VCs and entrepreneurs push for 'start-up visa'
Differing from the H-1B visa program, so-called "start-up visas" would help immigrants launch US companies and create jobs in the United States, proponents say.
By Tam Harbert, Contributing Editor -- EDN, February 23, 2010
When Bettina Hein and her husband, Andreas Goeldi, graduated in 2007 with master’s degrees from the MIT Sloan Fellows Program in Innovation and Global Leadership, they wanted to launch a couple of companies in the United States. She had an idea for an online video editing service; he for a social-media analytics company.
Neither was a novice entrepreneur. Each had launched at least one start-up in Europe, including SVOX AG, a speech technology company in Switzerland. But Hein and Goeldi were foreigners, citizens of Germany and Switzerland, respectively. They had the ideas. They had the technology. And they had the financing. What they didn’t have, and weren’t sure they could get, were visas.
Their situation is not uncommon. Hein’s MIT class consisted of 100 people – all with at least 10 years of professional experience -- from 30 different countries. Many of them wanted to stay in the States, but returned home because of the difficulty of getting a visa, said Hein. “I don't understand why the United States does this,” she said. “You are educating these [entrepreneurs], then you kick them out and say, ‘go take the jobs elsewhere.’”
Such frustration has led a group of American investors and entrepreneurs to lobby for the creation of a new type of visa, dubbed the start-up visa. Brad Feld, founder of the venture capital firm Foundry Group in Boulder, Co, helped launch the effort last fall after a couple of entrepreneurs in his firm’s incubator program could not get visas. Although there are already several visa types for immigrant entrepreneurs, “in all cases, there is a significant passage of time and a significant expense, both of which is anathema for an entrepreneur trying to start a company,” said Feld. “There are all these convoluted ways of doing things. It’s just total nonsense.”
One of those ways is the EB-5 visa, which is for immigrants who invest $1 million (or $500,000 in disadvantaged areas) in a business that creates jobs for at least 10 US workers. But many entrepreneurs don’t have that kind of money. Rather, they are looking for others to invest in them. Feld said the EB-5 is “180 degrees from what is needed. An EB-5 gives a visa to a foreigner who invests $1 million in a US company. What we want is a visa for a foreigner entrepreneur who raises money from US investors and wants to start a company in the United States.”
Feld’s congressman, Democrat Jared Polis, included such a visa in a proposal that was folded into the House’s broader immigration reform bill introduced in December. Under Polis’ proposal, an immigrant would be eligible for a start-up visa if:
• the business plan had attracted at least $250,000 in investment from a US VC firm or $100,000 from a US angel investor
• the company would create at least 10 jobs (or five jobs in disadvantaged areas) and
• the company would generate a profit and at least $1 million in revenue within a specific period of time.
Such a visa could allow immigrants to found US companies based on innovative ideas and patents they’ve developed while studying and working in this country, said Vivek Wadhwa, a former entrepreneur who is a visiting scholar at UC-Berkeley, senior research associate at Harvard Law School, and director of research at the Center for Entrepreneurship and Research Commercialization at Duke University. Historically, immigrants have been a rich source of Silicon Valley start-ups. According to Wadhwa, 25% of the companies founded in Valley between 1995 and 2005 were founded by immigrants. But in the last few years more and more such immigrants are returning to their home countries.
“I’m not saying bring in more H-1B workers or temp workers,” said Wadhwa. “But we have a half-million [foreign] people working for American companies. They aren’t taking anyone’s job away. Why not give them a visa to start a company?”
Hein agreed, although she said the start-up visa could still leave a lot of entrepreneurs out in the cold. Many first-time entrepreneurs cannot attract VC funding, instead relying on relatively small investments from friends, family and perhaps an angel investor or two. But according to a summary of Polis’ proposal on the start-up visa Web site, the entrepreneur’s investor has to be a “super angel,” defined as one who has “made at least two equity investments in each of the previous three years (a total of six) with each investment being at least $50,000 (a total of $300,000).”
