Will Immigrate for Innovation

November 29, 2012

American progress and growth has traditionally relied on a steady source of skilled immigrants. The topic remains a theme in the press, being covered lately in CNET (“Silicon Valley hopes to...”), The New York Times (“Innovative immigrants”), Nature (“Federal talent drive”), The Economist (“People power”, “Fixing the capitalist machine”), Quartz (“5 things Obama...”), and The Washington Post (“Silicon Valley’s second-term wish list”). 

The dominant issue across these outlets is that government policies are choking off the supply of immigrant talent. The deeper and unvoiced concern is that this pool sees a bigger pull elsewhere for business opportunity. 

Tao Jiang is a Stanford University engineering graduate student on a student visa from China. After graduation, he’d like to start a company in the United States, but he is concerned that it cannot sponsor his work visa. Instead, he tells me, “I would choose to set up a new business in Shanghai” because his hometown is a “prosperous and young” city that can support a growing startup. 

Joshin Raghubar, founder and CEO-chairman of marketing consultancy iKineo, looks to Africa. In 2000, Raghubar was part of the team that launched the Bandwidth Barn, one of Africa’s largest incubators for technology businesses, and as chairman of the Bandwidth Barn since 2005, he has been actively working with government groups to build a regional innovation cluster in Cape Town. Raghubar understands the power of immigrants. Four generations ago, his ancestors came from India to work in Africa as traders and sugar cane workers. As a serial entrepreneur in South Africa, Raghubar is considering basing his next startup in the United States—but he wouldn’t leave his home country completely. Instead, he says, “My bet for real growth opportunities in the next 10 to 20 years is in Africa in various markets, so a potential approach is to co-locate with a U.S. presence to raise capital and attract talent.” 

Skilled immigrants continue to excel in the United States. Immigrants and their children have founded 40 percent of the Fortune 500 list, according to a report from the Partnership for a New American Economy. In fact, immigrant entrepreneurs are radically over-represented on the Fortune 500 list compared to the rest of the nation, which has averaged almost 11 percent in foreign-born population since 1850. 

For years, companies like Microsoft and Cisco have lobbied to expand the number of H-1B visa permits granted, aiming to tie the permits more to degrees in the fields of science, technology, engineering, and math (STEM). Foreign-born talent dominates STEM jobs in the United States; nearly half (47 percent) of all U.S. engineers and one quarter (24 percent) of all scientists are foreign-born. Moreover, foreign-born entrepreneurs obtain patents at twice the rate of U.S.-born entrepreneurs. 

More recently, companies have focused on a new bipartisan bill called the Startup Act 2.0, which has been languishing in Congress. Among its changes, the Act proposes a new STEM visa to allow students like Jiang to receive an automatic green card to stay in country. The Act also would create an entrepreneur’s visa for legal immigrants on the condition that they start a business that employs American workers. 

This could be the ideal opening for aspiring entrepreneurs like William Matthews. An undergraduate student at Stanford University, Matthews is on a student visa from the United Kingdom. However, unlike his native-born counterparts who can take a leave of absence to explore new startup ideas—in the footsteps of famous Stanford dropouts such as Sergey Brin and Larry Page of Google—Matthews has to immediately leave the country if he pauses his coursework. Alternatives, such as the OB1 work visa, are difficult to obtain. “Being in Silicon Valley is purposeful,” Matthews says. “If I had to leave Silicon Valley, I would find a workaround to get back here.”