August 31, 2016

The Case for (Permanently) Welcoming Immigrant Entrepreneurs

By Elmira Bayrasli

Entrepreneurs are innovators by nature, willing to take chances and pursue opportunity. In the United States immigrants are twice as likely to start businesses as their native-born peers. Generations of hard-working immigrant entrepreneurs have founded iconic American companies such as AT&T and Kraft, along with new billion-dollar tech startups like Dropbox and SpaceX. They’ve made the United States—which already ranks a competitive seventh on the global list of business-friendly countries—globally synonymous with startup success. And in launching companies here versus tackling the red tape and bureaucracy they often encounter at home, their efforts pay off for the United States with job creation.

Yet despite the United States’ rich history of immigrant entrepreneurship and its competitive business ecosystem, the American immigration system limits opportunities for would-be entrepreneurs. There is currently no visa that allows an entrepreneur abroad to come to this country to start a businesses. As a result, they are increasingly taking their talents elsewhere to launch startups—or opting to simply build them at home.

On August 26, the White House took a step to reverse this trend, creating expanded opportunities for foreign-born entrepreneurs to build businesses in the United States, part of the Immigration Accountability Executive Actions first announced in November 2014. The proposed International Entrepreneur rule marks a step in the right direction, but it falls to Congress to build more sustainable channels—visas—for immigrant entrepreneurs, recognizing our country’s strong startup heritage and securing its future success.

The Value of—and Global Competition for—Immigrant Entrepreneurs

Immigrants build businesses, create jobs, and revitalize local economies. Nearly 40 percent of today’s Fortune 500 companies have an immigrant behind them, and together these companies generate $4.2 trillion in annual revenue and employ some 10 million people worldwide. A full 60 percent of the startups valued at $1 billion or more—popularly known as “unicorns”— were started by immigrants or their children, and together these businesses are worth $81 billion. And immigrant-founded engineering and technology companies in the United States generate some $63 billion in sales and employ 560,000. The positive effects of these companies are felt elsewhere in the business ecosystem as they attract talent, create additional jobs, and fill local tax coffers.

Countries Welcoming Immigrant Entrepreneurs

Australia launched an entrepreneur visa program, called SkillSelect, back in the 1970s. Australia’s immigration officials administer this program in partnership with the country’s labor officials. More recently, Australia rolled out a Business Innovation and Investment Visa in 2012. Through this program, individuals who make an investment of $1.2 million or at least $787,000 in assets receive a temporary workers visa and are eligible for permanent residency after one year.

Canada introduced its Startup Visa program in 2013, which offers permanent residence to individuals who have either venture capital backing (up to $118,000), an angel investor ($45,000), or acceptance by a Canadian incubator or accelerator program.

Chile launched its “Start-Up Chile” program in 2010, which offers temporary visas to individuals with special skills who are deemed to be a potential value-add to the country. The government-funded program selects promising entrepreneurs and gives them $40,000 in startup capital, and a one-year visa to develop the idea in Chile. To date, the program has incubated over 800 companies.

Ireland unveiled its Start-up Entrepreneur Programme in 2012, designed to attract individuals with startup ideas that show high growth potential and to attract foreign direct investment. It requires these immigrants to have raised $85,000 in startup capital and to show a business plan. 

The United Kingdom offers three visa options for entrepreneurs. Entrepreneur visas are for individuals that have raised $77,000 in startup capital from a qualified investor or $309,000 from another source. Graduate entrepreneur visa are granted to students with a letter of support from a university. Finally, a prospective entrepreneur visa is for individuals with a startup idea but no capital who will be admitted to the UK further develop the idea.

Singapore has become a startup haven. Though it offers a number of funding schemes, its most important asset in attracting entrepreneurs is its visa system. The EntrePass is for foreigners who want to set up their own company. The application process takes five weeks and requires a business plan. The entrepreneur must be ready to start or already own at least 30 percent of a registered company less than six months old with capital of at least $39,000. The EntrePass is given for 12 months and can be renewed if the business continues its operations.

Other countries have long recognized—and embraced—the economic potential of immigrant-founded startups. Australia, Canada, Chile, Ireland, Singapore, and the United Kingdom all have startup or entrepreneurship visas that encourage individuals eager to set up a business to immigrate to their respective countries.

The United States currently does not offer a startup visa, dramatically limiting the channels that entrepreneurs can access to immigrate to the United States. This reality potentially contributed to an 8.5 percent decline in immigrant-founded companies in Silicon Valley between 2005 and 2012.

Updating an Outdated System

With its last comprehensive immigration reform dating back to 1965, the United States has not updated its immigration laws in a way that recognizes the importance of immigrant entrepreneurs and the high-growth businesses they create.

While it is true that plenty of immigrants have achieved entrepreneurial success in the United States, their paths to success were largely unplanned. Immigrant entrepreneurs who eventually launch businesses usually come to the United States via other channels, entering on student visas, as temporary workers, or as permanent workers sponsored by other companies. Common visas include the E-2 and EB-5 (for investors), along with the H1-B (for business), but their effectiveness is limited by high out-of-pocket costs, outdated caps, red tape, and abuse. Would-be entrepreneurs too often encounter snags and setbacks as they navigate our complex immigration system.

