[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


 
                 MODERN TOOLS IN A MODERN WORLD: HOW 
                   APP TECHNOLOGY IS BENEFITTING SMALL 
                   BUSINESSES

=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON HEALTH AND TECHNOLOGY

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             JULY 23, 2015

                               __________

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
                               

            Small Business Committee Document Number 114-021
              Available via the GPO Website: www.fdsys.gov
              
              
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                       U.S. GOVERNMENT PUBLISHING OFFICE
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                      STEVE CHABOT, Ohio, Chairman
                            STEVE KING, Iowa
                      BLAINE LUETKEMEYER, Missouri
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                        TOM RICE, South Carolina
                         CHRIS GIBSON, New York
                          DAVE BRAT, Virginia
             AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                        STEVE KNIGHT, California
                        CARLOS CURBELO, Florida
                          MIKE BOST, Illinois
                         CRESENT HARDY, Nevada
               NYDIA VELAZQUEZ, New York, Ranking Member
                         YVETTE CLARK, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                       BRENDA LAWRENCE, Michigan
                       ALMA ADAMS, North Carolina
                      SETH MOULTON, Massachusetts
                           MARK TAKAI, Hawaii

                   Kevin Fitzpatrick, Staff Director
            Stephen Dennis, Deputy Staff Director for Policy
            Jan Oliver, Deputy Staff Director for Operation
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director
                            
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Aumua Amata Coleman Radewagen...............................     1
Hon. Seth Moulton................................................     2

                               WITNESSES

Mr. Morgan Reed, Executive Director, ACT / The App Association, 
  Washington, DC.................................................     4
Mr. David Barrett, CEO, Expensify, San Francisco, CA.............     6
Patricia G. Greene, Ph.D., Paul T. Babson Chair in 
  Entrepreneurial Studies, Babson College, Babson Park, MA.......     7
Ms. Cassie Gray, Owner, ShopClementine, Ashfield, MA.............     9

                                APPENDIX

Prepared Statements:
    Mr. Morgan Reed, Executive Director, ACT / The App 
      Association, Washington, DC................................    15
    Mr. David Barrett, CEO, Expensify, San Francisco, CA.........    31
    Patricia G. Greene, Ph.D., Paul T. Babson Chair in 
      Entrepreneurial Studies, Babson College, Babson Park, MA...    40
    Ms. Cassie Gray, Owner, ShopClementine, Ashfield, MA.........    45
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    None.


MODERN TOOLS IN A MODERN WORLD: HOW APP TECHNOLOGY IS BENEFITTING SMALL 
                               BUSINESSES

                              ----------                              


                        THURSDAY, JULY 23, 2015

                  House of Representatives,
               Committee on Small Business,
             Subcommittee on Health and Technology,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2360, Rayburn House Office Building. Hon. Aumua Amata 
Coleman Radewagen [chairwoman of the subcommittee] presiding.
    Present: Representatives Radewagen, and Moulton.
    Chairwoman RADEWAGEN. Good morning. I call this meeting to 
order.
    Good morning. I want to welcome all of you to this hearing 
of the Small Business Subcommittee on Health and Technology. It 
is an honor to chair this Subcommittee, and I look forward to 
continuing the work we are doing to improve opportunities and 
growth for the nation's small businesses.
    Today, we will be examining apps which are applications of 
technology accessed on smartphones and other portable handheld 
devices. U.S. demand for mobile data grew by 63 percent in 
2014, and is expected to increase sevenfold by 2019. Since 
2007, the United States has seen more than 750,000 app economy 
jobs created. An astonishing 77 percent of the apps are made by 
startups, or small companies, and nearly 80 percent of these 
companies are located outside of Silicon Valley. And this 
industry is steadily growing. Findings predict that the app 
economy will reach 151 billion by 2017.
    App technology provides businesses and consumers with fast, 
viable solutions to everyday problems, and research shows it is 
the entrepreneur due to an ability to remain flexible in a 
quickly changing market environment who is leading the 
development of these innovative apps. Developers are producing 
apps that integrate home automation systems, track and monitor 
health statistics, offer budget and financial transaction 
tools, and allow consumers to have their groceries purchased 
and delivered.
    The continued impact that the app industry will have on the 
United States' economy are significant, and we must help foster 
that growth. In fact, more than 20 percent of all apps sold in 
China were developed by American businesses. This is a perfect 
illustration of the potential growth for the industry.
    I also want to touch on the implications app technology 
provides for underserved regions, such as my district, American 
Samoa. Entrepreneurs in the farthest corners of American can 
tap into the app industry, and our residents are among the 
innovators. For instance, a Pago Pago native from my district 
developed a photo app that allows users to add Polynesian 
cultural filters and designs to their photos before sharing 
them.
    I want to thank the witnesses for being here today to help 
us examine and further understand the implications app 
technology can have on the economy.
    I now yield to the ranking member for his opening 
statement.
    Mr. MOULTON. Thank you, Chairman Radewagen, for holding 
this important hearing. Thank you also to our witnesses, 
especially Cassie Gray, a small business owner who traveled 
from Massachusetts to be here today. Creative entrepreneurs 
like Cassie make our economy stronger, and we need their input 
to ensure the laws we make are working for every day Americans.
    There is no question that technology has changed every 
facet of the American economy. Think about it. Only a few years 
ago it would be hard to imagine how much we could accomplish 
from a device that fits comfortably in our pockets. This 
hearing comes at an appropriate time. Research shows that 
entrepreneurship among Americans is declining, an alarming 
trend. In her testimony, Ms. Gray describes the Etsy platform 
as a ``onramp to entrepreneurship.'' For our economy to truly 
improve, we need more onramps to entrepreneurship, and 
technology, like mobile apps, can help lead the way.
    Today, entrepreneurs are building entire business models 
around smartphone applications. New forms of commerce are 
emerging daily as the web becomes an increasingly mobile 
platform. Small business owners use social networks, like 
Facebook, Instagram, and Twitter, to market their products. 
Americans now use smartphones, tablets, and other handheld 
devices to do everything from ordering groceries to booking 
travel arrangements, to sharing photos, to monitoring their 
health and fitness. Our economy is stronger and more efficient 
as a result of these innovations.
    Not only are entrepreneurs developing innovative apps, but 
more traditional businesses are harnessing wireless technology 
to reach new markets and serve existing customers more 
efficiently. Nearly two-thirds of small businesses now say it 
would be difficult to continue operating without the use of 
wireless technology. Thirty percent of firms with fewer than 20 
employees utilize mobile applications as part of their business 
model, and small companies are saving 275 million employee 
hours a year through the innovative uses of wireless 
technology.
    As mobile web platforms become more integral to the 
American economy, Congress, the FCC, and other agencies will 
encounter a number of regulatory challenges that must be 
addressed. As Cassie will demonstrate in her testimony, one of 
the most basic challenges is ensuring widespread access to 
broadband. Today, the Federal Communications Commission reports 
that 95 percent of small firms have broadband connectivity. 
This constitutes important progress but more work must be done. 
In particular, there remains a significant gap between rural 
areas like western Massachusetts and large cities.
    Ensuring universal broadband access is vital to promoting 
commerce. In that regard, programs like the Rural Utility 
Service and the Universal Service Fund will remain critical to 
economic development in traditionally underserved communities. 
This Committee has an important role to play in ensuring that 
as those initiatives evolve and are reformed, the needs of 
small and micro businesses are kept in mind.
    Entrepreneurship and innovation are two traditions that 
have always made our country an economic leader. That remains 
the case today as small businesses are on the leading edge of 
developing new apps and utilizing them to expand their market 
share and find new efficiencies. As always, this Committee has 
an important role to play in ensuring that policy changes in 
this area provide the appropriate degree of regulation and 
consumer protection, while allowing the space for maximum 
amount of innovation and growth.
    Before I close my remarks, I want to take a moment to 
acknowledge another witness, Patty Greene. Ms. Greene is the 
academic director of the Goldman Sachs 10,000 Small Business 
Program at Babson College in Massachusetts. This program has 
benefitted small business owners throughout the country, 
throughout Massachusetts, and throughout the Sixth District. It 
is wonderful to have her with us here today.
    On that note, I would like to thank all the witnesses for 
being here to share their valuable perspectives, and I yield 
back the balance of my time.
    Chairwoman RADEWAGEN. I would like to take a moment to 
explain the timing lights for you. You will each have five 
minutes to deliver your testimony. The light will start out as 
green. When you have one minute remaining, the light will turn 
yellow. Finally, it will turn red at the end of your five 
minutes. I ask that you try to adhere to that time limit.
    Our first witness this morning is Morgan Reed, executive 
director at ACT, The App Association, where he specializes in 
application development issues. Mr. Reed has testified in both 
the House and Senate chambers, and has authored several white 
papers on app development. He also serves on the Advisory 
Council of the Mobile Health Information Management Systems 
Society.
    Our next witness is Dr. Patricia Greene. Dr. Greene is the 
Paul T. Babson chair in Entrepreneurial Studies at Babson 
College. Before joining Babson, she chaired entrepreneurial and 
leadership programs at the University of Missouri, Kansas City, 
and Rutgers University. She is also a member of the National 
Advisory Board for the Small Business Administration's Small 
Business Development Center.
    Next, we have David Barrett, the founder of Expensify, a 
complete online expense management service. He started 
programming when he was six-years old, and it has been his 
primary activity ever since. With a brief hiatus for project 
management, technical writing, and world travel.
    Finally, we have Ms. Cassie Gray, owner of ShopClementine, 
an Etsy shop that she runs out of her home in Massachusetts. 
Ms. Gray creates minimalist jewelry using recycled silver, 
reclaimed gold, and gemstones, and diamonds. What started as a 
hobby has developed into a nine-year-long career through online 
sales. Ms. Gray, thank you for being with us today.
    Mr. Reed, you have five minutes.

