This week, the Senate Judiciary Committee approved the Gang of 8 immigration bill. One provision of this bill will be welcome news to potential immigrants who wish to form new companies in the United States. This bill would create the nation’s first visa specifically designed for this special group of immigrants. But it isn’t just immigrants who would benefit—America needs these immigrants in order to remain internationally competitive.
How important are immigrant entrepreneurs?
Google, Intel, Sun Microsystems, Yahoo!, Yurie Systems, Kraft, Pfizer, eBay, Nordstrom, and AT&T are just a few the many companies that were started by immigrants. In fact, immigrants were more than twice as likely as Americans to start new businesses in 2011, according to the Kauffman Foundation. In 2011, they started 28 percent of all businesses, and in certain sectors, immigrants have at times founded the majority of new businesses. Kauffman found that in 2005, foreign-born owners comprised 52 percent of Silicon Valley entrepreneurs. In 2011, the number remained at almost 44 percent.
According to a 2011 study by the Partnership for a New American Economy, immigrants or their children founded more than 40 percent of Fortune 500 companies, and these companies have aggregate revenues of $4.2 trillion and employ more than 10 million people. This means that these entrepreneurs control the third largest economy in the world, excluding the U.S. The same report found that immigrants founded seven of the ten most highly valued brands—Coca-Cola, Microsoft, General Electric, and others. This activity has made America the world’s premier hub of international trade and global innovation.
What’s wrong with the current process?
What is most remarkable about all this activity is that America has no visa designated specifically for entrepreneurs. Under the existing E-2 treaty investor visa, entrepreneurs can receive a visa if they invest substantially in their business, but they must justify their business plan to the government every two years, and the visa excludes immigrants from major countries like China, India, and Brazil. Although the E-2 and the EB-5 investor visas can be used to start businesses, they both have their requirements based on specific investment quantities rather than entrepreneurship per se. Moreover, the investment quantities are too large for many new startups. E-2 mandates the foreigner own 51 percent of the business, and EB-5 requires an investment of at least $1 million, and investors must prove this has created at least 10 full-time jobs, or they can risk losing their visas.
The last category that certain entrepreneurs have utilized in recent years is an O-1A temporary visa, which is allocated for individuals of “extraordinary ability.” The Obama administration in particular has taken a broad interpretation of “extraordinary” to include certain proven entrepreneurs from overseas. But this process is extremely difficult. Entrepreneurs must demonstrate “sustained national or international acclaim” to qualify. The experience of Josh Buckley, a British-born entrepreneur, is typical. He needed to line up endorsements from the co-founders of Netscape and Apple Inc. to qualify for his O-1A visa.
Ultimately, it is no surprise that most immigrant entrepreneurs never use these categories to come to the United States, and very few immigrants start companies as a means of obtaining a visa. EB-5 restrictions have kept their visa numbers to below half their yearly quota, and 90 percent of EB-5s are for “regional center investors,” special investments designated by USCIS, not startups. Despite no specific restrictions, the O-1A category is even more restrictive than the EB-5, approving half as many applications. None of these categories are designed for entrepreneurs, which is why they all ultimately prove inadequate to their needs.
What would the Senate bill do?
The Invest Visa provisions of the Senate immigration bill would guarantee 10,000 green cards for immigrant entrepreneurs, assuming they meet certain criteria. It also creates uncapped number of new temporary 3-year visas, which can be renewed, for immigrant entrepreneurs who meet substantial requirements in terms of investment and jobs created. These visas will be welcomed by many entrepreneurs, but the restrictions are much higher than those placed in another recently-introduced bill also intended to help foreign entrepreneurs, the Startup Act 3.0 (more jobs, higher revenue and investment requirements, wage standards for jobs created, etc.). This could prevent many potential entrepreneurs from even applying.
The restrictions, however, should not detract from the real success of finally seeing the Senate get on board with this common sense reform: more entrepreneurs mean more businesses, more jobs, and a more competitive U.S. economy.