That's a pretty huge caveat, given that the industry has no definition for what a startup even is.
That's the problem with the idea of auctioning off H1Bs, as far as I can see it - startups would suffer. It also turns the H1B visa into a visa for people of extra special talent, and the O1 visa already exists for that.
Also, the current system isn't great for startups. There are far more H1B applicants than there are visas. There are a few large companies that bring in the majority of H1Bs. These large companies can afford to apply for thousands of H1Bs knowing that only 50% or less will be approved. A startup hiring a handful of people can't afford to put in the application for a handful of people knowing that there is a very real chance that none of them will be approved. Even if they are approved, applications need to be in several months before the visa is issued. How many startups are hiring in March for a position they won't need to fill until October?
For "H-1B dependent employers and willful violator employers", there is a requirement to "not displace any similarly employed U.S. worker" and to "recruit U.S. workers for the job for which the alien worker is sought, at wages at least equal to those offered to the H-1B worker". That doesn't apply to normal H-1B applications.