  STATEMENTS OF MORGAN REED, EXECUTIVE DIRECTOR, ACT/THE APP 
ASSOCIATION; PATRICIA G. GREENE, PH.D., PAUL T. BABSON CHAIR IN 
 ENTREPRENEURIAL STUDIES, BABSON COLLEGE; DAVID BARRETT, CEO, 
         EXPENSIFY; CASSIE GRAY, OWNER, SHOPCLEMENTINE

                    STATEMENT OF MORGAN REED

    Mr. REED. Thank you.
    Chairwoman Radewagen, Ranking Member Moulton, and 
distinguished members of the Committee, my name is Morgan Reed, 
and I am the executive director of ACT, The App Association. I 
thank you for holding this important hearing on the impact of 
the app industry on mobile innovation for small businesses.
    We represent more than 5,000 companies that create the apps 
used on smart devices around the globe. My goal today is to 
highlight the remarkable growth of the app industry and where 
it is headed.
    We have three key findings for the Committee. First, app 
companies are succeeding in every region of the country, as you 
have all pointed out. Two, the growth of the app economy 
provides access to technology previously out of reach from many 
small business owners in rural and underserved communities. And 
three--here is where I am going to predict the future a little 
bit--the future of the app economy, including in your 
districts, will be in financial, enterprise, and in health.
    In 2008, The App Store launched with only 500 apps. In 
seven years, the number of apps now exceeds four million across 
several different platforms, and the app economy has emerged as 
a $120 billion marketplace. Our industry research has 
consistently found that more than three-quarters of the top 
grossing apps are made by small companies, and 80 percent are 
based in the U.S. And as you noted, 77 percent are based 
outside of Silicon Valley. And while we all love Silicon 
Valley, I think it is a very important thing, especially as we 
are sitting on this Committee, to understand that spread and 
that capability that the app economy is producing.
    But, you know, those are just numbers, so let us get a 
little bit more specific.
    Chairwoman, you have already mentioned the app is called 
Kavagram, and it is done by a gentleman, Sonny Stevenson. And 
he did it, as you pointed out, to spread Polynesian artwork, 
allowing you to edit photos, decorate them with designs and 
images. It really borrows from the Instagram theme, and it has 
really been a huge hit. Several NFL players have been using it 
and putting out some pretty amazing photos using the app from 
Sonny.
    Ranking Member Moulton, you have one of my favorite app 
companies in your district. It is called Playrific. With more 
than 50 employees, Playrific builds amazing kids' apps, like 
Pink Chillies, the Magical Elephant Game, which lets you build 
puzzles, test your memory. They are doing just a great job in a 
really safe environment for kids, and it is worth pointing out, 
50 employees is a real job creator.
    More importantly, every single one of your districts has a 
bricks-and-mortar small business that is using mobile to manage 
their point of sale, to manage their expenses, to help with 
customer relations, and improve customer service in the field.
    Now, the future of that mobile app economy is not 
necessarily just in those apps in the store but in the apps 
being used in your place of business. If you think of it this 
way, your mobile device then becomes the place in the 
repository for all of your information on your customer, 
something called customer relations management. It tells you 
when you last met with them, what was your sale. When you go 
into that meeting with a customer, you possess in your hands 
for the first time what did they last buy? When did they last 
talk to you? All of that information that makes for rich 
customer relations can be right in front of you on your mobile 
device. Your training documents, and as we say most 
importantly, your sales material for that next big deal.
    Now we step to the next place in health. Right now, we all 
know about wearables. I think at least three of the four of us 
have wearables on right now. And what we know about them is 
that your wearable device collects amazing information. But 
your next step is your doctor is going to speak to you through 
an app, and they are going to be able to see in near real time, 
the information off your wearable. And God forbid you are in an 
ambulance. The ambulance will be able to send information to 
the emergency room via an app called Airstrip, which is already 
in the market, to keep tabs on your vitals, to make sure your 
emergency room is ready the moment you land.
    Well, what makes these apps possible? There is some obvious 
stuff--the network, devices, storefronts--but I would say the 
biggest element is trust. Cloud technology that provides remote 
data storage is the lifeblood of the mobile economy. It allows 
users to access and share from any location.
    And if trust is a key building block, then loss of trust is 
the destructive kryptonite. Small businesses must be able to 
protect the data of their customers whose trust they have 
worked so hard to earn, so strong encryption, something, by the 
way, OPM did not have, is critical. We ask that you take 
seriously any government efforts to weaken security measures.
    Just as troubling, the Department of Justice is currently 
requiring American companies to break the law overseas, forcing 
them to give data stored on foreign nationals at datacenters 
abroad without approval of the host country. We encourage you 
to support the LEEDS Act, which would provide a clear legal 
framework for law enforcement agencies.
    And finally, while small businesses must have the ability 
to protect their intellectual property, they also need help 
pushing back on patent abusers. H.R. 9, the Innovation Act, 
restores trust by including strong measures to ensure 
transparency in patent ownership, clarify what is and is not 
infringement, and allow defendants to recover legal costs.
    I thank you again for the opportunity to testify, and I 
look forward to your questions.
    Chairwoman RADEWAGEN. Now, Mr. Barrett.

