Home >> United States & Canada >> Immigration

     Email   Print 

Aiming “High” or How to Boost American Edge through Immigration

Irina Aervitz - 5/27/2011

As President Obama is campaigning for his re-election in 2012, the emphasis is being placed on the problem of the so-called “low” or undocumented immigration to attract the sympathies of the Hispanic voters.

The “high” or professional immigration is being also discussed as part of the “comprehensive immigration reform.” However, the “high” immigration requires a different set of solutions from the “low” immigration. One of the prospective solutions is the new EB-6 visa initiative. If approved, it has a potential to enhance entrepreneurial activity and innovation in the US.

The US has always prospered on innovation and entrepreneurship, but now its position as a technological vanguard is being challenged by ambitious China and India. The two countries are not content any longer with reverse engineering or technology transfer, they are hungry for original research and eager to invest both public and private funds into research and development. It is also a mistake to think that innovation is primarily state-funded in these two countries. Governments in India and China like the idea of encouraging high-tech start-ups as well as buttressing the ecosystem of venture capitalists and angel investors, which is indeed a classical Silicon Valley recipe. Something has to be done and the EB-6 can be a “cheap” solution to the “Asian challenge”. After all, what exactly is a “green card” that makes it such an expensive commodity in financial, political, cultural, and even emotional terms? May be it is time to put a reasonable price tag on it and achieve a mutually agreeable bargain.

The story of the EB-6 visa is a combination of an impressive grass-root social media movement and a professional lobbying effort backed by academic research. On 26 February 2010, two key US Senators, John Kerry from Massachusetts, and Richard Lugar from Indiana, introduced a new EB-6 visa bill called “The StartUp Visa Act of 2010.” The legislative initiative was the result of the inspirational lobbing effort by a group of American entrepreneurs and venture capitalists. In 2010, more than 160 venture capitalists have endorsed the StartUp Visa Act. The declared goals of the StartUp Visa Act are to promote entrepreneurship, build a conducive business environment, and ultimately, enhance US global economic competitiveness. The bill has to pass both houses.

The contents of the bill have been extensively discussed since February 2010, and, according to Vivek Wadhwa, the new draft of the bill that was introduced by Senator Richard Lugar (R-Ind.) in March 2011 has better provisions for foreign students and workers who are already in the U.S. to qualify for a visa, including the amount of the start-up capital and job creation requirements. The proposed legislation, if approved, will allow a foreign-born entrepreneur to receive a two-year visa if a qualified US investor, or a group of investors invests at least $100,000 into the new start-up venture. In two years, in order to qualify for a green card, the immigrant entrepreneur should demonstrate that the venture made half a million in revenue, or attracted $500,000 in follow-up investment, as well as created five full-time jobs.

Grass-Roots for a Green Card

Many of venture capitalists who endorsed the StartUp Visa Act are immigrants themselves, and can thus relate to the existential struggle with the Kafkaesque US immigration system. The EB-6 proposal is an inspirational story of a “grass-roots” movement, an endogenous effect of the American democratic process, empowered by novel social media like Twitter, Facebook, YouTube, and blogs. The grass-roots effort was reportedly triggered by a blog posted by Paul Graham of venture capital firm Y Combinator in April 2009.

Brad Feld, a venture capitalist with the Foundry Group in Colorado, picked up the torch and repeatedly endorsed the idea on his website and blog. He inspired Congressman Jared Polis from Colorado to draft legislation on the EB-6 visa that was introduced in the House in 2009. This congressional effort was later joined by Kerry and Lugar, who brought similar legislation to the Senate. Dave McClure, a venture capitalist with entrepreneurs Eric Ries and Shervin Pishevar then created the StartupVisa.com website after a “geeks-on-a-plane” trip to Washington, DC in September 2009.

The EB-6 is about attracting the best and the brightest. The StartUp Visa movement quickly drew thousands of supporters. “There are no lobbyists, no campaign contributions, no PR agencies,” McClure said. “This is a 100% grass-roots movement of citizens who want to encourage job creation and innovation in the United States.” The “start-up visa” website serves as a discussion platform where immigration stories are shared and associated research, data, and publications are amassed. Even though the website “preaches to the choir,” the movement spilled over into major media outlets. For example, Paul Kedrosky and Brad Feld published an opinion piece in Wall Street Journal in December 2009 that furthered the issue in the mainstream.

Manu Kumar, a venture capitalist and an immigrant himself, signed the EB-6 letter of support to the Senate. He shares his immigration story in his blog, which vividly illustrates the potential benefits of the entrepreneur visa to the US economy. In a separate E-mail exchange he added that the investors who signed the EB-6 support letter were not only involved in the IT sector, even though the idea originated in IT and spread from there. “I believe investors in every sector recognise that allowing foreign entrepreneurs to come or stay in the US to start companies is crucial to maintaining the innovation and creating jobs in the US,” Mr. Kumar remarked.

In a globalised world, the competition for talent, brains, and entrepreneurial spirit is fierce. The UK, Australia, and Canada have merit-based immigration provisions that are easier and more prepossessing to immigrant entrepreneurs. The US has, however, two vantage points: strong consumer markets and venture capital infrastructure. According to those advocating the EB-6 visa, potential EB-6 visa applicants can take advantage of both and add value to the US economy by sourcing locally, spending their earnings, paying taxes, and employing American citizens.

Immigration via Employment

Tim Draper, founder of Draper Fisher Jurvetson, a legendary US venture capital group that invested in such companies as Hotmail, Overture, Skype among many, commented in an E-mail exchange, “We have had so much trouble keeping good entrepreneurs in the country.” He added that until the US started “properly educating our children in math and science, entrepreneurial - immigrants are mission critical. They are generally well educated in math and science and they are generating many of the great companies that will support our country in the future.”

