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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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capital factory

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

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3 Comments

3 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.

  2. Pingback: Summer 2017's best paying internships - The American Genius

  3. Pingback: THE DISRUPTORS: Joshua Baer stamps his brand on the DFW startup scene - Launch DFW

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Business News

This web platform for cannabis is blowing up online distribution

(BUSINESS NEWS) Dutchie, a website platform for cannabis companies, just octupled in value. Here’s what that means for the online growth of cannabis distribution.

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A small jar of cannabis on a desk with notebooks, sold online in a nicely made jar.

The cannabis industry has, for the most part, blossomed in the past few years, managing to hit only a few major snags along the way. One of those snags is the issue of payment processing, an issue compounded by predominantly cash-only transactions. Dutchie, a Bend, Oregon company, has helped mitigate that issue—and it just raised a ton of money.

Technically, Dutchie is a jack-of-all-trades service that creates and hosts websites for dispensaries, tracks product, processes orders, keeps stock of revenue, and so much more. While it was valued at around $200 million as recently as summer of 2020, a round of series C funding currently puts the company at around $1.7 billion—approximately 8 times its worth a mere 8 months ago.

There are a few reasons behind Dutchie’s newfound momentum. For starters, the pandemic made cannabis products a lot more accessible—and desirable—in states in which the sale of cannabis is legal. The ensuing surge of customers and demand certainly didn’t hurt the platform, especially given that Dutchie is largely responsible for keeping things on track during some of the more chaotic months for dispensaries.

Several states in which the sale of cannabis was illegal also voted to legalize recreational use, giving Dutchie even more stomping ground than they had prior to the lockdown.

Dutchie also recently took on 2 separate companies and their associated employees, effectively doubling their current staff. The companies are Greenbits—a resource planning group—and Leaflogix, which is a point-of-sale platform. With these two additions to their compendium, Dutchie can operate as even more of an all-in-one suite, which absolutely contributes to its value as a company.

Ross Lipson, who is Dutchie’s co-founder and current CEO, is fairly dismissive of investment opportunities for the public at the moment, saying he instead prefers to stay “focused with what’s on our plate” for the time being. However, he also appears open to the possibility of going public via an acquisition company.

“We look at how this decision brings value to the dispensary and the customer,” says Lipson. “If it brings value, we’d embark on that decision.”

For now, Dutchie remains the ipso facto king of cannabis distribution and sales—and they don’t show any plans to slow down any time soon.

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Business News

Ford adopts flexible working from home schedule for over 30k employees

(BUSINESS NEWS) Ford Motor Co. is allowing employees to continue working from home even after the pandemic winds down. Is this the beginning of a trend for auto companies?

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Woman in car working on engineering now allowed a flexible schedule for working from home.

The pandemic has greatly transformed our lives. For the most part, learning is being conducted online. At one point, interacting with others was pretty much non-existent. Working in the office shifted significantly to working remotely, and it seems like working from home might not go away anytime soon.

As things slowly get back to a new “normal”, will things change again? Well, one thing is sure. Working from home will be a permanent thing for some people as more companies opt to continue letting people work remotely.

And, the most recent company on the list to do this is Ford Motor Co. Even after the pandemic winds down, Ford will allow more than 30,000 employees already working from home to continue doing so.

Last week, the automaker giant announced its “flexible hybrid model” schedule to its staff. The new schedule is set to start in the summer, and employees can choose to work remotely and come into the office for tasks that require face-to-face collaborations, such as meetings and group projects.

How much time an employee spends in the office will depend on their responsibilities, and flexible remote hours will need to be approved by an employee’s manager.

“The nature of work drives whether or not you can adopt this model. There are certain jobs that are place-dependent — you need to be in the physical space to do the job,” David Dubensky, chairman and chief executive of Ford Land, told the Washington Post. “Having the flexibility to choose how you work is pretty powerful. … It’s up to the employee to have dialogue and discussion with their people leader to determine what works best.”

Ford’s decision to implement a remote-office work model has to do in part with an employee survey conducted in June 2020. Results from the survey showed that 95% of employees wanted a hybrid schedule. Some employees even reported feeling more productive when working from home.

Ford is the first auto company to allow employees to work from home indefinitely, but it might not be the only one. According to the Post, Toyota and General Motors are looking at flexible options of their own.

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Business News

Unify your remote team with these important conversations

(BUSINESS NEWS) More than a happy hour, consider having these poignant conversations to bring your remote team together like never before.

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Woman working in office with remote team

Cultivating a team dynamic is difficult enough without everyone’s Zoom feed freezing halfway through “happy” hour. You may not be able to bond over margaritas these days, but there are a few conversations you can have to make your team feel more supported—and more comfortable with communicating.

According to Forbes, the first conversation to have pertains to individual productivity. Ask your employees, quite simply, what their productivity indicators are. Since you can’t rely on popping into the office to see who is working on a project and who is beating their Snake score, knowing how your employees quantify productivity is the next-best thing. This may lead to a conversation about what you want to see in return, which is always helpful for your employees to know.

Another thing to discuss with your employees regards communication. Determining which avenues of communication are appropriate, which ones should be reserved for emergencies, and which ones are completely off the table is key. For example, you might find that most employees are comfortable texting each other while you prefer Slack or email updates. Setting that boundary ahead of time and making it “office” policy will help prevent strain down the road.

Finally, checking in with your employees about their expectations is also important. If you can discuss the sticky issue of who deals with what, whose job responsibilities overlap, and what each person is predominantly responsible for, you’ll negate a lot of stress later. Knowing exactly which of your employees specialize in specific areas is good for you, and it’s good for the team as a whole.

With these 3 discussions out of the way, you can turn your focus to more nebulous concepts, the first of which pertains to hiring. Loop your employees in and ask them how they would hire new talent during this time; what aspects would they look for, and how would they discern between candidates without being able to meet in-person? It may seem like a trivial conversation, but having it will serve to unify further your team—so it’s worth your time.

The last crucial conversation, per Forbes, is simple: Ask your employees what they would prioritize if they became CEOs tomorrow. There’s a lot of latitude for goofy responses here, but you’ll hear some really valuable—and potentially gut-wrenching—feedback you wouldn’t usually receive. It never hurts to know what your staff prioritize as idealists.

Unifying your staff can be difficult, but if you start with these conversations, you’ll be well on your way to a strong team during these trying times.

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