                   STATEMENT OF DAVID BARRETT

    Mr. BARRETT. All right. Hello, everyone. I am going to be 
the least slick speaker here. I have never done this before, 
but it is quite exciting. Thank you so much for having me here.
    I am David Barrett, the founder and CEO of Expensify. We do 
expense reports that do not suck. It is a bold division, but we 
are improving the world one expense report at a time.
    So what I am going to talk about here is probably highly 
overlapping, so I am going to be more anecdotal here about the 
rise of the app stores. And I would say in my mind, the app 
economy started with actually a little known phone called the 
Danger Hiptop. I think I was only person who liked this phone. 
It was the first phone to actually have its own integrated app 
store, meaning that you could actually download and expand the 
functionality of the phone itself. This phone launched in 2002, 
but the app economy did not really typically take off until 
about 2008 with the iPhone App Store. And at six years, nothing 
happened. And I think the important reason why nothing happened 
is because the Hiptop was not backed by Apple, and thus, did 
not have the power to convince AT&T to allow applications to be 
installed on their phones. And so for about six lost years, we 
had the potential for an app economy but it simply did not 
happen. And I think that really drives home the importance of 
having open access to the technology, the Internet, and the 
users, in order to actually enable the technology of an app 
store to work.
    Secondarily, I would say in addition to the app store, what 
makes this whole revolution possible is the sheer power of 
these phones. I am trying to think of ways to sort of summarize 
how powerful these phones are, so to give some examples, the 
first portable computer that I can think of would probably be 
the Apollo Command Module, 1969. It had about 64 kilobytes of 
memory, 43 kilohertz of processing speed. To put it into 
comparison, a single iPhone can process about 16,000 times more 
data, about 33,000 times more fast. So that is basically a 
single iPhone has more power than the entire Apollo mission 
combined. All of NASA at that time could be powered by a single 
iPhone easily.
    Maybe more recent is 1997. IBM had a computer called Deep 
Blue. It was the first computer to ever beat a world champion 
in chess. A single iPhone is about 10 times more powerful than 
that computer, and that was just 1997. Or maybe a more recent 
IBM computer is Watson. In 2011, it beat Jeopardy for the first 
time. And so it was hailed at the time as being the smartest AI 
ever created. It is about 2,500 iPhones, which means in about 
seven years, due to Moore's Law, which means that basically 
computing power doubles every 18 months. In about three terms, 
every one of your constituents is going to have a phone in 
their pocket more powerful than today's smartest AI. And so 
that is pretty astonishing I would say. It is not totally 
accurate to say that every smartphone is as powerful as a super 
computer, but it is pretty darn close. And any policy you put 
in place today is probably going to be applied to super 
computers by the time it is actually out in the real world.
    And so how this sort of works as a real world example. 
Expensify, as I said, we work in the ever-so-exciting field of 
expense report management, and what we do is we have an app 
where you take a picture of the receipt and a technology called 
Smart Scan will read the information off that receipt 
automatically without any typing involved, put it on the right 
expense report, and submit it for you. And so I would say in 
our world, the availability of a telephone platform with an 
integrated smartcam can enable this sort of scanning technology 
to bring extreme productivity to small businesses that are 
doing mobile travel on the road.
    And so I would say the app evolution is not going to sort 
of appear like HAL 9,000. Artificial intelligence is not going 
to sort of appear in this personal form. It is first going to 
start off with applications highly optimized for certain 
problem demands, like Expensify.
    And so I think that an exciting thing about this, as we are 
getting these more powerful automation platforms, they are not 
going to appear typically like in the enterprise or in the 
factories and trickle down to the people. The exciting thing 
about this environment is because of the sheer affordability of 
this platform, it affects everyone all at once. The entire 
world is benefitting from these sort of small business 
applications, starting with the individuals and moving on up. 
And so this sort of bottom-up adoption of this technology I 
think is really a major change for how technology has 
historically been adopted.
    So I would say maybe a final point, I have heard real 
broadband mentioned. I think that an amazing component of the 
app technology is it enables rural areas to actually contribute 
to a global economy. I know that our Smart Scan Technology 
employs about 150 contract workers throughout actually rural 
Michigan, where we have one of our offices. And so unlike a 
typical Silicon Valley business, which is just based around San 
Francisco, we actually employ a global workforce and bring jobs 
actually back from around the world to rural America.
    And so I think that the smartphone technology, sort of 
powered by this global Internet economy, is bringing rural 
economy into the global economy as well. And so I think there 
is a wide variety of things it can do. All sorts of information 
in my notes here. But most importantly, things are really great 
right now, and I would say the most important thing we should 
work on is let us not screw it up. Things are actually really 
awesome. We do not need a ton of help. I would say patent 
reform, innovation reform, even tax reform things could help, 
but by and large, the main thing is let us just keep the party 
going. So thank you so much.
    Chairwoman RADEWAGEN. And now Dr. Greene?

