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Congressman: Startups' innovations threatening to established markets

U.S. Rep. David Schweikert, R-Scottsdale, talks with entrepreneurs Wednesday at Seed Spot, a Phoenix business incubator. (Cronkite News Service Photo by Joe Martin)

PHOENIX -- U.S. Rep. David Schweikert, R-Scottsdale, warned a group of entrepreneurs Wednesday that established companies and their lobbyists will fight to keep startups' innovations from disrupting their markets.

"Legacy manufacturers are scared to death of you because of the chaos the new economy is creating," Schweikert said during a visit to Seed Spot, a Phoenix business incubator.

As examples, Schweikert said taxicab companies are trying to prevent ride-sharing programs from taking too much of their business, while the hotel industry is fighting airbnb.com, which connects travelers with short-term rentals offered by individuals.

Schweikert said such innovations are quickly creating a new economy based on peer-to-peer commerce, which involves sales of services or products without a middleman. Easy access to technology is making it possible for individuals to disrupt traditional businesses models in this way, he added.

"Because of your access to information now, literally the world's library is in your hand," Schweikert said. "But that speed, that access to ideas, the ability to create, is a real threat to incumbent organizations."

Schweikert said the rollout of the federal Jumpstarting Our Business Startups Act, which became law in 2012 aims to make it easier for startups to get capital through different avenues such as crowdfunding, is being hampered by the "regulatory state." Some of its provisions haven't been rolled out while federal agencies review them, he noted.

"We're literally two years later and many of the things that should have already been rolled out are still in rule-promulgation," Schweikert said. "That's now one of my threats, that I have to change the way the regulatory state slows down innovation."

Courtney Klein, CEO and co-founder of Seed Spot, said crowdfunding will have a significant impact on how entrepreneurs can raise money.

"I think a part of it is a trajectory of how the industry's changing," Klein said. "When you think about how capital was traditionally raised, and now this whole notion of crowdfunding and what does that mean? What does that look like?"

Justin Rohner, founder of Seed Spot-based Agriscape Technologies and iAgriscape.com, which help people grow produce in their lawns and gardens and sell it to local markets, said Schweikert's warning gave him pause.

"What lobbyists might be out there that might try and squash us through regulation that they might lobby for?'" Rohner said.

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