America can't be the world's tech leader without immigration reform.

The intersection of government and technology.
Sept. 14 2009 3:47 PM

Give Me Your Tired, Your Poor, Your Startup Founders

America can't be the world's tech leader without immigration reform.

Sergey Brin. Click image to expand.
Google co-founder Sergey Brin

Andy Grove, Intel's former chairman and CEO, was born in Hungary in 1936 and immigrated to the United States in his 20s. Jerry Yang, co-founder of Yahoo, was born in Taipei, Taiwan, and moved to San Jose, Calif., with his family as a child. Sergey Brin, who co-founded Google, came to the United States from his native Russia when he was 6. They aren't special cases: About one-quarter of American tech companies are founded in part or entirely by foreigners. The proportion in Silicon Valley is even higher—a recent survey (PDF) by Vivek Wadhwa, an engineering professor at Duke University, showed that more than 52 percent of Valley startups were founded or co-founded by people born outside of the United States. According to Wadhwa's research, immigrant-founded firms produced $52 billion in sales and employed 450,000 workers in 2005.

Paul Graham insists that those numbers could be much higher. Graham, a partner at Y Combinator, a venture-capital firm that provides early-stage funding to startups, calls the U.S. government's immigration restrictions "the biggest constraint on the number of new startups that get created in the U.S." In May, Graham, whose essays on business and science are popular in V.C. circles, floated a novel idea: He wants the government to create a new immigration class for founders of new firms. Every year, Graham's "Founder Visa" program would let in 10,000 immigrants who've shown a plan for starting a new company. These people would be barred from working at existing companies—in other words, they wouldn't be "taking American jobs." Instead, Graham argues, they'd be creating jobs: "If we assume four people per startup, which is probably an overestimate, that's 2,500 new companies. Each year," Graham writes. "They wouldn't all grow as big as Google, but out of 2,500 some would come close."

Graham's proposal has won approval from many of his fellow V.C.s, some of whom have started a campaign to push the Founder Visa idea through Congress. Here's hoping a forward-thinking lawmaker takes it up: There's much to decry about U.S. immigration policy, but in the absence of "comprehensive reform" (which President Obama says will be delayed until next year—good luck!), loosening restrictions on tech entrepreneurs is a sensible, easy fix. Graham's plan would create jobs, it wouldn't hurt American workers, and it would ensure that Silicon Valley remains the world's center of tech innovation. What's not to love?

The tech industry has long criticized the United States' byzantine immigration restrictions. Every year, the government allows just 85,000 skilled workers to enter the country legally—far fewer than the industry says is optimal. The program under which these people can work in the United States—known as H1-B—is beset with bureaucratic restrictions, creating long waiting times for workers that American companies say they need to remain competitive. For instance, the plan imposes a cap of 10,000 immigrants per country of origin; this means that it's extraordinarily difficult for firms to attract people from countries with many skilled workers, like India and China. As the New York Times reported recently, Google alone spends $4.5 million every year on "visa administration" to help shepherd its foreign-born workers through the arduous process of coming to America.

Why do American tech firms need so many immigrant employees? Because there aren't enough native workers to fill the jobs tech companies need. According to the National Science Foundation, about 60 percent of doctorate degrees in engineering at American universities are awarded to foreign students who are in the country on temporary visas (PDF). And foreign workers are responsible for some of the tech world's signature innovations. In April, the Times profiled Sanjay Mavinkurve, one of Google's most respected engineers, who, among other things, came up with a brilliant way of reducing the time that Google Maps takes to load on mobile phones. But Mavinkurve—who was born in India, educated at Harvard, and would love to live in America—is stuck working in Google's Toronto office, because the United States won't let him bring his family into the country. Reflecting on stories like Mavinkurve's, Intel Chairman Craig Barrett told the Times that the immigration process here has reached a crisis point. "We are watching the decline and fall of the United States as an economic power—not hypothetically, but as we speak," he said. "With a snap of the fingers, you can say, 'I'm going to make it such that those smart kids—and as many of them as want to—can stay in the United States.' They're here today, they're graduating today—and they're going home today."

The restrictive quotas aren't the only problem with the H1-B program. That particular visa is open only to people who want to work for established American companies; their visas would expire if they started their own companies. Indeed, getting to the United States to start your own company is very difficult. The E2 visa program, the most straightforward way for founders to come to America, is closed off to many tech entrepreneurs. For one thing, it often requires that the immigrants provide a huge outlay of capital, sometimes hundreds of thousands of dollars. What's more, the program is open to a select list of countries that have treaty agreements with the United States. India is not among those nations, even though, according to Wadhwa's research, one-quarter of all immigrant-founded tech firms were started by Indians.

The tech world brims with stories of new companies that have failed or decided to relocate elsewhere because of visa restrictions. Investor Brad Feld wrote recently of two firms he funded that were co-founded by people in Canada and the United Kingdom. These entrepreneurs have gone through the final stages of starting up their companies, including raising capital. "It should be trivial for them to stay in the U.S.," Feld wrote—but it wasn't. After looking into a variety of risky and expensive ways to stay in the country legally, both companies are looking to move back to their founders' home countries.

To be sure, Graham's Founder Visa plan could use some fleshing out. How would the government decide which immigrants really are serious founders of companies? Graham and his fellow V.C.s argue that startup investors decide. Feld, for instance, suggests that the government should set up a board of investors, entrepreneurs, and tech lawyers who are used to vetting tech ideas; they'd review applications and choose which ones are worthy of a Founder Visa. That sounds a bit unwieldy, and it would seem to invite corruption, giving a few select investors special access to new tech talent. A better plan might be to have foreigners apply to V.C.s with their best ideas, then let the V.C.s bid on each of the 10,000 slots—what folks in the Valley would call a "market-based solution."

But there's time for the details to be ironed out; Graham's basic idea is sound. As the Economist pointed out recently, the United States is the world's most entrepreneurial nation, in part because it has long been extremely hospitable to immigrants. Americans don't have a monopoly on good ideas—but wouldn't it be best for America if everyone with a good idea were free to implement it here?

Farhad Manjoo is a technology columnist for the New York Times and the author of True Enough.