Ideas for Improving the Startup Visa Act

Ann All

Last spring I signaled my support for the Startup Visa Act, which will grant temporary work visas to foreign entrepreneurs who are able to obtain certain types of financing and make visas permanent for those who create jobs, calling it a flawed but still worthy piece of legislation.


I cited some concerns from Venture Chronicles blogger Jeff Nolan, several of which involved making entrepreneurs too beholden to venture capitalists. Vivek Wadhwa, director of research at Duke University's Center for Entrepreneurship and Research Commercialization, voices some similar concerns about the Startup Visa Act in a TechCrunch column.


One of Wadhwa's biggest issues with the act: With its requirement for entrepreneurs to obtain an investment of at least $100,000 from a venture capitalist or a qualified "super angel" investor in an equity financing of not less than $250,000, the bill incorrectly assumes all startups raise venture or angel capital, something Wadhwa says his research shows isn't true.


Thanks to the falling price of technology, entrepreneurs no longer need as much money up front as they once did, writes Wadhwa. Instead, they need venture capital only when they are ready to scale up, which for most is probably two to three years after starting their business.


Like Nolan, Wadhwa says this gives investors too much power. He writes:

... Do we want the same investors who are negotiating valuations and other terms with fledgling entrepreneurs to also have the power to make life-changing decisions about whether they can live in the United States? Investors already have too much power over the entrepreneur, and they can be cutthroat in negotiations; I wouldn't want them to also have power over my life and my family if I were in this situation.

Wadhwa says the U.S. would do better to adopt a model similar to one used in Chile, which bases funding on "quality of talent and commitment of the founding team members; international market potential of the project; and the value of the applicant's affiliated networks that will be injected into the Chilean entrepreneurship ecosystem." (Not coincidentally, Wadhwa is an advisor to Chile's program.)


Wadhwa also worries worthy startups would be overlooked, as the "herd mentality" of VCs and angel investors would lead them to focus only on trendy ideas.


Wadhwa suggests removing the bill's requirement for super angel or VC approval and lowering the investment threshold to $100,000. And he adds, anyone on a startup visa should be precluded from working for any employer other than the startup itself, which should avoid criticism of foreigners "stealing" U.S. jobs.


Wadhwa believes an even better approach than the Startup Visa Act would be simply tweaking the requirements used by the U.S. Citizenship and Immigration Services to adjudicate employment-based petitions. The current approach unfairly favors large companies, and the USCIS process is not well aligned with the Obama administration's goal to create new jobs and innovation.


Writes Wadhwa:

Unlike the bailouts and stimulus programs that are costing taxpayers hundreds of billions of dollars, a program to bring in the world's best and brightest entrepreneurs will cost us nothing. It could lead to an inflow of billions of dollars in investment from abroad and create thousands of new startups across America and hundreds of thousands of new jobs. As well, rather than fuel our global competitors as we are doing with our flawed immigration policies, we will make the U.S. more competitive.

Add Comment      Leave a comment on this blog post
Feb 18, 2011 1:14 AM Letitia Green Letitia Green  says:

Wow. A complicated set of problems can ensue either way you look at it.

QUESTION: Do foreigners have some lock on how to create jobs? Won't they be subject to the same regulation strangulation, or uneducated work force, or tax disincentives that our own potential workforce creators are experiencing; the same set of problems that is causing the current slow down in job creation at the innovation/start-up phase? How does bringing in more people, not yet able to be entrepreneurs, or maybe already entrepreneurs but not with our unique set of issues and experience in the US actually help job creation?

QUESTION: Doesn't every investment dollar that goes to a foreign-born, not-yet-citizen of this country but working hard at innovation, does NOT go to one of our own entrepreneurs?

QUESTION: REPEAT: Why is a foreign born "entrepreneur" better able, equipped, or educated to create jobs than the work force we have here? If a foreign-born legal resident has a specific knowledge base that a company needs for hiring, that is a different VISA question. Where is the evidence that foreigners make better entrepreneurs, with more jobs, hiring skills and ability to raise capital than our own?

If we can't create our own ecosystem and jobs, what metrics tell us that foreigners are the most creative and innovative people in the world? Nothing. Nothing at all.

Shouldn't we be incenting our own "entrepreneurship within" from our own towns, universities and the like?

Mar 13, 2011 4:11 AM Viv Chandra Viv Chandra  says: in response to Letitia Green

Indeed Leticia, foreigners will be subject to the same environment as anyone native here when it comes to doing a startup. But the intent of the bill is really to create a path for entrepreneurs who have a higher propensity for risk taking and have the willingness to commit a reasonable amount of startup capital . Most countries already have this in place . The US also has what is called an EB-5 program where you can buy your way into a green card if you can spare a million dollars (in some cases 500K). But the EB-5 didn't meet its intent of creating jobs and scalable companies because of its flawed design. Think about it this way - if you relocated to Asia and wanted to start a business there and you are willing to risk $250K of your capital and are committed to create at least 5 new jobs, wouldn't you think its reasonable to expect they should welcome you to set up shop?


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