Anyone familiar with internet startup culture knows how little capital it takes to start a tech company these days. With hardware and software costs practically nonexistent for most new companies, the main determinant of whether a promising startup will get underway and off the ground lies with the founders’ circumstances, namely whether they can pay off their personal bills from month-to-month and find a place to work.
This climate should produce an a important, long-term counterweight to the problems of our economy as a whole. While established corporations have been reeling, laying off workers and draining money from the federal budget, tech companies in high growth sectors have continued to sprout up with the promise of new jobs and services. And with costs so low, entrepreneurship – and its concomitant boon to the economy – these days relies overwhelmingly on one factor: the entrepreneur.
Numerous startup incubators over the last few years have emerged in the US and elsewhere to reflect this new state of affairs. Y Combinator led the charge in 2005 and has since been joined with organizations such as TechStars, LaunchBox Digital and fbFund, to name just a few. These firms serve as enablers, giving entrepreneurs just the nudge they need to get started, whether that nudge comes as a bit of money to survive until a larger round of funding or some mentorship that emboldens them into action.
Unfortunately, the pool of entrepreneurs that can benefit from these programs is smaller than it could be due to outdated immigration law. Ideally, an aspiring entrepreneur from Bangalore who has some chops and a wish to start the next Google in San Francisco should be able to immigrate and set up shop here. With a little venture backing, there’s virtually no downside since they won’t be taking out loans or stealing anyone else’s job. If their venture doesn’t work out (a likely scenario), they can pack their bags and head back home.
The potential upside, on the other hand, is obvious and enormous. So why doesn’t this scenario play out more often?
One big reason is that the immigration law that’s most relevant to would-be entrepreneurs isn’t designed with their likely circumstances in mind. A lot of talk about the H-1B visa was made around the election last year, but that visa only covers immigrants who want to become employed by preexisting American firms. The lesser known EB-5 visa intends to help foreigners create businesses in the US, but it involves a couple stipulations that make it unworkable for many modern entrepreneurs.
First off, the EB-5 requires that an immigrant invests $1 million (or $500,000 under certain circumstances) of their own money in a new business. This rule ignores the fact that tech startups are often backed by venture capitalists, and it overemphasizes the role of money instead of assessing a foreigner’s talent and ambition as primary factors. The EB-5 is also only given to immigrants who can promise to create 10 full-time jobs within 2 years, which doesn’t mesh well with the reality that successful startups (while creating plenty of new jobs in the medium and long-runs) often maintain deliberately low head counts in the short-run.
It’s for these reasons that a group of techies and politicians alike have begun to rally around the concept of a Startup Visa, which essentially constitutes a set of improvements to the EB-5 that would make it more useful to today’s entrepreneurs. The Startup Visa concept, which was initially proposed and explored by Y Combinator’s Paul Graham and Foundry Group’s Brad Feld, aims to get rid of the requirements for $1 million in investment and the creation of 10 jobs. In their place, it would establish the requirement that entrepreneurs be financially backed by at least one accredited investor in the US. This rule would serve primarily to validate the foreigner as a promising entrepreneur by leveraging the venture capital community’s judgment as a proxy. It would also ensure the admittance of only entrepreneurs with enough capital to get started.
The StartupVisa movement was first introduced to me by a few of its main proponents – Dave McClure, Eric Ries and Shervin Pishevar – this past September when I was traveling with them through DC on a GeeksOnAPlane trip. One of our trip’s members, Eric Diep, had a particularly poignant story about the difficulties he’s encountered as an entrepreneur from Canada who tries to conduct business in the US. You can watch a video of his story from the trip above.
If you have any personal stories about how difficult it can be as a foreign entrepreneur wishing to immigrate to the US, please share them in the comments. And whether or not you are in such a situation, please provide us with your impression of the Startup Visa concept by answering our poll below. If you wish to support the cause, you can tweet your local representative using @2gov, a service run by David Binetti that enables grassroots communication with House and Senate politicians. US Representative Jared Polis of Colorado has already begun proposing these sorts of changes to the EB-5, but many more politicians will need to get aboard the idea before the new law becomes a reality.