Immigrant Founders Need Policy Reform To Keep Creating Tech Jobs

President Obama took executive action last November to further ease policies around skilled tech labor. However, our laws haven’t done much to help the foreign startup founders who create quite a few tech jobs here.

A 2008 Kaufman Foundation study concluded that between 1995 and 2005, more than half of all Silicon Valley tech companies were created by immigrant founders, employing 560,000 workers and generating $63 billion in sales.

But something changed in 2006. There was a commonly estimated 12 million illegals living in America at the time. New reforms that were supposed to make it easier for immigrants who’d been here a while to obtain worker visas seemed to be making it harder for those with startups.

The Comprehensive Immigration Reform Act of 2006 allowed those who’d been in the country for 2-5 years to stay, but would required them to return to their country of origin after 3 years. Meanwhile, those who’d been here less than 2 years would have to leave.

Vivek Wadwha suggested in his book ‘The Immigrant Exodus’ that the changes to U.S. immigration policy was causing a brain drain in Silicon Valley.

This was seemingly confirmed in a follow-up Kaufman study, showing that the number of immigrant-founded startups dropped from 52 percent to less than 44 percent in 2012.

This suggests would-be Silicon Valley entrepreneurs were having a harder time getting the visas they needed to start businesses here.


Source: Kaufman Foundation

U.S. employers can currently sponsor foreign workers with a temporary H-1B visa. However, those visas are capped at 65,000 a year. This limits the amount of workers able to stay and add to the economy here. Further, immigrants trying to start their own company have no such employer sponsorship.

Canada saw an opportunity to poach Silicon Valley talent in 2013 with a billboard campaign strategically placed on the Peninsula of California’s highway 101. Signs read, “H-1B Problems? Pivot to Canada.”

The President’s executive action addresses problems facing high-skilled immigrant workers seeking a green card. This could help tech companies hoping to bring in (or keep) foreign talent.

Obama also mentioned making it “easier for…entrepreneurs to stay and contribute to our economy, as so many business leaders have proposed.” But he didn’t provide any specific policy guidance to address that.

“We absolutely need legislative fixes because the president cannot increase the [visa] cap, and that is what really hurts start-ups and large companies,” Emily Lam, vice president of the Silicon Valley Leadership Group, told the L.A. Times at the time of the president’s immigration announcement.

Meanwhile House Republicans have vowed to overturn Obama’s executive action on immigration. More centrist GOP leaders are reluctant to push the issue, fearing they’d lose Hispanic groups. However, it looks like Senator Ted Cruz, who was born in Canada, is up for a fight against what he calls “lawless and illegal amnesty.”

Some in the valley have tossed around the idea of a startup visa. Foundry Group VC Brad Feld and the Kaufman Foundation’s Paul Kedrosky wrote a Wall Street Journal op-ed back in 2009 suggesting a separate visa for entrepreneurs.

While there’s general bipartisan agreement over legislation to support new businesses, the idea for a separate visa of this nature has so far gone nowhere in our nation’s capital. Virginia Senator Mark Warner proposed the “Startup Act” this week, re-introducing the idea for an entrepreneur visa for the 4th time before Congress.

The President will address the nation this Tuesday, Jan 20 in the constitutionally ordained 2015 State of the Union. He has already announced a few tech initiatives involving consumer privacy and cyber security measures ahead of his speech. Pundits expect Obama to also focus on immigration.

Some of the most well-known Silicon Valley founders and job creators weren’t born here. Tech billionaires Elon Musk, Peter Thiel, Eduardo Saverin and Sergey Brin were all born outside the United States.

A report from the Partnership for a New American Economy points out that 9 of the 25 top tech companies were founded by immigrants. That’s a lot of American jobs.