Let's Give Visas to Startup Founders(businessweek.com)
businessweek.com
Let's Give Visas to Startup Founders
http://www.businessweek.com/technology/content/dec2009/tc2009121_842902.htm
28 comments
To be fair, this was not at all part of the original proposal; it's one of those idiotic riders tacked on by politicians after they get their hands on something. The only "approval" required was in the form of investors stumping up cash. Any accreditation should be of the investors, not the the founders.
This is pretty close to the E2 Treaty Investor visa, which exists already. I have held one of them. Our investment was bringing over a company founded in the UK. The interesting thing was that the majority of the actual investment came from US investors. Then our accountant valued the company, based on the work we had done since the investment, to be significantly higher than what the investment was. This was submitted in the paperwork, and was accepted.
So my one data point says: a good US immigration lawyer and an accountant who understands how to value software companies does do the trick.
The E2 Treaty Investor:
Nationals of qualifying Treaty countries who have made a significant investment in the United States may qualify for E2 Treaty Investor status. Like the E1 visa, there is no set minimum level of investment which may qualify for E2 status, but the lower the investment the less likely one is to qualify. Again, the level of investment must be sufficient to justify the treaty national (or his/her employees) presence in the United States. The investment must be in an operating business – i.e. simply buying property or stocks and bonds does not qualify. Also, a substantial part of the investment must have been made before applying for E2 status.
Source: http://www.workpermit.com/us/investor_e1_e2.htm
So my one data point says: a good US immigration lawyer and an accountant who understands how to value software companies does do the trick.
The E2 Treaty Investor:
Nationals of qualifying Treaty countries who have made a significant investment in the United States may qualify for E2 Treaty Investor status. Like the E1 visa, there is no set minimum level of investment which may qualify for E2 status, but the lower the investment the less likely one is to qualify. Again, the level of investment must be sufficient to justify the treaty national (or his/her employees) presence in the United States. The investment must be in an operating business – i.e. simply buying property or stocks and bonds does not qualify. Also, a substantial part of the investment must have been made before applying for E2 status.
Source: http://www.workpermit.com/us/investor_e1_e2.htm
This is the problem area that bugs me about the founder visa concept. The concept is great. Embodying it into law requires it go through the sausage factory.
I jokingly told a doctor last week I could write health care reform in 5 pages. I'm pretty sure I could. But it wouldn't get through congress in that form.
I jokingly told a doctor last week I could write health care reform in 5 pages. I'm pretty sure I could. But it wouldn't get through congress in that form.
I was being a bit glib. The sausage factory is there for a reason. That reason often sucks, but it's not random.
Look at it from a policy maker's standpoint: strip out the happy talk about money and jobs. What this boils down to is a group of rich people on the left coast asking for a grant of power, the power to give visas, with no oversight. The politicians doesn't know these geeks from anyone, and here they are asking for a slice of government power.
So they propose a committee to make sure this doesn't become a loophole for rich fugitives and tax-evasion. Certain types of people smell a cushy job and the role expands, the idea gets paraphrased to someone at WSJ and we end up with that sentence.
Look at it from a policy maker's standpoint: strip out the happy talk about money and jobs. What this boils down to is a group of rich people on the left coast asking for a grant of power, the power to give visas, with no oversight. The politicians doesn't know these geeks from anyone, and here they are asking for a slice of government power.
So they propose a committee to make sure this doesn't become a loophole for rich fugitives and tax-evasion. Certain types of people smell a cushy job and the role expands, the idea gets paraphrased to someone at WSJ and we end up with that sentence.
Well, there is potential for abuse: a startup founder gets an "investment" of $500k from an accredited angel and a permanent resident visa. A little while later, the startup takes an exit (e.g. dissolves the company and returns the assets to the investor), netting the founder a greencard in the process.
If you've got somebody willing to wire you $500k, you can basically do that already.
http://en.wikipedia.org/wiki/E-2_visa
http://en.wikipedia.org/wiki/E-2_visa
Well, that requires that you leave the country immediately after the business has been concluded; this proposal says that "... the founder would be granted a permanent resident visa", which presumably wouldn't expire.
Another problem with the idea is that the investor approving your founder visa has additional leverage over you. This extra leverage will take the form of lower valuations, lower investments, and (even more) investor friendly terms.
For proof, look to H1Bs. H1B employees are paid significantly less than non-H1B employees. Don't like it? STFU or go back to your home country.
For proof, look to H1Bs. H1B employees are paid significantly less than non-H1B employees. Don't like it? STFU or go back to your home country.
I think this may strongly depend on the home country (thus creating more distortion).
