Percentage of Immigrant-Founded High-Tech Startups Declining, Study Finds

A new study on immigrant entrepreneurship has found that the proportion of immigrant-founded high-tech startups in the United States has stagnated, and that it’s starting to decline.

The study, released on Tuesday by the Ewing Marion Kauffman Foundation, a nonpartisan foundation that supports entrepreneurship and innovation, evaluated the rate of immigrant entrepreneurship from 2006 to 2012. According to Dane Stangler, director of research and policy at the Kauffman Foundation, “For several years, anecdotal evidence has suggested that an unwelcoming immigration system and environment in the U.S. has created a ‘reverse brain drain.’ This report confirms it with data.”

The study examined a random sampling of 1,882 engineering and technology companies founded since 2006. Of those companies, 456 had at least one foreign-born founder. Here are some of the highlights:

• The proportion of immigrant-founded companies nationwide has slipped from 25.3 percent to 24.3 percent since 2005. The drop is even more pronounced in Silicon Valley, where the percentage of immigrant-founded startups declined from 52.4 percent to 43.9 percent.
• The exceptions to the downward trend were immigrants from India. Although founders in the study hailed from more than 60 countries, 33.2 percent of them were Indian, up from about 7 percent in 2005. Indians founded more of the engineering and technology firms than immigrants born in the next nine immigrant-founder countries combined.
• After India, immigrant founders represented China (8.1 percent), the United Kingdom (6.3 percent), Canada (4.2 percent), Germany (3.9 percent), Israel (3.5 percent), Russia (2.4 percent), Korea (2.2 percent), Australia (2.0 percent) and the Netherlands (2.0 percent).
• While immigrant entrepreneurship has stagnated, the rates of Indian and Chinese startups have increased. In 2005, Indians and Chinese entrepreneurs accounted for 26.0 percent and 6.9 percent of immigrant-founded companies, respectively.
• Immigrant-founded firms were most likely to be located in traditional immigration gateway states: California (31 percent), Massachusetts (9 percent), Texas (6 percent), Florida (6 percent), New York (5 percent) and New Jersey (5 percent). Indian founders tended to establish businesses in California, New Jersey and Massachusetts, and Chinese founders showed a propensity to start companies in California and Maryland. Except for Germans, who most often chose Ohio as the location for their startups, all immigrant groups displayed a preference for establishing businesses in California.
• Immigrant founders, who are most likely to start companies in the innovation/manufacturing-related services (45 percent) and software (22 percent) industries, employed about 560,000 workers and generated an estimated $63 billion in sales from 2006 to 2012.