Report: Start-up Investment Will Wither If Piracy Bill Passes

The bill could make ventures that invite user-created content too risky for funding.

If Congress passes a much-contested bill that would penalize websites violating its broad anti-piracy laws, angel investors and other private equity firms will stop funding as many early stage start-ups, according to a report from Booz and Co., a prominent research consultancy. Any new venture that’s classified as a digital content intermediary—basically any website where users post content—will find funding scarce. More than 70 percent of the angel investors surveyed in the Booz report indicated they would be deterred from investing in these types of websites.

The Stop Online Piracy Act was introduced to prevent European websites from distributing pirated music and videos. The bill would allow the FBI and federal government to fine and sue a website that’s done little more than link to, say, a pirated clip on YouTube. To make matters worse, third-party sites that do business with those “infringing” websites could also be liable, The Washington Post reports. ISPs would also have to block any these malignant websites, which is the digital equivalent of nailing a brick-and-motar business’ front door shut. While intended to help Hollywood studios and record labels, the bill could instead alter the way thousands of other companies do business.

Imagine the websites that might not exist today if these rules had existed 15 years ago. YouTube. Ebay. Google.

Google has been one of the loudest voices against the new bill. A Google executive testified before Congress yesterday—the only witness against the bill—and Google CEO Eric Schmidt bashed the idea while speaking at MIT, Time reports.

“The solutions are draconian,” said Schmidt. “There’s a bill that would require [Internet service providers] to remove URLs from the Web, which is also known as censorship last time I checked.”