Home country is not necessarily Bangladesh, it could be UK or Switzerland, in which case the H1B holder can and does negotiate for market rate salary or he will go to his home country where he is payed fairly and life is just as good.
Home country is not necessarily Bangladesh, it could be UK or Switzerland, in which case the H1B holder can and does negotiate for market rate salary or he will go to his home country where he is payed fairly and life is just as good.
You're right, assuming the H1B employer is honest. However, the defacto primary use-case of an H1B is to depress the wages that MegaCorp pays its employees.
The current advocates of the Startup Visa probably have honest intentions, but I guarantee that after 10 years, the startup visa will work similarly to the H1B program.
The current advocates of the Startup Visa probably have honest intentions, but I guarantee that after 10 years, the startup visa will work similarly to the H1B program.
The "visa discount" is a real phenomenon, but the alternative is not coming here at all. You don't have to like it (I don't), but that's how it goes.
> the alternative is not coming here at all
That is one alternative. Another is coming up with a program that doesn't allow MegaCorp to abuse its H1B employees and depress market wages for US citizens at the same time.
That is one alternative. Another is coming up with a program that doesn't allow MegaCorp to abuse its H1B employees and depress market wages for US citizens at the same time.
I completely agree.
There's an additional problem with this proposal - may great startups don't feel they need investment, which allows them to avoid VC's or hold out for favorable terms. From what I've read, this trend is increasing, and I'm pleased to see that founders with technical backgrounds are gaining power relative to investors with expensive watches and MBAs.
But with this proposal, investors would control more than money - they'd control the right to reside and work within the United States.
I don't enjoy being so cynical, but having witnessed the abuses of the H1B, I am absolutely certain that VCs would use this visa to gain power and push around the founders.
There's an additional problem with this proposal - may great startups don't feel they need investment, which allows them to avoid VC's or hold out for favorable terms. From what I've read, this trend is increasing, and I'm pleased to see that founders with technical backgrounds are gaining power relative to investors with expensive watches and MBAs.
But with this proposal, investors would control more than money - they'd control the right to reside and work within the United States.
I don't enjoy being so cynical, but having witnessed the abuses of the H1B, I am absolutely certain that VCs would use this visa to gain power and push around the founders.
I agree 100%. Having the government decide what is a good idea or not for a startup is ridiculous.
A better solution would be to just fix immigration. Adopt something similar to the Commonwealth point system http://en.wikipedia.org/wiki/Highly_Skilled_Migrant_Programm..., where you get points for being young, educated, in a useful profession, etc. Get enough points and you're automatically allowed in.
A system like this would reduce the distortion, and allow talented people into the country to bootstrap or e.g. work at Google.
A system like this would reduce the distortion, and allow talented people into the country to bootstrap or e.g. work at Google.
Also removing worldwide taxation of non-resident income of non-resident citizens. (As in, if I make a million a year living in peru, I don't want to have to pay taxes for the income above $80'000 to the IRS that I made in Peru while I lived in Peru). The US is the only (or one of a very small number) of countries that do this. I do not want to become a US citizen expressively for that reason.
The idea is a good one, but I'm wrestling with the dollar amount that needs to be invested before the founder can get a visa. Specifically, how likely is it that a US venture capitalist will invest $250,000 or more in a startup that's not located in the US (or Silicon Valley for that matter) vs. another startup that is?
Even if the non-US startup will move to the US once they receive funding, the largely intangible advantages bestowed on a startup in the Valley (which I've witnessed in the month that I've lived here) give it a better chance.
To be successful in facilitating the immigration of founders to the US, the founders' Visa should be available to any startup that has received any funding from a "qualified US investor" over $15K, which would include non-US startups accepted into YC.
And to avoid creating a huge immigration loophole (which seems to be the author's rationale for suggesting a "real money" cutoff), perhaps the Visa could have a clause that limits it to two years unless additional capital is secured and the startup is deemed to have "passed muster", at which point a permanent resident visa could be granted.
Even if the non-US startup will move to the US once they receive funding, the largely intangible advantages bestowed on a startup in the Valley (which I've witnessed in the month that I've lived here) give it a better chance.
To be successful in facilitating the immigration of founders to the US, the founders' Visa should be available to any startup that has received any funding from a "qualified US investor" over $15K, which would include non-US startups accepted into YC.
And to avoid creating a huge immigration loophole (which seems to be the author's rationale for suggesting a "real money" cutoff), perhaps the Visa could have a clause that limits it to two years unless additional capital is secured and the startup is deemed to have "passed muster", at which point a permanent resident visa could be granted.
