Startup Visa Act of 2011

Chad Moutray

America needs more startups, especially those which might someday grow into high-impact, high-growth firms.  Despite adding over one million net new jobs in 2010, the U.S. has over 7 million fewer nonfarm payroll employees today than at the end of 2007 when the recession began.  Research from the Kauffman Foundation and others support this notion, with startups accounting for most of the net new jobs in the economy and adding new vitality to the marketplace. 

Of course, some entrepreneurial ventures will have a greater impact than others.  A handful of new firms each year will go on to be the next “big thing,” growing rapidly enough to have billions of dollars in sales, hundreds of employees, and worldwide recognition.  Increasing the number of such “home run” firms can significantly increase our GDP growth, drive new innovations into the marketplace, and keep the country competitive globally.  The challenge is for us to find innovative ways to promote new entrepreneurial ventures that can help us drive the economy moving forward. 

Where will these start-ups come from?  In addition to helping our own citizens create world-class businesses, we must also woo highly-educated and creative foreign entrepreneurs to set up shop here in the U.S.  Last year, Thomas Friedman asked, “… where do start-ups come from?  They come from smart, creative, inspired risk-takers.  How do we get more of those?  There are only two ways: grow more by improving our schools or import more by recruiting talented immigrants.”  In the policy debate over what to do with illegal immigrants, we often lose sight of the correct response for luring entrepreneurial foreigners to our shores.  Robert Fairlie has found that immigrants are nearly 30 times more likely to be entrepreneurs than non-immigrants, and in some states, they have a disproportionately higher impact.  They account for one quarter of all business income in California, for instance.  What’s more, most of these immigrants were educated in the United States, with one study suggesting 53 percent of all founders receiving their degrees here and another finding two-thirds.  The key is keeping them here.

On March 14, Sens. John Kerry (D-MA), Richard Lugar (R-IN), and Mark Udall (D-CO) re-introduced the “Startup Visa Act of 2011.”   This bill “will allow an immigrant entrepreneur to receive a two year visa if he or she can show that a qualified U.S. investor is willing to invest in the immigrant’s startup venture.”  As Robert Litan wrote in an op-ed piece for the Wall Street Journal last year, it would create a “job creator’s visa.”   He noted that Google was founded by Sergey Brin, a Russian immigrant, and American Larry Page, suggesting that policymakers would be wise to encourage more immigrants like Sergey Brin.  This is one way to do that.  One initial criticism of the bill, as it was introduced last year, was the requirement that the initial investment be $250,000 of which at least $100,000 needed to come from U.S. venture capitalists or angels.  This new bill lowers that threshold – which was too high to encourage much investment, according to Vivek Wadwha and others – to $100,000, with annual investments from VCs or angels of $50,000.  With this change, Wadwha optimistically writes, “I expect it to unleash a flood of entrepreneurship.”

Specifically, the bill would create three new options for residency.  According to the official press release, these options are:

  • Option One: Immigrant entrepreneurs living outside the U.S. would be eligible to apply for a StartUp Visa if a qualified U.S. investor agrees to financially sponsor their entrepreneurial venture with a minimum investment of $100,000. After two years, their business must have created 5 new jobs and raised not less than $500,000 in additional capital investment or generate not less than $500,000 in revenue.

  • Option Two: Immigrant entrepreneurs currently in the U.S. on an unexpired H-1B visa; OR immigrant entrepreneurs currently in the U.S. who have completed a graduate level degree in science, technology, engineering, math, computer science, or other relevant academic discipline from an accredited United States college, university, or other institution of higher education would be eligible for a StartUp Visa if;

    They demonstrate annual income of not less than roughly $30,000 or the possession of assets of not less than roughly $60,000; and

    Have proven that a qualified U.S. investor agrees to financially back their entrepreneurial venture with a minimum investment of $20,000.

    After two years, their business must have created 3 new jobs and raised not less than $100,000 in additional capital investment or generate not less than $100,000 in revenue.

  • Option Three: Immigrant entrepreneurs living outside the U.S. would be eligible to apply for a StartUp Visa if they have controlling interest of a company in a foreign country that has generated, during the most recent 12-month period, not less than $100,000 in revenue from sales in the U.S.

    After two years, their business must have created 3 new jobs and raised not less than $100,000 in additional capital investment or generate not less than $100,000 in revenue.

Rep. Carolyn Maloney (D-NY) plans to introduce similar legislation in the U.S. House, and so far, the reactions from the supporters of this bill have been positive.  Easing the barriers for foreign-born entrepreneurs should provide a big boost in start-ups, some of which will go on to become high-growth firms (we hope) down the road.  Given the need for job creation, this is definitely a bill worth considering.

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