Currently there are five employment-based categories of immigration visas. One of the avenues to permanent residence is via graduation from an H1-B non-immigrant work visa, when an employer sponsors a foreign-born worker for a green card. The H1-B allows foreign students to become employed by a US employer, but it does not allow them to start their own business. The process involves the approval of the Department of Labour which needs to make sure that the immigrant worker does not compete with a qualified US citizen for this job, as well as other requirements, including meeting a prevailing wage. Potential immigrants from India and China are especially susceptible to long queues in receiving permanent residence via this program.

The EB-6 visa provides an alternative immigration route to foreign students. In fact, students in STEM (science, technology, engineering, and math), who are already in the US might benefit the most from this new visa category. It is difficult enough to attract start-up capital under normal circumstances, but it is near impossible to do so from abroad. US-based students might lack a proven track record of business experience and success, but at least they are more integrated into the venture capital infrastructure of the US by virtue of their US education, language skills, and personal contacts. Thus, if the “start-up visa” is passed into law, it might release some of the pressure from the over-utilized H1-B visa category, and allow immigrants to jump from a student visa directly into the EB-6 category.

Research on Impact of Immigration

The academia and think tank community have generated extensive studies on the positive economic impact of immigration. A pioneer of the research on immigrant contribution to the US economy, Anna Lee Saxenian, is a professor at the University of California at Berkeley, argued that skilled immigrants, directly as entrepreneurs, and indirectly as facilitators of trade and investment with their countries of origin, accounted for one-third of the region’s engineering workforce and are increasingly noticeable as entrepreneurs and investors. Two-thirds of the region’s foreign-born engineers are from Asia. Chinese and Indian immigrants accounted for 74% of the total Asian-born engineering workforce. In 1998, Chinese and Indian engineers were senior executives at one quarter of Silicon Valley’s technology businesses. (Saxenian 2002).

In 2009, David Hart, Zoltan Acs, and Spencer Tracy, in their study of high-tech immigrant entrepreneurship in the United States, found that about 16% of the companies in their sample had at least one foreign-born person among their founders. The 250 foreign-born entrepreneurs came from 54 countries. India was the largest source country, accounting for 16% of this group, followed by the UK at 10% (Hart, Acs and Tracy 2009). This estimate of high-tech immigrant entrepreneurship is lower than that found in previous studies (Anderson and Platzer 2006; Saxenian 2002). Nonetheless, their data show that immigrants do play a crucial role in the high-tech sector.

The economic and social contribution of potential immigrant-generated start-ups can be also anticipated based on the recent research on the economic impact of small businesses on the US economy. Companies that are between three and five years old make up less than 1% of companies but generate about 10% of the new jobs in a given year, according to the Kauffman Foundation study (Stangler 2010). Small business is a key contributor to the nation’s economy, generating 50% of the private, non-farm gross domestic product (GDP), according to a study released by the Office of Advocacy of the US Small Business Administration. The study covers the period 1998 - 2004, and confirms the findings of the earlier research.

Future of EB-6

The proposed law on the EB-6 has a propensity to contribute to the economic competitiveness of the US. This claim is bolstered by the research on the effects of immigrant entrepreneurs and small business on the US economy, as well as pure common sense.

Sceptics of EB-6 visa point to its prospective susceptibility to fraud. Some are questioning the attractiveness of building businesses in the US. The hiring costs are high, the burdens of navigating the complicated tax system, in addition to dealing with the immigration bureaucracy, can distract one's focus, and undermine the success of any business venture. Others point to the difficulties of immigrant entrepreneurs in finding investors in the US, or to the tight-fisted requirements of venture capitalists.

However, the biggest danger to the program lies in emphasising the resolution of the low-skilled and illegal immigration in the new immigration reform. Even though the so-called “low immigration” duly requires attention, high-skilled immigration is a separate matter and calls for a different set of solutions. No one denies the political and economic importance of tackling the problems of border security and the sheer presence of about 11 million unauthorized immigrants in the US. However, talent retention and efforts to encourage technology, innovation, and entrepreneurship in the US do not just represent the interests of a few venture capitalists and corporations. This is a question of American global competitiveness and decisions on the EB-6 visa or similar initiatives must be pushed forward. After all, potential benefits outweigh any real or imaginary downsides of granting permanent residency to a few successful entrepreneurs.



Irina Aervitz is an assistant professor at Global Affairs program at George Mason University. She focuses on the political economy of China and Russia and her reports and analytical pieces have appeared in Russia Profile, Asia Times Online and Voice of America.


References:
Anderson, Stuart and Michaela Platzer (2006): “American Made: The Impact of Immigrant Entrepreneurs and Professionals on U.S. Competitiveness,” National Venture Capital Association (NVCA), Viewed 13 June 2010 (http://www.nvca.org/index.php?option=com_content&view=article&id=254&Itemid=103).

Hart, David, Zoltan Acs, and Spencer Tracy (2009): “High-Technology Immigrant Entrepreneurship in the US,” U.S. Small Business Administration, Office of Advocacy, July 2009 , Viewed June 13 2010 (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1457269).

Saxenian, AnnaLee (2002): “Silicon Valley’s New Immigrant High-Growth Entrepreneurs,” Economic Development Quarterly 16 (1): 20-31 , Viewed on 13 June (http://people.ischool.berkeley.edu/~anno/Papers/EDQ_on_immigrants_2002.pdf).

Stangler, Dane (2010): “Kauffman Foundation Research Series: Firm Formation and Economic Growth High-Growth Firms and the Future of the American Economy,” Ewing Marion Kauffman Foundation, March 2010, Viewed 13 June 2010
(http://www.kauffman.org/uploadedfiles/high-growth-firms-study.pdf).