Startup Visa Act Introduced In The Senate

from the great-news dept

Less than a year ago, Paul Graham wrote one of his fantastic essays suggesting that the world needs a startup founder’s visa. The problem, of course, is that our immigration policies have made it quite difficult for immigrants to come to the US to start companies, even though many of the most innovative companies these days are founded by immigrants. Tragically, our immigration policy is often created under the belief that immigration and jobs are a zero sum game — whereby more immigrants means fewer jobs. But if those immigrants are creating new companies that create new jobs, the opposite is true. Thus the impetus for a startup founder’s visa that would allow immigrants to come to the US to build new companies here, creating jobs here, rather than creating those companies elsewhere.

In the fall, venture capitalist Brad Feld felt compelled to try to get actual political support for the idea (now called the “startup visa” rather than the “founder’s visa”) and in just a few months has succeeded in at least getting Senators Kerry and Lugar (bipartisan support, which is good) to introduce the Startup Visa Act in the Senate. You can read the text of the bill (pdf).

While I’m still a huge supporter of the concept of the startup visa, I’m still a bit concerned that the focus is only on supporting entrepreneurs who have taken a certain amount of venture capital money. There could be unintended consequences with that, in forcing immigrant entrepreneurs to take venture capital that they don’t need just to secure their visas. The risk, then, is that immigrant entrepreneurs become way too dependent on their VCs. One of the great things about the startup world today is that capital requirements have changed for many types of startups, and the ability to bootstrap a startup has increased greatly — but bootstrappers aren’t welcome under the startup visa. I’ve been told that this was a political necessity, and including some sort of venture capital “sponsor” was the only way this bill would move forward — so hopefully this passes, but further changes are made later to account for the fact that not all startups need venture money, and without forcing an entrepreneur into taking money from someone just to get his or her visa.

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Comments on “Startup Visa Act Introduced In The Senate”

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Brendan (profile) says:

What about the opposite problem?

Mike, you’re concerned that founders will take VC money they don’t need in order to be allowed to build here (USA). What about the opposite problem?

Does this bill address concerns of VCs essentially “buying” visas for faux founders, just to get them into the country? (Or out of their own). Does it include language to verify the startup as a legitimate business? And if so, who makes those decisions on what grounds?

I understand this is likely very early in a long process, but I think they are still important questions.

Michial Thompson (user link) says:

You've got to be kidding me?

Does it remove the tax breaks that immagrants get in the first years they are here? Does it stop an imagrant from starting a business then a few months before the tax breaks end selling it to their imagrant cousin to keep the breaks going? Does it have language in it requiring that the imagrant actually NOT discriminate in hiring AMERICANS for the jobs? Does it prevent the immagrants from turning around and importing other immagrants in under work visas? OH, does it also guarentee the lenders of the VC that the immagrants not going to get the money, bow through all but the cost of a plane ticket home and then skip on the debts? Does the laws put restrictions against US Tax Payor money being used in any way to support this crap?

Americans talk about all these laws against discrimination yet the Americans are the most discriminated against in their own country.

I think only a FOOL would support such a visa ESPECIALLY with the terms that they have to take Venture Capital to build such a business. If anything the immagrant should at least be able to provide 100% of the startup costs out of pocket rather than any amount of borrowing…

ashamed says:

Re: You've got to be kidding me?

Besides the fact that Mr. Thompson apparently cannot spell, it would also be helpful if he had actually read the bill before spouting off a series of what, I assume, are meant to be rhetorical questions, since if they were meant to be real questions, the answers to them could have been found in the text of the proposed bill.

I would like to point out in response to both posts above that there already is a category of visa, called an investor visa, where the applicant is required to start a business using his own cash in order to qualify for the visa. The difference with this bill is that the applicant can use borrowed cash to start the business while still qualifying.

Hari Srinivasan says:

Re: You've got to be kidding me?

What tax breaks are you talking abt? Legal skilled immigrants pay every federal and state tax including medicare and social security which they may never get to use. They are actually subsidizing your social security and medicare. Where are you from? Have you seen the silicon valley? Go to the graduate school in any top univ and see who is studying there..It will open your eyes and you might send your kid to do engineering.

Hari Srinivasan says:

Re: You've got to be kidding me?

What tax breaks are you talking abt? Legal skilled immigrants pay every federal and state tax including medicare and social security which they may never get to use. They are actually subsidizing your social security and medicare. Where are you from? Have you seen the silicon valley? Go to the graduate school in any top univ and see who is studying there..It will open your eyes and you might send your kid to do engineering.

Anonymous Coward says:

As someone who recently lost my job (i.e. replaced by a lower salaried visa holder [east Indian), I have to take exception with Mike on this issue as a whole. For the curious, my job “position” was eliminated and I, along with many others, where laid off. Funny thing though, most of those positions reappeared 2 months later under different titles, occupied by lower paid visa holders. Funny how that works.