                STATEMENT OF PATRICIA G. GREENE

    Ms. GREENE. Thank you, Chairman Radewagen, Ranking Member 
Moulton, members of the Subcommittee. Thank you for the 
opportunity to testify. It really is an honor to be here today.
    I am going to base my testimony largely on that as an 
entrepreneurship educator, but also as the owner of a small 
business, a store in Gettysburg, Pennsylvania.
    I am also very pleased with the topic of the hearing today. 
As much of the public discussion around entrepreneurship and 
technology is really driven on a very thin slice of actual 
businesses in the United States, those that use or sell 
technology, and I would like to focus today that we are also 
looking at the other side of the equation. How do small 
businesses use and benefit from technology?
    If we consider that fewer than 10 percent of all U.S. 
businesses have more than four employees, we are a country of 
microbusinesses. There are 25 million businesses that fit into 
this territory of how do we actually learn again and use about 
this. The fact that apps can be helpful I take as a given. The 
question is how? How do these small businesses get access to 
the apps? How do they learn about them? How do they integrate 
them into their actual operation so that they can be tools for 
productivity?
    For evidence, I am going to use a couple different things. 
One is a piece of research that was done last year by AT&T with 
the Small Business and Entrepreneurship Council, and finding 
that 94 percent of the polled small businesses use smartphone 
technology, two-thirds of them are using mobile apps, and they 
do save up to 150 hours each. However--and I think this is an 
important however--73 percent of them are using them for social 
media and marketing; only 18 percent of them are using them for 
point of sale, those types of activities; and only 18 percent 
of them are currently using apps to improve their operations. 
There is a huge opportunity to work with our small businesses.
    The rest of my evidence I am really going to draw from the 
Goldman Sachs 10,000 Small Businesses Program. This is a half 
billion dollar initiative to help small businesses. We 
currently operate in 13 sites across the country in some of the 
territories, and we are working with businesses that do have at 
least four employees, so they are growth-oriented countries. 
The companies today reflect over $3 billion in revenues.
    The important part about that is the diversity of the 
businesses and the diversity of the people. So for the 
businesses, no single industry represents more than 10 percent 
of the businesses in the program, the professional services is 
34 percent. Everybody else is under 10 percent. And the 
business owners are important, too, in thinking about who is 
actually using the technology tools. The median age in the 
10,000 Small Businesses is 46 years old. The range goes from 22 
to 75. And please remember that these are, by definition, 
growth-oriented businesses fairly split as to gender with 46 
percent of the businesses are owned by women and a very broad 
array of educational backgrounds ranging from some high school, 
possibly a GED, to multiple graduate degrees. So when we are 
thinking about who is using apps in growing their businesses, 
we are looking at all kinds of people in all kinds of 
businesses.
    Within the program, we teach about technology in three 
different ways. The first one really is it is embedded into the 
curriculum, so we actually do have teaching notes for our teams 
to use as to how do they expand and learn about technology. We 
work with peer learning, so how do they actually learn from 
each other, which is a huge way to learn about apps, and we 
also have a tech clinic where we actually teach them not about 
the apps themselves but about how do I identify what technology 
is available, how do you evaluate it, how do you know what to 
pay for it, and most importantly, how do I bring it back into 
my company and teach others how to use it?
    The app technology piece is really probably the most 
critical question in the how to use it. So the pricing is 
rarely the big challenge. It really is about a fear of 
inappropriate adoption. If I bring it in, will it work? And 
what is the cost if it does not work for me to have to go back, 
as these businesses generally have a very slim margin for 
errors.
    The question of app is also related to how they train their 
employees, and within the 10,000 Small Businesses, we have got 
86.4 percent of the business owners report that they are 
providing on-the-job training, and again, these are very small 
companies with 62.6 percent using some version of online 
learning. Again, another opportunity for apps in general.
    I would like to close with one short example actually from 
a woman in another Massachusetts, Victoria Amador, of 
Tremendous Maids, who basically learned about an app to 
organize communication across her company from another person 
in the program. She reports that using--in this case she is 
talking about Google Voice--saves her thousands of dollars. He 
recommended to her when they met during the online portion and 
therefore, she becomes an example of using technology to enable 
working with others to learn about technology.
    Thank you very much.
    Chairwoman RADEWAGEN. And now Ms. Gray.

