross-border payments.

Bridget van Kralingen, Senior VP of IBM Industry Platforms, said in statement, “with the guidance of some of the world’s leading financial institutions, IBM is working to explore new ways to make payment networks more efficient and transparent so that banking can happen in real-time, even in the most remote parts of the world.”

Over a dozen banks are part of the initial pilot program, and plan to expand to Southeast Asia, South America, and other areas by early next year.

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A real life robot battle: America vs Japan

(BUSINESS NEWS) Robots are real and America is fresh out of a battle with Japan in a real life robot battle royale.

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What’s the future of sports look like?

Giant. Fighting. Robots.

That’s right, your childhood dreams have arrived, at least I know mine have.

Two years ago, American robotics firm, MegaBots Inc., challenged Japanese rival, Suidobashi Heavy Industries, to a showdown of the battle of the mechs. The challenge was accepted, but with one simple caveat: the inclusion of melee combat.

And so the Super Heavyweight Title Fight two-years in the making premiered on leading social video platform, Twitch, yesterday evening to tech and sci-fi fans alike who waited with baited breath for such an event.

In order to prepare for the match, the American team needed to build a new bot capable of fulfilling the duel requirement, as well as one that would be a force to be reckoned with against the Japanese fighting machine.

MegaBots, or “Team America,” was able to crowdfund the robot battle through a Kickstarter campaign earning over $500,000 by just under 8,000 backers. With this campaign, they were also able to upgrade their Mk.II behemoth that would be entering the rumble.

Meet Eagle Prime.

More metal. More power. More American.

According to MegaBots, Eagle Prime “weighs in at 12 tons, stands 16 feet tall, seats two, is powered by a 430 horsepower V8 LS3 engine, and costs a cool $2.5M.” This robot is massive; a good foot higher than its predecessor.

Founders Matt Oehrlein and Gui Cavalcanti commented on the design of Eagle Prime, quipping, “We made it huge and strapped guns to it;” as American as apple pie.

Suidobashi’s robot, KURATAS, stands a few feet shorter (about 13 feet tall), but carries a more sleek and elegant design to it. With a tripod-wheeled base and twin Gatling BB canons with the ability to fire 6,000 bullets per second, it seemed a toss-up as to who would reign supreme in the first mech battle.

While this sounds like an epic episode of awesomeness, don’t expect Pacific Rim level combat just yet. Rather than give a play-by-play of the event, I’ll just tell you straight away that Eagle Prime came out on top in the brawl. To be fair though, it really wasn’t much of a brawl.

Eagle Prime had two years of extra time to be built in preparation for such a match against Kuratas. It was made bigger (and for “funzies”, added patriotic colors to the bot as well as a head of a bald eagle for a “head” as well as a chainsaw-sword-type of device that likely, and ultimately, ended up costing Kuratas a pretty penny in damages.

Really, Kuratas had no chance: there was a bit of overkill on the part of Eagle Prime.

The chain-sword alone raises some safety concerns, especially when we’re talking the future of sports. That said, the pilots of both mechs, Eagle Prime piloted by both Oehrlein and Cavalcanti and Kuratas by Kogoro Kurata, could use a bit more protective gear than helmets, even if the robots in action look like a couple of toddlers fighting.

But hey, it’s a start. And that’s the point.

Maybe one day we will be in giant stadium arenas watching huge robots piloted by humans hashing it out, but we’ve got a long ways to go. And maybe, just maybe, these things could be of use in natural disaster efforts.

Who wouldn’t want to be saved by an Optimus Prime-like, human-piloted “robot” that could withstand whatever was thrown its way?

It’s going to be an expensive endeavor that will require a nice chunk of change in investments and endorsements, though I will say, what a time to be alive.

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These stores refuse to start Black Friday early

(BUSINESS NEWS) There is a rising trend of stores being pressured to open their doors earlier and earlier each holiday weekend but these companies refuse.

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This year, Target, Walmart, and Best Buy are among a group of retail super villains who have decided it’s appropriate to begin the Black Friday shopping nightmare on Thanksgiving Day, with some opening as early as 5pm on Thursday.

As someone who has only had the misfortune of working the retail tornado of Black Friday once, I would never wish it upon anyone. Yet many stores feel pressured to begin the doorbusters earlier every year.

To compete with online shopping, brick-and-mortar retailers implement drastic measures to get customers in stores during the discount season.

Last year, eMarketer reported internet users in their survey were likelier to shop online during Black Friday and Cyber Monday. This comes as no surprise to anyone who’s been watching retail stores crumble as online shopping continues to dominate the market.

To lure in shoppers, physical stores must come up with deals so alluring that people would kill for them.

Literally. I just googled “did anyone die on Black Friday last year” and found out that there’s a handy site called Black Friday Death Count. The answer is yes, some people died last year in Black Friday-related incidents, and in fact two of the three deaths took place at separate Walmarts.

So that makes this year’s disturbingly early foray into deal hunting even less enticing.

While I don’t hold Thanksgiving sacred by any means, moving the even unholier Black Friday back to impede on a holiday is ludicrous. But a handful of heroes are saying no seriously guys, we’re not doing this.

Over fifty retailers are collectively putting their foot down, and will remain closed on Thanksgiving Day. While some may still be party to next-day discounts, they’re at least taking a stand.

Here’s a list of all the places you can’t go on Thanksgiving, because mercifully they’re closed:

  • A.C. Moore
  • Abt Electronics
  • Academy Sports + Outdoors
  • At Home
  • BJ’s Wholesale Club
  • Blain’s Farm and Fleet
  • Burlington
  • Cabela’s
  • Cost Plus World Market
  • Costco
  • Craft Warehouse
  • Crate and Barrel
  • DSW – Designer Shoe Warehouse
  • Ethan Allen
  • Gardner-White Furniture
  • Guitar Center
  • H&M
  • Half Price Books
  • Harbor Freight
  • Hobby Lobby
  • Home Depot
  • HomeGoods
  • Homesense
  • IKEA
  • JOANN Fabric and Craft Stores
  • Jos. A. Bank
  • La-Z-Boy (all corporately owned stores)
  • Lowe’s
  • Marshalls
  • Mattress Firm
  • Micro Center
  • Music & Arts
  • Neiman Marcus
  • Office Depot and OfficeMax
  • Outdoor Research (closed Black Friday too)
  • P.C. Richard & Son
  • Party City
  • Patagonia
  • Petco
  • PetSmart
  • Pier 1 Imports
  • Publix
  • Raymour & Flanigan Furniture
  • Sam’s Club
  • Sierra Trading Post
  • Sportsman’s Warehouse
  • Sprint (Corporate & Dealer Owned Stores; Mall Kiosks May Open)
  • Staples
  • Sur La Table
  • The Container Store
  • The Original Mattress Factory
  • TJ Maxx
  • Tractor Supply
  • Trollbeads
  • Von Maur
  • West Marine

And while that’s a pretty hefty list, the fact remains that many unfortunate employees will have to show up to work on Thanksgiving when they should be taking naps, or avoiding helping their family clean up after lunch.

Thinking about some retailers’ decision to open a day early for Black Friday almost makes Cards Against Humanity’s crowdfunded hole stunt last year seem reasonable. Maybe if we’re lucky, the tradition of Black Friday will get sucked up in a black hole, never to plague us again.

I guess staying home is also an option. If you opt into the shopping this year, stay safe. And if you choose to do so on Thanksgiving, maybe just don’t tell anyone.

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