Dateline: Tbilisi: Georgia
Go where you’re treated best.
We talk quite a lot around here about those five magic words. Whether it’s placing your gold in the best countries for offshore gold storage, banking in the world’s best banks, setting up your business in a country with favorable tax policies, or simply going where you can best enjoy life, “go where you’re treated best” is undoubtedly the Nomad Capitalist mantra.
However, while I did indeed coin the term, people have been following that creed for thousands of years. Whether they were the original nomads constantly in search of the best pastures, gold diggers, or religious pilgrims looking for a place to freely live their beliefs, the world has always been full of people on the move. People going where they knew conditions were best for living an abundant life.
And, for several centuries, the United States was one of the prime locations for many people willing to pull up their roots in search of something better. Naturally — despite the controversy and challenges that immigration seems to always cause there — the United States did (and does) benefit from all those enterprising individuals.
Simply put, those brave enough to leave the comfort of home are usually the ones with enough vision and drive to achieve and build great things.
Even today, over half of U.S.-based startups valued at $1 billion or more were started by immigrants. In fact, collectively these 44 companies are valued at $168 billion, and each one creates an average of 760 jobs per company in the US.
These startup immigrants hail from places as far away as India, Egypt, Argentina, South Africa and Uzbekistan, and as close as Uber’s co-founder, Garret Camp, from Canada.
While there are many immigrants from Western European countries such as the UK, Germany, France, Ireland, Holland and Norway, immigrants from the eastern countries of Armenia, Azerbaijan and Russia have contributed several billion-dollar companies as well.
And to round out the list, Israel, China, Iraq, Singapore and South Korea all have at least one billion-dollar start-up founder in the US.
While it appears that the world is well represented among the movers and the shakers in the US startup scene, it is far from what it could be. The United States immigration system is anything but an open-arms policy for the world’s best and brightest. And, unsurprisingly, it seems that the best and brightest are beginning to look elsewhere.
The tables are beginning to turn
Several years back, I noticed something interesting during a stay in Southeast Asia: While young people were still looking to get out and find the best opportunities, very few of them mentioned anything about the United States.
Silicon Valley hadn’t just lost its appeal as the innovation capital of the world, but it was being replaced by new entrepreneurial ecosystems. These innovators were looking to places like Qatar, Dubai, Australia, Singapore, Israel and India — not the United States.
Opportunities are everywhere now, and foreigners don’t need the US like they did in the past.
As one technology designer in India told Vivek Wadhwa, “Why should I move to Silicon Valley when I have a market 10 times as large here?”
And I would add, why insist on moving to the US when taxes are high and residency is nearly impossible? Wadhwa estimates that over 1.5 million skilled workers are currently in “immigration limbo” in the United States. Even worse, only 120,000 green cards are made available each year for such applicants. He explains the consequences:
Hundreds of thousands of highly skilled workers as well as the graduates of top American universities have returned home because of America’s flawed immigration policies. They are in leadership roles at top research labs and at the unicorns in China and India. America has lost an entire generation of entrepreneurs and innovators and bolstered its global competition.
Indeed, many industry leaders and tech titans claim that the restricted immigration policies in the US keep the country from competing with the rest of the world and limit innovation. Even if the number of available H1-B visas were to go up, it would do nothing to draw in entrepreneurs who want to start their own businesses on US soil.
The New International Entrepreneur Rule
That is one reason why the White House has created the International Entrepreneur Rule.
As we all know, immigration is a hot button issue in the US. So, while President Obama’s common-sense immigration reform plan always included a “startup visa” for international entrepreneurs, the bipartisan immigration bill that passed the Senate in 2013 got shot down in the House shortly thereafter.
Without real legislation, the Obama Administration is making a last-ditch effort to create some form of his original plan within the extent of his executive legal power. I can’t say I agree with all of Obama’s actions (beginning with FATCA and Obamacare), but at least he understands the importance of doing what it takes to attract innovative entrepreneurs to the country.