                    STATEMENT OF CASSIE GRAY

    Ms. GRAY. Good morning. My name is Cassie Gray, and I am 
the owner of Clementine, a handcrafted jewelry business. Thank 
you, Chairwoman Radewagen, and Ranking Member Moulton, for the 
opportunity to testify.
    My road to entrepreneurship was anything but fast or 
predictable. I moved to New York after graduating from college 
and joined the publishing industry, working my way up from 
assistant to senior copywriter. But I developed something like 
a restless hand syndrome. I just wanted to make something 
tangible, and I found my way to beading and jewelry making in 
my spare time.
    About 10 years ago, my personal life was influx and I left 
New York to move back to my hometown of Ashfield, 
Massachusetts. In this rural hill town, I had to cull together 
a living from whatever I could--freelance writing, waiting 
tables, and making my jewelry. I opened ShopClementine on 
Etsy.com in January 2006. When I got my first sale, I literally 
jumped for joy. For the first few years, revenue was quite 
modest but I had fallen in love. While I was still working 
other jobs, I devoted myself to learning all I could about 
jewelry. I took a series of intensive metalsmithing courses, 
which gave me the confidence to expand my line and focus on 
attracting new customers.
    Through it all, Etsy has remained my main venue. The Etsy 
platform allows me to directly talk to my customers, making the 
shopping experience truly personal. Now, I work 50-60 hours a 
week on my business, and yearly business is more than $130,000. 
While my store is particular to my personal circumstances, my 
experience is similar to other Etsy sellers. Just today, Etsy 
released a new report about U.S. Etsy sellers, which reveals 
that they are business owners in their own right, and the 
income they earn on Etsy through the website and mobile apps, 
matters to their lives and the broader economy. Like me, most 
Etsy sellers are women, 86 percent. Many are parents with 
children at home. Just under a fifth are low income. And 39 
percent live in rural areas. Nearly half of all sellers had 
never sold their goods until they joined Etsy, demonstrating 
that Etsy functions as an onramp to entrepreneurship.
    And while some might be inclined to write our community off 
as hobbyists, income from these creative businesses matters. 
For 30 percent of Etsy sellers, their creative business is 
their sole occupation. For the rest, their creative business 
supplements other jobs, contributing an average of 15 percent 
to total household income overall.
    The Internet and mobile technologies have opened up 
incredible new opportunities to people like me. To operate my 
shop, I use the website and two mobile apps Etsy offers. As of 
December 31, 2014, Etsy's mobile apps have been downloaded 21.8 
million times. The Sell on Etsy app is indispensable in my day-
to-day routine. When I am working at my jewelry bench, I check 
orders and communicate with customers via the app. If I go to 
make a hammered ring but I cannot remember what gauge the 
silver should be, I check the listing details via the app. If I 
get a message from Etsy alerting me that one of my items has 
been featured editorially, I can increase the quantity 
available so that item does not sell out. I also do most of my 
business's social media interaction via apps--Instagram, 
Pinterest, Twitter.
    Mobile app technology enhances how entrepreneurial Etsy 
sellers, like me, reach customers and make a living. And it is 
only the beginning. Already more than half of Etsy's traffic 
comes from mobile devices. The fact that I can use my phone at 
all to do these things is a bit of a miracle; however, we still 
have a long way to go to getting access to technology to those 
who need it.
    I live and work in Franklin County, which is the poorest 
county in Massachusetts. Most of Ashfield, where I live, is 
completely without cellphone reception. In my house, high on 
the hill, I get just one bar of 3G. There is no broadband or 
cable available, so I use a satellite to connect to the 
Internet. It is slow and it involves me having to go out in the 
middle of winter storms with a kayak paddle to whack the 
accumulated ice off the dish.
    This gap in accessibility harms entrepreneurship and 
business. Policymakers have an opportunity to support 
businesses like mine. In addition to expanding broadband to 
rural areas, lawmakers should focus on the needs of the self-
employed and microbusinesses. Most Etsy sellers work alone and 
face very different challenges from even a 10 or five person 
business. They are part of a growing trend towards self-
employment in the U.S., which offers both new opportunities and 
new challenges.
    For example, new administrative burdens impact 
microbusinesses dramatically. The newly introduced Remote 
Transactions Parity Act would require all Etsy sellers, 
regardless of size, to collect and remit sales tax in every 
state. Proposals like this threaten to undermine businesses of 
one who simply do not have the time or resources to comply with 
such requirements.
    Overall, I believe the Internet and mobile apps are 
creating incredible new opportunities for entrepreneurs around 
the country. I urge Congress to enact policies that support 
independent, creative businesses, enabling the broader maker 
market to thrive.
    Thank you.
    Chairwoman RADEWAGEN. I want to thank the panel for your 
testimony. And now I will give myself five minutes to ask some 
questions.
    Mr. Reed, you note that there are three billion different 
apps on the Apple store site. This is tremendous growth in just 
seven years. Do you expect the industry to continue growing 
exponentially or do you believe it will taper off?
    Mr. REED. Oh, I am confident that it will continue to grow 
exponentially simply because look at the number of devices that 
people have. This last year, we reached a point where connected 
devices in the United States exceeds the population of the 
United States. One of the things to realize is that the next 
generation of cars will all be connected devices. You have 
heard of the whole connected car movement. Well, now, every 
single car is going to come with its own series of applications 
and its own connection. So there is no question that the 
explosion is going to happen.
    What I think is more exciting is, as much as I love cool 
games, and we have a ton of members making cool games, I think 
it is really the way that mobile devices are going to empower 
Ms. Gray and others are the place where that exponential growth 
is going to be the most significant.
    Chairwoman RADEWAGEN. You mentioned that some small 
businesses are using apps for inventory tracking instead of 
expensive software programs. How do these apps compare in terms 
of the quality, features, and ease of use as compared to a 
program used on a desktop?
    Mr. REED. Well, it is a great opportunity to sit here next 
to Mr. Barrett, who is, in fact, one of those generating an 
application, as he said, that completely alters the paradigm. 
That is what is so amazing.
    So as you know, before, you would sit down at your desktop 
computer. You would have your stack of expenses, and you would 
sit there typing away. Well, with a product like Expensify--I 
am going to be your salesman today--you literally take your 
phone, you click it, and it shows up. So the idea of how it 
changes--and I thought Dr. Green, her point was exactly right--
the fact that that is only still at somewhere under 20 percent, 
that is this hockey stick growth that we are going to see, 
because an app like his does not just do better or cheaper than 
the desktop equivalent; it literally changes the paradigm by 
adding features, like the ability to take a photograph, the 
ability to combine it together, and then move it to a desktop 
product that allows you to file your taxes, that allows you 
to--hopefully not independent state sales tax in 7,000 
districts--but that is where you really see that hockey stick 
growth. It is right there. It is from products like his, and 
from what Dr. Greene talked about, and the way that Ms. Gray 
said that she would like to incorporate them in her practice.
    Chairwoman RADEWAGEN. Thank you, Mr. Reed.
    Dr. Greene, what do you consider to be the major hurdles to 
small businesses utilizing apps in a constructive manner to 
increase a small business's efficiency?
    Ms. GREENE. I think there are two parts to that. The first 
is knowing what is out there. They do know about a lot of the 
social media, but especially in underserved areas, I am finding 
that they only know about a small slice of what is really 
possible. So just knowing what is actually possible. And then 
the second is being able to undertake what they do see as a 
risk of incorporating this because they are afraid of getting 
it wrong, they do not have a lot of resources available to 
correct mistakes, and they think they may be doing okay as they 
go and not necessarily seeing the opportunity of what they 
could really accomplish with using these new types of tools.
    Chairwoman RADEWAGEN. Mr. Barrett, could you please 
elaborate on the impact your business in particular has had on 
the state and local community at your location in Michigan? How 
did you choose this location?
    Mr. BARRETT. Sure. Well, actually, I just flew from there 
yesterday, and it is in rural Michigan, in the middle of 
nowhere, surrounded by trees and one ski hill. It happened 
randomly. We had a contractor that we hired remotely, and then 
we had a problem. And we were like, ``Hey, we need the guy to 
do this.'' And he was like, ``I know a guy.'' And then that 
became two people, then it became four, and now it is like 
basically hundreds.
    And so I would say we have brought millions of dollars of 
economic activity to this tiny town. We are working with the 
local government, with the mayor and the city developers there, 
and so I would say we view Ironwood, Michigan, as a true 
partner in the business, and a really critical sort of secret 
weapon that we employ to compete aggressively with our Silicon 
Valley peers, but also the enterprise incumbents.
    Chairwoman RADEWAGEN. Dr. Greene, in your testimony, you 
state that peer learning about technology tools for small 
businesses is critically important. What recommendations would 
you make to policymakers to encourage the use of these tools, 
specifically mobile technology, such as apps?
    Ms. GREENE. I think that is a difficult one from a policy 
perspective on how do you drive peer learning. The part I would 
probably go to comes back to my experience working with the 
SBDCs and the SBA, in making sure that there are arenas in 
those funded parts of the program where these kinds of programs 
can happen. Probably the most important part of that though is 
to make sure that anyone that teaches in any kind of program 
that is supported by the government actually does understand 
technology, is able to teach about technology, and age cannot 
be an excuse. These programs are really for everyone, so no 
matter the age of the instructor or the student, there has to 
be an openness there to try new things.
    Chairwoman RADEWAGEN. Thank you.
    And now I yield to Ranking Member Moulton.
    Mr. MOULTON. Thank you, Chairman.
    Ms. Gray, what can Congress do to help promote the 
development of apps for small business?
    Ms. GRAY. Well, I would say the most important thing is to 
continue to keep it free and open, to not put any barriers. 
Your work on the net neutrality was really helpful. I think 
that in order to really tap into entrepreneurship and 
technology, we need to keep a level playing field for everyone 
involved so that no single party or entity has an advantage.
    Mr. MOULTON. Thank you very much.
    Mr. Reed, would you like to add some comments?
    Mr. REED. I think one of the things that I think she 
mentioned, that this committee of particular jurisdiction has 
some interesting efforts on a very good story about figuring 
out how do you get mobile apps to be built? When we had our 
fly-in, we had a person come who had tried to reach out for an 
SBA small business loan, and he went through a process where he 
went to, I think, 19 banks. He is a great entrepreneur, 
incredibly successful. One of the banks said something I 
thought was amazing. Said, ``You know what? You are a great 
guy. We know you will be successful. If you were coming here to 
build a gas station, I would write you a check. But because I 
do not know how within the confines of the SBA to properly fund 
your clearly, likely to be successful mobile application, I 
cannot give you the money.''
    And so while I completely agree with Ms. Gray that barriers 
to entry are a huge part of it, the government has the ability 
to write a check. And when it says I will write a check for a 
gas station but I will not write it for an app that will grow 
and employ 150 people, that is when I have a problem.
    Mr. MOULTON. Thank you very much.
    Mr. Barrett, I am a former Expensify user myself. I ran a 
small business before running for Congress. I appreciate it. 
You certainly made things a lot easier for us as we were trying 
to get our company off the ground.
    Mr. BARRETT. Happy to help.
    Mr. MOULTON. You mentioned immigration reform. I wonder if 
you could comment on that and what a difference it would make 
and why you feel it is important to the small business economy.
    Mr. BARRETT. Sure. I think there are sort of two aspects of 
immigration reform. One is that immigrants are historically 
much more likely to start businesses than nonimmigrants. I 
think 40 percent of the Fortune 500 has been founded by 
immigrants or children of immigrants. And so I think if we are 
trying to drive the growth in the small business economy, the 
number one thing we can do, Trump's comments notwithstanding, 
is to encourage legal immigration, because legal immigrants are 
the best and the brightest. And so we want to encourage this.
    Secondarily, I would say the truly best and the brightest 
are H1B visa holders. These are basically the finest people 
that we can find around the world. If we are going to let 
anybody in, that would be the people that we should definitely 
emphasize. And I know that as a small business, we compete very 
aggressively with, again, our peers and our incumbents. And the 
number one tool that we have in doing that is hiring. And so I 
think that hiring is, as I mentioned, rural Michigan for us is 
really key because we find the right people for the right 
position, but also, we search around the world for the best 
people. And so I think improving or raising the cap on H1Bs can 
help not just Silicon Valley, but I think many businesses, 
compete more aggressively. In addition to just increasing 
immigration overall, I think we will drive more small business 
growth.
    Mr. MOULTON. Great. Thank you.
    And Dr. Greene, would you be willing to add to that and 
offer your own perspective on the value of immigration reform, 
or whether it is valuable or not, frankly, to small businesses?
    Ms. GREENE. I think Mr. Barrett covered that quite well. 
There are two ways to look at that in entrepreneurship, too. 
There is a long history of certain immigrant groups also being 
very strong in creating businesses. Not all immigrant groups 
but certainly quite a few of them. So not only for the best and 
the brightest coming in, and I think there are a lot of best 
and brightest here, too, that they can all work together with, 
but also looking at who is going to start and grow the next 
round of businesses comes into play as well.
    The woman that I mentioned from Massachusetts as an example 
of using apps actually is an immigrant to the United States and 
has received several awards as an immigrant-owned business.
    Mr. MOULTON. Thank you very much.
    Thank you all very much for appearing before the Committee 
and for testifying. I certainly have learned a lot, and I yield 
the balance of my time.
    Chairwoman RADEWAGEN. I want to thank all of the witnesses 
for taking time away from their businesses and families to 
participate in today's hearing.
    I now ask unanimous consent that members have five 
legislative days to submit statements and supporting materials 
for the record.
    Without objection, so ordered.
    This hearing is now adjourned.
    [Whereupon, at 10:43 a.m., the Subcommittee was adjourned.]
                            
