Surveillance fallout hits startups hard, business executives say


FILE - A sign outside the National Security Administration (NSA) campus in Fort Meade, Md. (Patrick Semansky/AP)
January 15, 2014

Losing a major client is never easy, but it’s even harder when it happens due to something that’s out of your control.

It’s not that we don’t trust you, your client says one day over the phone. We just don’t trust your government.

That may sound familiar to anyone who followed Huawei’s troubles in the U.S. But this isn’t the case of a Chinese company losing American business. Clients in Europe, Asia and elsewhere are saying “no thank you” to American-made products for fear that they have flaws that government and other hackers can infiltrate, said Brough Turner, founder and chief technology office of netBlazr, a broadband company based in Watertown, Mass.

“It’s hard enough out there,” said Turner. He said that revelations that the National Security Agency can hack into the hardware of Cisco — and the resulting tumble the company saw in overseas demand — have been magnified for smaller companies. And these startups often don’t have the cushion of cash that major companies do to weather this storm, he said.

Hoping that lawmakers could be swayed by their financial concerns, Turner and executives from ThoughtWorks and Reddit hit the Hill this week to lobby lawmakers to support the USA FREEDOM Act, which would take steps to curb government surveillance programs and give companies more say about what kind of surveillance their products are used for.

The bill isn’t perfect but does move in the right direction, said Daniel Goodwin, chief financial officer of Thoughtworks, the software firm where Internet activist Aaron Swartz worked at the time of his death last year. The bill moves to end bulk collection of data under section 215 of the Patriot Act and to install a special citizen’s advocate in the Foreign Intelligence Surveillance Court. The bill would allow companies to report an estimate of how many FISA letters they receive, how many orders they comply with and how many accounts or users are affected by those requests.

Executives at major tech companies such as Google, Facebook, Microsoft, Yahoo and Apple have already said they want those changes. Companies that offer cloud services have also been vocal about the hit they’ve taken — 10 percent of foreign companies cancelled projects with U.S. providers as of July, according to the Cloud Security Alliance. But with so much focus on startups as an engine for the U.S. economy, these executives wanted to let lawmakers know how difficult the landscape has become.

“There’s a general erosion of slide of public trust; it affects all U.S. companies,” said Erik Martin, general manager at Reddit.

“Any Internet business is a global business,” said Matthew Simons, director of social and economic justice at ThoughtWorks. “Saying that surveillance isn’t in the U.S. doesn’t really help us. In fact, it makes some of our overseas clients feel insulted,” he said.

And while Turner, Goodwin, Martin and Simons all feel strongly that the current programs violate civil liberties, they said that their more business-focused approach has gotten them a more receptive response on the Hill. On Monday and Tuesday, the men met with staffers from eight offices on both sides of the aisle and in both houses of Congress.

In most cases, they said, lawmakers were open to their concerns, but also said that they wanted to hear what President Obama has to say on Friday, when he is slated to give a speech on NSA reform.

The surveillance, Simons noted, has shattered what little dialogue there had been between the intelligence and hacker communities. And that’s a problem the tech industry will have to deal with for a long time, Goodwin added.

“When companies can’t recruit top tech people, that makes us less secure,” he said.

Hayley Tsukayama covers consumer technology for The Washington Post.
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