There’s a big problem with the whole argument that these immigrant entrepreneurs create jobs for Americans. The vast majority of these start ups are small businesses and they invariably only employ friends and family members (bringing them over as well).

Now, you can say that they create jobs, in a vary modest trickle down effect but as far as directly employing extant Americans, on the whole that’s really not true at all.

Anonymous Coward says:

wtf, why don’t we give them foreclosed houses to try to get them here, we are way too stupid to start an innovative business ourselves. This is such a good idea for jobs in america, wow. And since they have created such great innovative companies in there own country, this is a no brainer. Just think we will be just like india, china or wow dare i say mexico. the sky is the limit. greedy vc’s, greedy and dishonest bankers, greedy corrupt congress, hey great plan for destroying the US. Good Work.I shock that an american could even come up with something so smart and innovative, did you have an immigrant help you. Yea h1-b hip hip hooray.

Nick Coghlan (profile) says:

Bootstrapped startups

Bootstrapped startups usually take a long time to start creating significant numbers of jobs – only startups boosted by VC funding can afford to hire a lot of people early on.

So from a job creation point of view, the VC funding condition makes sense, while also making this a lot easier to sell politically.

Immigration in general is a tricky area politically, as it a case of concentrated harm (for example, the poster above me) balanced by generalised benefits (for example, the customers, clients, shareholders and creditors of the company involved, as well as their customers, clients, etc, recursing indefinitely). Members of the first group are very vocal because the harm to them is obvious and severe, while the individual benefit to members of the huge latter group is usually small, despite the aggregate benefit being large).

Tiara (user link) says:

You all don't know how it is like to be an immigrant, apparently.

Because I’d like to know where these abundance of jobs and tax breaks for immigrants are, being one myself. (In Australia, but similar system. Pay everything, get hardly anything.)

I’m concerned that the requirement for VC funding beforehand will disadvantage people who aren’t wealthy enough to have strong VC networks in the US already. A lot of entrepreneurship is built on immigrants from developing countries who know how to best use their very limited resources. Where are they going to find VCs that aren’t going to automatically discriminate against them due to their ethnic origin or accent? The comments here aren’t really helping either.

Nick Coghlan (profile) says:

Re: You all don't know how it is like to be an immigrant, apparently.

I should note that my comments were only looking at the issue from a political expediency point of view.

From a humanitarian point of view the whole immigration process across most of the world is so fundamentally broken (as your blog describes in the specific case of Australia) that a requirement to have VC funding already established seems like a fairly minor symptom of an endemic disease.

richard herman (user link) says:

New Immigration Discussion: JOBS, JOBS, JOBS

The StartUp Visa bill is great. It is an exciting way to raise the discussion on how to leverage immigration as as job-creating stimulus. And its cost-efficient!

It is interesting to see Congressional leaders not afraid to acknowledge that innovation, job-creation, and American technology leadership depends on an ability to attract and retain the world’s best, brightest, and most entrepreneurial.

But really fascinating is how the Startup Movement began with some venture capitalists like Brad Feld, Dave McClure, Mike Speiser and others, who became frustrated with an antiquated immigration system that bears little connection to the demands of the New Economy.

They saw numerous examples of international students, or H1B professional workers, or inventors overseas who had great technology or ideas for a new business, but couldn’t secure immigration status to make it happen in America. As opportunities continue to expand in China and India, more and more internationals were giving up on the U.S. and going back home to test out their business idea.

It has been well-documented by Vivek Wadhwa and others that the America is experiencing the first brain drain in U.S. history.

So Feld and company came up with the Startup Visa concept, and began building grassroots support around the country, using the web ( ), twitter, and other social networking platforms. The group is also not afraid to take a few trips to D.C. to make their point face-to-face.

This is an inflection point in the immigration reform debate. The entrepreneurs and the people behind the entrepreneurs are beginning to make their voices heard. They need to tell their story to America and explain how the word “immigrant” can mean “job-creator.”

When the venture capitalists speak, everyone listens. Or at least they should listen. They are the talent scouts, the explorers, on perpetual mission to find the next big idea, the next Google, Intel, or Sun Microsystem. They provide more than just money: they provide the coaching, the networking and the helpful early management to get an idea to market and grow.

Take a listen to what some of the biggest VCs are saying about immigrant talent & entrepreneurship:

Michael Moritz/Sequoia
Is not fluke that Seqoia has backed many other immigrant-founded companies, including Google, Yahoo, Paypal, YouTube, LinkinIn, Nvidia, a123systems, and others.
In fact, the website for Sequoia proudly proclaims their attraction to immigrant newcomers:

“UNDERDOGS. The collision of intelligence and ambition with opportunity is unbeatable. Almost everyone we have ever invested in has been a complete unknown at the time we met. Many have been immigrants or first generation Americans with barely a penny to their name. Underdogs are our favorite kind of people.”