                            A P P E N D I X

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
             
             Testimony from Dr. Patricia G. Greene

  Paul T. Babson Chair in Entrepreneurial Leadership, Babson 
                            College

 Academic Director, Goldman Sachs 10,000 Small Businesses and 
                          10,000 Women

               Co-Owner: Artworks, Gettysburg, PA

         Investor and Advisor: Portfolia, San Jose, CA

               House Committee on Small Business

             Subcommittee on Health and Technology

                 Modern Tools in a Modern World

                         July 23, 2015

    Chairwoman Radewagen, Ranking Member Moulton, Members of 
the Subcommittee, thank you for the opportunity to testify 
before the Subcommittee on Health and Technology on the topic 
of Modern Tools in a Modern World, or more explicitly for 
today, how apps, which I interpret as mobile computing tools, 
``improve businesses' day-to-day operations, make them more 
efficient, assist their marketing and outreach capabilities, 
and, ultimately, stimulate revenue and job growth''.

    I'm going to base my testimony largely on my experience as 
an entrepreneurship educator with Babson College, as the 
academic director and lead designer of the Goldman Sachs 10,000 
Small Businesses and now 10,000 Women programs, as a federal 
appointed member of the SBA Advisory Board for the SBDC 
programs, as co-owner of Artworks, a store in Gettysburg, PA, 
and most recently, as investor and advisor to Portfolia, an 
equity based crowdfunding platform focused on women-led 
businesses and women investors.

    I'm very pleased with the topic of this hearing today as 
much of the public discussion around entrepreneurship is very 
technology driven, but it's often driven to a tiny slice of 
businesses, those that exist to advance the use and/or sell 
technology. It's gratifying that today we are looking at the 
other side of the equation, how small businesses can use and 
benefit from technology.

    Our economy is one of small businesses, with less than ten 
percent of all U.S. businesses having more than four employees. 
This means there are more than 25 million very small businesses 
either creating jobs, or providing the owner a job, and 
approximately an additional two million with between 5 and 499 
employees, all trying to find the best tools to survive and 
thrive.\1\
---------------------------------------------------------------------------
    \1\ http://www.census.gov/econ/smallbus.html. Accessed July 21, 
2015.

    10,000 Small Businesses, or 10KSB, is a $500 million 
initiative to help small businesses in the United States by 
providing entrepreneurs an integrated program of practical 
business and management education, business support services, 
and the opportunity to access capital. Babson College is the 
academic partner for the program and is responsible for the 
education and advising components, the training for all those 
who deliver the program, the measurement and evaluation system, 
and the national alumni program. To date the program has served 
nearly 5,000 small businesses who represent nearly 100,000 
employees across the US and the UK, including 49 states, D.C, 
and Puerto Rico and collectively have over $3 billion in 
revenues. We deliver the program through twelve community 
college sites and one blended (on-line and face-to-face) model 
---------------------------------------------------------------------------
housed at Babson College.

    The 10,000 Small Businesses alumni provide a highly useful 
context for considering the questions of this subcommittee 
today, how do, or how can, apps help them run more efficiently. 
The entrance requirements are for the business to be at least 
two years old, have at least four employees, and have revenues 
of at least $150,000. The program alumni are a broad cross-
section of U.S. small businesses, with one unifying criteria, 
they all explicitly want to grow their businesses. They are 
largely mature businesses. The typical business comes into the 
program with $692,000 in revenues, 11 employees, and having 
been in business for 11 years. Professional, scientific and 
technical services is the only industrial category that 
includes more than ten percent of the businesses and all 
industrial categories are represented in one way or another.