The current immigration system also poses challenges to the growth of the STEM (science, technology, engineering, and math) sector. STEM industries are fertile ground for entrepreneurs, and economists project the sector will grow 17 percent between 2008 and 2018. Tomorrow’s STEM leaders—students pursuing advanced degrees in the field—are mostly international students. While a new expansion of the Optional Practical Training program would allow STEM graduates to stay in the United States and work in the field for up to 24 months, international students have few options for long-term, permanent employment in the United States under our current immigration system.

The White House’s proposed International Entrepreneur rule forges a new pathway for entrepreneurs in our country’s otherwise-labyrinthine immigration system. The new rule would authorize the Department of Homeland Security (DHS) to allow some foreign-born entrepreneurs to legally work in the United States, given that their work provides “significant public benefit” to the United States through job creation and business growth. Entrepreneurs would be granted permission to work in the United States for an initial two years, followed by an option to renew for three years.  

DHS will evaluate entrepreneurs’ eligibility on a case-by-case basis. Eligible entrepreneurs must have an active role in operations for a startup already formed in the United States. The proposed rule is subject to 45 days of public comment; the White House hopes to finalize it by the end of 2016.

While this proposed rule represents an important step forward for maximizing the potential of immigrant entrepreneurs, it has limitations. As it requires applicants to be affiliated with a business already formed in the United States, it does not create a pathway for would-be entrepreneurs residing outside of the country. It also requires access to significant capital. Entrepreneurs’ startups must have secured at least $350,000 in investments or $100,000 in government grants, a stumbling block for those behind new or growing businesses. Most significantly, as an executive action, this proposed rule is temporary in nature and could potentially be revised or discontinued with a new administration in the White House in 2017.

A Path Forward

Only Congress can legislate permanent solutions for entrepreneurs. While Speaker of the House Paul Ryan has indicated that his chamber won’t take up the issue of immigration reform until 2017, a bipartisan cohort of Senators are mulling the possibility of reviving reform efforts after the election. In the meantime, Congress should move forward with other legislative proposals that would build both channels for and pipelines of immigrant entrepreneurs, including:

  • Creating a visa for entrepreneurs: Congress should carefully consider the Startup Act, a proposal that would create a permanent visa category for entrepreneurs to start and grow businesses in the United States. The bill provides for 75,000 temporary visas, which could become permanent if the entrepreneur meets hiring and investment requirements after three years. While it enjoys strong bipartisan support, legislation still has not advanced for a vote, even after four years of various attempts from its sponsors.
     
  • Expanding opportunities for STEM students: The Startup Act includes provisions for visas for up to 50,000 foreign-born students who graduate from US universities with degrees in STEM fields. A different bill, the STEM Jobs Act of 2015, which would allocate 55,000 visas for STEM graduates with advanced degrees, also sits before Congress. While neither bill has advanced, both have significant merit and should be considered.
     
  • Improving existing investor visa programs: While neither is technically a startup visa, many entrepreneurs successfully enter the United States on EB-5 or E-2 investor visas. But both visa programs have application hurdles that can only be addressed via Congressional legislation. The EB-5 program requires a $1 million investment in a business, putting it out of reach for many entrepreneurs. Experts also agree the program would benefit from a streamlined application process with improved monitoring and measurement. And the E-2 visa is only available for applicants from a country that maintains a trade treaty with the United States; notably, that list excludes China and India, countries with growing levels of entrepreneurship.
     

In light of stalled Congressional action on these issues, state and local governments—many in the economically stagnant Midwest—have taken steps to build programs to attract and support immigrant entrepreneurs. Some states are considering building a version of Massachusetts’ Global Entrepreneurship in Residence, which allows entrepreneurs to build businesses while maintaining employment at local universities. Michigan aims to keep more of its international STEM students with a Global Talent Retention Initiative. And city-level economic development programs in places such as Cleveland, St. Louis, and Detroit help immigrant entrepreneurs cut through red tape. Some have announced plans to offer employment-based visas for highly skilled immigrants. 

Like the White House’s executive action, the local programs represent an important step in the right direction, with promise to successfully scale across the country. Savvy elected officials will champion these programs in their communities.

But a permanent pathway for entrepreneurs is still needed. Congress can—and should—legislate updates to our immigration system, honoring our country’s long history of entrepreneurial success and ensuring its future competitiveness.

 

Elmira Bayrasli is the author of From the Other Side of The World: Extraordinary Entrepreneurs, Unlikely Places.

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The Chicago Council on Global Affairs is an independent, nonpartisan organization that provides insight – and influences the public discourse – on critical global issues. We convene leading global voices and conduct independent research to bring clarity and offer solutions to challenges and opportunities across the globe. The Council is committed to engaging the public and raising global awareness of issues that transcend borders and transform how people, business, and governments engage the world.

The Chicago Council on Global Affairs is an independent, nonpartisan organization. All statements of fact and expressions of opinion in blog posts are the sole responsibility of the individual author(s) and do not necessarily reflect the views of the Council.

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