Sequoia’s Michael Moritz, a former board member of Google with a net worth reported at over $1 billion and listed as one of Time’s most influential 100 people in the world, has written:

“An entrepreneur without passion is an empty vessel. Anyone who starts a business — and wants it to last — needs this quality. It is a journey against all odds. Every business starts with one or two people, an idea and nothing else — no employees, no money, no product, no customers and no shareholders….Force venture capitalists to choose between a well-heeled Ivy League student and a smart and impoverished immigrant, and we’ll pick the latter every time. The lily-livered need not apply for a life at a start-up. Tenacity is a necessity.”

In 2007, before the Cardiff Business Club in his native Wales, Moritz had this to about immigration restrictions of high-skilled talent:

“It’s no coincidence. You go around most of these companies and….all of the founders and very early employees are either an immigrant or a first-generation American. That has been the fuel that has propelled these companies”

John Doerr, Partner, Kleiner Perkins
Billionaire, investor in immigrant founded companies: Google, Sun Microsystem
The day after Barack Obama was elected president of the United States, VC John Doer was asked this question at the Web 2.0 Summit in San Francisco:

“What should the new Chief Technology Officer of the U.S. Government do?”
Doer responded with his immigration reform mantra:
“staple a green card to the diploma” of any international student graduating from a U.S. university with a degree in engineering.

Vinod Khosla, Khosla Ventures, former General Partner Kleiner & Perkins, co-founder Sun Microsystems, billionaire, a founder of TiE

“How many jobs have entrepreneurs, Indian entrepreneurs, in Silicon Valley created over the last 15, 20 years? Hundreds of thousands I would guess.” Vinod Kholsa in CBS news.

Guy Kawasaki, is a managing director of Garage Technology Ventures, an early-stage venture capital firm and an author. From his blog: How to Change the World: A practical blog for impractical people

“How to Kick Silicon Valley’s Butt:
Encourage immigration: I am a third-generation Japanese American. My family moved here to drive a taxi and clean white people’s homes. If I had a choice between funding someone from a family who moved here from Vietnam whose father and mother run a 7-Eleven verses a descendant of a Mayflower passenger with “IV” in his name, I’ll give you half a guess as to my preference. You need to encourage smart, hungry, and aggressive people to immigrate from around the world. Add to do that, you need good schools. To mix several metaphors, if you want to cover your ass, you need to open your kimono because trust fund kids don’t make good entrepreneurs.”

In 2006, the National Venture Capital Association, which represents the people and firms that invest in young, risky, fast-growing companies, put hard data to these observations. It sponsored a deep look at the kinds of people its members were bankrolling and published its findings in a report titled, “American Made: the Impact of Immigrant Entrepreneurs and Professionals on U.S. Competitiveness.”

And what an impact. Looking at businesses launched between 1990 and 2005 with money from venture capitalists, the researcher concluded that immigrants were behind one-fourth of all public venture-backed companies created in America. Add a high technology label, and the immigrant share soars to 40%. The study showed that the market capitalization of U.S. public companes that were founded by immigrants and backed by venture capital was $500 billion.

Some of those immigrants founded companies that became icons of the New Economy:

Sergey Brin, a founder of Google, immigrated from Russia;
Vinod Khosla, a co-founder of Sun Microsystems, was born in India. His partner, Andy von Bechtelsheim, came from Germany.
Pierre Omidyar, the founder of eBay, was born in France to Iranian immigrants.;
Andy Grove, a founder of Intel, immigrated from Hungary.
Jerry Yang, c0-founder of Yahoo, came to America from Taiwan.
Elon Musk came to America from South Africa and later co-founded PayPal.

Those are just the rock stars of the New Economy. In companies small and large, some famous and some you’ve never heard of, immigrants are often the ones pushing the envelope, introducing ideas, defining the state of the art and creating new industries and jobs.

Perhaps venture capitalists who are also immigrants possess keener insight into the immigrant advantage.

Six out of the top Vcs on the 2009 Forbes Midas List of top 100 Vc’s are immigrants, including Moritz at #2, and fellow early Google funders David Cheritan, Andreas von Bechtolsheim and Ram Shriram. Big companies start out as small companies. If Congress and the President follow the advice of the VCs, maybe some of the Startup Visa holders will turn out like some of America’s earliest immigrants who founded icons such as DuPont, Pfizer, Dow Chemical, Procter & Gamble, Levi Jeans, and U.S. Steel.

The VCs are willing to bet on it.

Sure Americans may not like to hear that immigrants are nearly twice as likely to start a business and be granted a patent, more likely to hold an advanced degree, and that 50% of the tech companies in Silicon Valley were founded by immigrants.

But isn’t it time that we got over the insecurity of our own deficits, and learn to partner with foreign-born entrepreneurs and innovators to usher in a stronger America?

Richard Herman
Cleveland, Ohio

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