    The owners themselves are also important to consider when 
thinking about the use of technology tools. The business owners 
are most often around 46 years old, with a range from 22 to 75. 
They are fairly evenly split as to gender, with 46% of the 
businesses owned by women. And they have a very broad range of 
educational backgrounds, ranging from some high school to 
multiple graduate degrees.\2\
---------------------------------------------------------------------------
    \2\ http://www.goldmansachs.com/citizenship/10000-small-businesses/
US/about-the-program/impact-of-10ksb/index.html. Accessed July 21, 
2015.

    Given my background, my focus is more on how small 
businesses actually learn about technology tools. Most 
entrepreneurial education programs focus on planning, and very 
few actually focus on how to operate the business. I do take 
10,000 Small Businesses as an exception. The use of technology 
by the businesses is primarily addressed in three ways in this 
program. First, we train all instructors to have an area of 
their classroom dedicated to a technology flip chart. Each 
business owner is asked to list the tech tools they use in 
running their businesses, with an emphasis on apps. This 
approach is particularly used during the Operations and 
---------------------------------------------------------------------------
Processes module.

    Second, the program is built on peer learning and the 
business owners are organized into Growth Groups to work with 
each other. These sessions include both formal and informal 
exchanges of information about tools used. Notably, we avoid 
organizing any business owner group by industry to promote 
cross boundary learning about tools.

    And third, we created a technology clinic for alumni of the 
program that is focused on learning how to identify what 
technology exists, how to decide what apps are relevant, how to 
price them, and very importantly, how to integrate them into 
the company, including training employees on their use.

    I'd like to briefly expand on each of these techniques. 
First, too often technology, particularly apps, is thought of 
in very small buckets, applied to only specific areas. So the 
push toward discussing apps in every module is designed to both 
encourage the use of apps where appropriate, but to also 
demonstrate to others the range of possibilities from note 
taking and collaboration to the more specific marketing or 
scheduling. This approach does mean that you need 
entrepreneurship and small business instructors who are 
actually current and adept in using these apps. Age is not an 
excuse for avoiding technology.

    Peer learning about these tools is important, while 
potentially limited as to scale, especially when conducted 
outside of any organized program such as 10KSB. The use of 
technology, particularly mobile technology such as apps, needs 
to be integrated into regular training about starting and 
growing businesses, and decidedly not segregated into separate 
courses or offered only to certain types of businesses. We do 
not serve our small business owners well if we ``protect them'' 
from technology. By this I mean a practice I have seen in a 
number of other small business service programs of deciding 
beforehand who is likely to grow, who is amenable to the use of 
technology, and therefore who would benefit from more exposure 
to and instruction about technology tools.

    The technology clinic proved to be a learning experience 
that we are now scaling across the country. For the pilot we 
included speakers from Square, largely focused on facilitating 
point of sale operations, Dropbox, for file sharing and 
storage, and Alignable, a social media collaboration tool. The 
intent was to demonstrate the range of tools available to the 
small business owners, while delving more deeply into the 
general technology selection and usage questions. The questions 
raised most often by the business owners were those that moved 
beyond selection, to training, and particularly about how to 
learn to connect across apps for increased efficiency. While 
not called this by the business owners, the desire was for an 
integrated portfolio, without being tied to any particular 
product or brand.

    For apps, the actual price of the app is generally less of 
a concern due to most pricing structures. The cost comes in the 
time spent on adoption, including the learning necessary to 
make the usage decision, and then to roll it into the company. 
There is also the fear of inappropriate adoption, the situation 
when the app doesn't perform as expected, or just isn't a fit 
for the business. Changes in technology are difficult for any 
size company; however, smaller companies generally have less 
budgetary room to make mistakes. While adopting an app may seem 
like a small download decision, the potential impact of that 
decision on their company often drastically slows down making 
the actual decision.

    The question of app adoption is also related to how small 
business owners train their employees, in this case, about the 
use of technology. This again is often something that could 
often be better addressed in small business start-up or growth 
programs. The need to do this is included in 10KSB and at 18 
months after the program, 86.4% of the business owners report 
that they are providing on-the-job training, with 62.6 percent 
using some version of on-line learning, which actually then 
suggests employee training and developing as another app use 
for small businesses.

    Much of the question about the use of apps and small 
businesses therefore comes down to learning. Learning about 
what is available, what makes sense, and how it can be used to 
improve the efficiency and effectiveness of any business. 
Overall, apps can make business life easier, and make small 
businesses more competitive. To also be considered, time is the 
small business owners' most precious resource and appropriate 
app selection and deployment takes time.

    I'd like to close with one general and one more specific 
example of learning and using apps in 10KSB:

          One of the most striking memories I have from my 
        experience in this program comes from New Orleans where 
        early one morning before class I noticed one of the 
        more senior business owners in the class sitting down 
        with the youngest member of the class in order to 
        unpack his new iPad and learn from her about the apps 
        and tools she was using to organize and operate her 
        business. This actually is peer learning at its finest, 
        recognizing that every business owner has both 
        something to learn and to teach.

          More specific is the example of Victoria Amador, co-
        founder and CEO of Tremendous Maid, Boston, MA.\3\ 
        Tremendous Maid provides residential and commercial 
        cleaning in the greater Boston area. The business was 
        awarded Small Business of the Year from the City of 
        Boston--Main Street District for Hyde Jackson and 
        recognized by Governor Deval Patrick during Immigrant 
        Entrepreneurship Month in 2013. Tremendous Maids was 
        also named the 2014 Neighborhood Business of the Year 
        by the Immigrant Learning Center Organization. Ms 
        Amador uses technology tools ranging from basic CRM to 
        sophisticated scheduling programs and free tools such 
        as Google Voice. She explains that she sees these tools 
        as a better way to serve her clients and communicate 
        much more effectively with her team. She reports that 
        the ability to maintain clear communication is 
        paramount to her industry in order to serve high end 
        clients. She credits Google Voice with saving her 
        thousands of dollars. She learned about Google Voice 
        from a discussion with another 10KSB business owner. He 
        recommended it to her when they met during the on-line 
        portion of the national blended cohort. Ms Amador's 
        example therefore becomes one of using technology to 
        enable working with others to learn about technology.
---------------------------------------------------------------------------
    \3\ http://www.tremendousmaid.com/about/. Accessed July 21, 2015.

    Thank you again for the opportunity to testify before you 
today.
   U.S. House of Representatives Committee on Small Business

             Subcommittee on Health and Technology

    Testimony on ``Modern Tools in a Modern World: How App 
          Technology is Benefitting Small Businesses''

                         Presented by:

                Cassie Gray, Founder, Clementine

                         July 24, 2015

    Good morning, my name is Cassie Gray and I'm the owner of 
Clementine, a handcrafted jewelry business. I'm so honored to 
have been invited to speak with you today. Thank yo Chairwoman 
Radewagen and Ranking Member Moulton for the opportunity to 
testify.