Specifically, how likely is it that a US venture capitalist will invest $250,000 or more in a startup that's not located in the US (or Silicon Valley for that matter) vs. another startup that is?
It might be more likely than you think. If the startup and the founders are solid, and if there is a clear (and most importantly, fast) visa path like the one proposed, I don't think most investors would have a problem. If anything, $250,000 is way too low for a VC, so you might have to find an angel investor instead. Some countries would have an advantage over others, of course, but I don't think it's a showstopper - my first startup, based in Canada, received an offer for funding which would've put us over this threshold.
Even if the non-US startup will move to the US once they receive funding, the largely intangible advantages bestowed on a startup in the Valley (which I've witnessed in the month that I've lived here) give it a better chance.
Can you elaborate? What is the difference, once both startups are in the Valley, and assuming there are no language issues? So many startup founders are already originally from other states or even countries.
It might be more likely than you think. If the startup and the founders are solid, and if there is a clear (and most importantly, fast) visa path like the one proposed, I don't think most investors would have a problem. If anything, $250,000 is way too low for a VC, so you might have to find an angel investor instead. Some countries would have an advantage over others, of course, but I don't think it's a showstopper - my first startup, based in Canada, received an offer for funding which would've put us over this threshold.
Even if the non-US startup will move to the US once they receive funding, the largely intangible advantages bestowed on a startup in the Valley (which I've witnessed in the month that I've lived here) give it a better chance.
Can you elaborate? What is the difference, once both startups are in the Valley, and assuming there are no language issues? So many startup founders are already originally from other states or even countries.
It may be more likely than I think, but what matters is if it is so much more likely that P(Silicon Valley startup getting funding) < P(Canada/foreign startup getting funding), all other things being equal. Do you think that this is the case?
I don't think that every startup needs to be in the Valley to get funding, but what I've witnessed here is a prime example of "it's not (only) what you know, it's who you know". If you have a viable startup, knowing people that have made names for themselves in the startup scene, many of which are based in Silicon Valley, can go a long way towards getting introduced to potential investors, whether they be angel investors or VCs.
I don't think that every startup needs to be in the Valley to get funding, but what I've witnessed here is a prime example of "it's not (only) what you know, it's who you know". If you have a viable startup, knowing people that have made names for themselves in the startup scene, many of which are based in Silicon Valley, can go a long way towards getting introduced to potential investors, whether they be angel investors or VCs.
I don't think we're disagreeing on much. Yes, of course, a startup with better connections in the US has a better chance to get funding from US investors, and it's easier for an US startup to make these connections.
My point is that P(Canada/foreign startup getting funding) is greater than zero even with today's visa situation, and is still large enough to make a visa program worthwhile, even if it is smaller than P(Silicon Valley startup getting funding).
My point is that P(Canada/foreign startup getting funding) is greater than zero even with today's visa situation, and is still large enough to make a visa program worthwhile, even if it is smaller than P(Silicon Valley startup getting funding).
Current waiting time for China and India-born employment-based Green Card application is likely to be 4-5 years.
Many of those applicants are potential startup founders. Sadly they cannot pursue their ambitions due to the long immigration process. Some of them will choose to leave US and found their startups in their home countries.
Many of those applicants are potential startup founders. Sadly they cannot pursue their ambitions due to the long immigration process. Some of them will choose to leave US and found their startups in their home countries.
Speeding up the Green Card process is actually a better solution & also has the greater probability of happening vs granting a founders visa.
Why can't the venture capital go there. Every article on Venture these days says American VCs are looking overseas more than here. Surely they'll find the best and brightest with great ideas and can invest at a better exchange rate by keeping entrepreneurs local. We have more than enough innovation in this country. Our problem is once the idea is proven we can't make an industry out of it without being undercut.
So my question is - if the startup has $250k in funding, why can't they sponsor for an H1B for the founder(s)?
This is the fatal flaw in the program. The whole reason startup culture exists is that we don't have a way of knowing in advance what ideas are really worth pursuing, short of giving them a try. But this program would create a board of experts whose job it would be to try to predict which ideas had a reasonable chance at success.
The obvious outcome would be a huge distortion in the kinds of startups foreign nationals would found. The value of a green card is far higher than the expected value of a startup, so the process would turn into a bad example of grantsmanship - trying to tailor your proposal to what you think the committee wants to see, and then making sure your startup stays solvent long enough for the permanent residency to come through.
Rather than taking real risks and trying to innovate, the role startups are supposed to take in our economy, we would be encouraging an extremely conservative startup culture, whose real purpose would be to secure green card status for the founders lucky enough to get in the program. How likely are you to bet the company if the consequence of failure is getting kicked out of the country?