Most foreign entrepreneurs are unlikely to have such an investor, said Hein. “They’d be out of the country by the time they get to the stage that a super angel would invest in them.”
Meanwhile, she and Goeldi found a way around their visa problems, at least temporarily. They established their companies with investor financing, then had the corporate entities hire them and sponsor them for H-1B visas. Assuming they can renew those visas after three years for another three years, that gives them six years. After that, she and her husband will have to find a new visa strategy.
Three ways in
Today, there are three types of visas for immigrant entrepreneurs, according to Michael Serotte, senior partner in Serotte Scarborough & Associates, which specializes in immigration law.
• The E2 visa is structured specifically for start-ups. However, these visas depend on treaties between the United States and individual countries, and if the immigrant’s home country does not have a treaty, he’s out of luck. India, for example, does not have a treaty, while Pakistan does. In addition, the E2 requires that the entrepreneur retain at least 50% control of the company, something that is not typical in investor-financed start-ups.
• The EB-5 is available to immigrants investing at least $1 million ($500,000 in disadvantaged areas) in a new commercial enterprise that will benefit the US economy and create at least 10 full-time jobs. It’s targeted to bringing foreign capital and investors, rather than entrepreneurs, into the country, noted Serotte.
• The L-1, or intracompany transfer visa, is available to a foreign business owner running a foreign company. He can either set up an US office or buy control of an existing business, and then transfer himself to that branch of the company. The visa is not, however, designed for immigrants wanting to launch a new company in the United States.
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Laughable....and RACIST.
I have a few really good ideas and am a US citizen. I have pitched them to Angels and VCs. Can I, a white American, borrow your money, Mr Indian Immigrant VC? Or yours, Mr Israeli-sympathetic VC?
NO. The money you control has to go to a desi or to a Jew from back home, and ideally feed the military/aerospace industry back home..
My business plan is more founded in reality and sound than those of your naive, newly graduated, foreign students, those of your nephews and of your friends' children, your associates from "back home". And you bet I'd hire unemployed American workers first, which really rubs all of you traitors the wrong way. You can also bet it won't be used against the US in future years as an economic or military threat to its very existence.
To which country are you most loyal Mr "Feld"...the one in the Middle East or the USA? Do you even care about unemployed Goyim? Probably not. Because you are a RACIST.
The system is fine as is. Bring in a million bucks of your own money, don't whitewash that it's 10 *US* jobs (not "10 jobs") that have to be created...if you can't do that, go home...there are no jobs for you here, no matter what your idea is. Come back after you've made the $1M at home with your brilliance.
And get some patriotism in your ass, those of you who have parked it in the US and who have reaped its rewards.
U.R. Kidding - 2010-23-2 18:16:00 PST -
How about helping Americans who want to start a business in the US?
Tired of H1bs - 2010-23-2 11:39:00 PST -
I am glad to see that the VC world feels a need to support immigration. With the need for investment dollars here in the US and for US based companies and business personnel this seems to me to be another of the problems with our current funding paradigm.
This article demonstrates for those who have had problems obtaining investment support that the VC world remains in never never land.
Sorry, this may be the reason companies like mine end up moving our business out side of the US. Now that should make the VCs drool and prepare to drop an investment on our front door.
Chet Przygoda, Jr. - 2010-23-2 10:54:00 PST -
By all means we need to expand openings for non-citizens - There an many well-qualified high-tech U.S. Citizens unable to secure employment.
Groove - 2010-23-2 10:13:00 PST -
"Under Polis's proposal, an immigrant would be eligible for a start-up visa if: the business plan had attracted at least $250,000 in investment from a US VC firm or $100,000 from a US angel investor"
You can't start a drive-through burger kiosk in the USA for $100K. And you keep implying that they're bringing investment into the USA. They should have to bring in at least $200K of their own money, and show they can raise another $100K from over-seas, and let the US VC go to help a US citizen start a business. Vivek Wadhwa would like us to think he, also, is a "great entrepreneur", but he was merely a cross-border body shopper.
jgo - 2010-23-2 08:34:00 PST