    My road to entrepreneurship was anything but fast or 
predictable. I graduated from Haverford College with a BA in 
English in 1997 and promptly moved to New York and joined the 
publishing industry, where I worked my way up from assistant to 
senior copywriter. But I developed something like restless hand 
syndrome; I just wanted to make something tangible. I started 
sewing again, then rediscovered beading and jewelry making--all 
things I hadn't done since I was a child.

    About ten years ago, my personal life was in flux, and I 
left New York to move back to my hometown of Ashfield, 
Massachusetts. In this rural hilltown, I had to cobble together 
a living from whatever I could: freelance writing, waiting 
tables, and selling my jewelry. I opened ShopClementine on 
Etsy.com in January 2006. When I got my first sale I literally 
jumped for joy. For the first few years revenue was quite 
modest, but I'd fallen in love. I spent hours each day in the 
Etsy community forums, chatting with other makers from across 
the country and the globe.

    While I was still waitressing and freelancing to get by, I 
devoted myself to learning all I could about jewelry. I 
attempted to teach myself to solder, but soon realized that a 
propane camping canister and tin plumbing solder probably 
weren't going to give me the results I was looking for. I took 
a series of intensive metalsmithing courses at several 
different craft schools, which gave me the confidence to move 
in new directions, expand my product line and focus on 
attracting new customers who were willing to spend more for 
high quality handmade jewelry. Through it all, Etsy has 
remained my main retail venue. The Etsy platform allows me to 
talk directly to my customers, making the shopping experience 
truly personal. Now, I work 50-60 hours a week on my business, 
and yearly revenue is more than $130k.

    While my story is particular to my personal circumstances, 
much of my experience aligns with that of other Etsy sellers. 
Just today, Etsy released a new report on the US Etsy seller 
community, which reveals that Etsy sellers are business owners 
in their own right, and the income they earn on Etsy--through 
the website and mobile apps--matters to their lives and to the 
broader economy.\1\
---------------------------------------------------------------------------
    \1\ www.etsy.me/sellercensus

    Like me, most Etsy sellers are women--86% in fact. Many are 
parents with children at home and just under a fifth are low-
income, with annual household income under $25,000. 39% of Etsy 
sellers live in rural areas, compared to 21% of the general US 
population. Nearly half of all sellers had never sold their 
goods until they sold them on Etsy. In this way, Etsy functions 
as an on-ramp to entrepreneurship, creating opportunities for 
many people who might not otherwise have started a business and 
---------------------------------------------------------------------------
removing traditional barriers.

    And while some might be inclined to write our community off 
as hobbyists, income from these creative businesses matters. 
For 30% of Etsy sellers, their creative business is their sole 
occupation. For the rest, their creative business supplements 
other jobs, contributing an average of 15% to total household 
income overall. This money makes a difference--44% use it for 
necessary household expenses.

    Etsy sellers are also self-reliant. Like me, most Etsy 
sellers manage every part of their business themselves. The 
vast majority of sellers work alone from home, and most are 
self-taught. Of the 65% who required capital to start their 
businesses, 83% relied on their own personal savings, and only 
1% obtained a loan.

    The Internet and mobile technologies have opened up 
incredible new opportunities to people like me. To operate my 
Etsy shop, I use the website and the two mobile apps Etsy 
offers, including one designed specifically to help sellers 
manage their shops, called Sell on Etsy. As of December 31, 
2014, Etsy's mobile apps have been downloaded 21.8 million 
times.

    The Sell on Etsy app is indispensable in my day-to-day 
routine. When I'm working at my jewelry bench, I check orders 
and communicate with customers via the app on my phone. If I go 
to make a hammered ring, but can't remember what gauge the 
silver should be, I check the listing details via the app. If I 
get a message from Etsy alerting me that one of my items has 
been featured editorially, I can go to the app and increase the 
quantity available so that item doesn't sell out. I also do 
most of my business's social media interaction via apps: 
Instagram, Pinterest, Twitter, and Facebook. There are apps 
that let you enhance photos with text to easily create 
promotions, apps that let you tie all your social media outlets 
together so posting to one automatically populates the others. 
If I see that I'm running low on 14k gold wire, I can check the 
metals market app for the spot price of gold and decide whether 
to place an order today or wait for the price to come down. 
Mobile app technology enhances how entrepreneurial Etsy sellers 
like me reach customers and make a living. And, it is only the 
beginning. Already, more than half of Etsy's traffic comes from 
mobile devices.

    The fact that I can use my phone at all to do these things 
is a bit of a miracle. However, we still have a long way to go 
getting access to technology for those who need it. I live and 
work in Franklin County, which is the poorest county in 
Massachusetts. Most of Ashfield is completely without cell 
phone reception; in my house high on a hill, I get just one bar 
of 3G.

    There is no broadband or cable available, so I use a 
satellite to connect to the internet; it's slow and involves me 
having to go out in the middle of winter storms with a kayak 
paddle to whack the accumulated ice off the dish. Technology is 
sprinting ahead, but there are rural areas that are at a 
disadvantage. This gap in accessibility is a huge hindrance to 
entrepreneurship and business.

    Policymakers have an opportunity to support Internet-
enabled businesses like mine with hearings like the one today 
focusing on the benefits of the mobile app economy. There are 
other needs as well. In addition to fostering greater broadband 
deployment in rural areas, policy makers should adopt policies 
that specifically target the self-employed and micro-
businesses. Most Etsy sellers are businesses of one, and face 
very different challenges from even a five- or ten-person 
enterprise. They are part of growing trends towards self-
employment in the US, which offer both new opportunities and 
new challenges.

    For example, members of our community often struggle to 
learn about and comply with the regulations that govern their 
businesses and products. Regulatory agencies should establish a 
Micro-Advocate to conduct direct outreach to micro-businesses, 
create user-friendly educational tools, and make formal 
recommendations to ease compliance burdens.

    Further, policymakers should not increase the 
administrative burdens our community faces. For example, the 
newly introduced Remote Transactions Parity Act would require 
all Etsy sellers, regardless of size, to collect and remit 
sales tax in every state. Proposals like this threaten to 
undermine businesses of one, who simply don't have the time or 
resources to comply with such requirements.

    Finally, many Internet-enabled businesses sell their goods 
worldwide, yet trade laws have not kept up with the advent of 
global e-commerce, and most independent, creative businesses 
lack the infrastructure and information to navigate complicated 
international trade rules. Customs and duties vary by country, 
and packages are often delayed at the border or subject to 
unforeseen import taxes, leading buyers to reverse transactions 
or demand refunds. De minimis customs exemptions offer a great 
opportunity to reduce these barriers. We appreciate efforts by 
this Congress to increase the U.S. de minimis to $800, and are 
hopeful that Congress can continue to pressure the 
administration to prioritize this issue in ongoing trade 
negotiations.

    Overall, I believe the Internet and the mobile app economy 
are creating incredible new opportunities for entrepreneurs 
around the country. I urge Congress to enact policies that 
support our efforts to start and grow our creative businesses, 
enabling the broader maker-economy to thrive.

                                 [all]