Through the Department of Homeland Security (DHS), the President has parole authority, meaning he has the ability to grant temporary entrance into the United States to certain individuals. On August 26, 2016, DHS proposed a new entrepreneur rule that would allow foreigners to enter or remain in the US to work at qualifying startups.
An entrepreneur parole of sorts.
Note, this is not a real startup visa program. No one who uses it will be granted an actual visa, visa stamp or green card. As Wadhwa puts it, “this is not a slam dunk for entrepreneurs wanting to come to the United States — and it provides no clear path to permanent residency.”
Still, it’s better than nothing.
The new rule must pass a 45-day notice and comment period in the Federal Register before it becomes effective. If it does pass, it could potentially bring hundreds of startups and thousands of jobs to the United States.
How to qualify for the new US “Startup Visa”
If, despite its limitations, the US is still the best place for your particular startup, here’s what you need to know about the program and how to qualify:
- Parole will be granted on a case-by-case basis for entrepreneurs of existing startups
- You must have significant ownership interest (at least 15%) and an active, central role in the operations of your startup
- Your startup had to have formed in the US within the past three years
- A maximum of three foreigners can be employed by the startup
- Your startup would provide a significant public benefit and has substantial and demonstrated potential for rapid growth and job creation, as evidenced by:
- At least $345,000 of investment capital from qualified US investors (with successful investment track records) OR
- At least $100,000 in awards or grants from federal, state or local government entities
- You may be asked for other reliable and compelling evidence of your startup’s potential as indicated by the DHS.
- Successful applicants will be granted an initial stay of two years to run their company in the US
- A request for re-parole for an additional three years will be considered at the end of the first two years if the entrepreneur’s startup has proven to provide significant public benefit and promises to continue to do so. This will be evidenced by increases in capital investment, revenue or job creation.
- The USCIS will allow spouses and children (21 or under) to apply for parole as well under the program. They also propose extending employment eligibility to the spouses (through the EAD application), but not to the children.
This doesn’t mean the system is completely fixed
The new international entrepreneur rule will mostly help foreign students who began working on a venture, new technology or product while in the US, but cannot continue their work due to the limitations of student visas and the visas available after graduation.
Unfortunately, it will not solve all the issues with the US immigration system. For instance, many graduates depend on H1-B visas. However, due to the low number of available H1-B visas, thousands of talented, educated workers are kicked out of the country each year. Just look at these Penn State students who were sent packing the moment they graduated.
As the US economy picks up, the demand for H1-B visas has increased once again. In 2015, the visa lottery for skilled foreign workers hit capacity within a week. The USCIS received 233,000 petitions when only 85,000 are allotted each year. The US economy is losing out on all the benefits the foreign-born tech and entrepreneurial talent could bring — whether they contribute to existing businesses or create their own.
Sure, the President’s new entrepreneurial rule will allow people to stay, but most immigrant entrepreneurs are only successful getting their business off the ground after getting residence. Who’s going to invest in a company when the founder will eventually have to leave the US?
One successful immigrant entrepreneur had to wait seven years for his visa before he could officially launch his tech startup now valued at $1.9 billion. In my books, that’s an immigration system that is seven years too slow. No doubt, the US needs better immigration reform before becoming a truly attractive place for foreign-born entrepreneurs.
Moving beyond the United States
Until then, the United States will continue to lose entire generations of entrepreneurs and innovators to the rest of the world. While this is a huge loss for the US, it’s not a loss at all for the entrepreneurs who will take their talent and innovation with them to places where they’ll discover even more opportunity than the US could ever offer.
There will always be a number of people around the world who want to come to any developed country to work. Many of those workers would be willing to go to Canada, Europe, Hong Kong, Australia, or any number of other places. And many of them are realizing that emerging and frontier markets may offer the greatest opportunities of all.
The world is a more competitive place these days. I’ve said it for years. The Singapores and Hong Kongs of the world are increasing as countries realize the incredible benefits of efficiency, pro-business policies and attractive immigration systems that allow the best and brightest into their borders.
In the grand scheme of things, the US is becoming just another dot on the map for many foreigners. Talent, like capital, goes where it is treated best.