There has been little to be optimistic about on the immigration reform front, of late. The Dream Act, which would create a path to citizenship for children of illegal immigrants, failed in the Senate last year despite starting with bipartisan support. Meanwhile, skilled immigrants trapped in "immigration limbo" have been voting with their feet. Because we did not provide them with visas, and because of greater opportunities abroad, highly educated workers are returning home to such countries as India and China. As a result, entrepreneurship is booming in those countries and not in the U.S.
But there is hope on the horizon.
Senators John Kerry (D-Mass.) and Richard Lugar (R-Ind.) have just introduced a bill that promises to slow down the outflow of skilled talent and boost entrepreneurship in the U.S. This is an updated version of the Startup Visa Act, drafted early last year, which addresses the original bill's major deficiencies. The new version adds provisions to allow foreign students in U.S. universities and workers on H-1B visas to start companies in the U.S.
The new legislation provides visas to the following groups under certain conditions:
1. Entrepreneurs living outside the U.S. qualify if an American investor agrees to fund their entrepreneurial ventures with a minimum investment of $100,000. Two years later, the startup must have created five new American jobs and either have raised more than $500,000 in financing or be generating more than $500,000 in yearly revenue.
2. Workers on H-1B visas, or graduates from U.S. universities in science, technology, engineering, mathematics, or computer science, are eligible if they have an annual income of at least $30,000 or assets of at least $60,000 and have had a American investor commit investment of at least $20,000 in their ventures. After two years, the startup must have created three new American jobs and either have raised more than $100,000 in financing or be generating more than $100,000 in yearly revenue.
3. Foreign entrepreneurs whose business has generated at least $100,000 in sales from the U.S. After two years, the startup must have created three new American jobs and either have raised more than $100,000 in financing or be generating more than $100,000 in yearly revenue.
The Peril in Failure
Not anyone can sponsor a foreign startup. The investor must be a qualified venture capitalist, a "super angel" (a U.S. citizen who has made at least two equity investments of at least $50,000 every year for the previous three years), or a qualified government entity.
The requirements for allowing a foreigner to stay permanently in the U.S. are quite stringent: His or her business must be successful and have created American jobs. This is a gamble for any potential immigrants—if they fail, they must start again or leave the country. But that's O.K.; this is what entrepreneurship is about, after all. Entrepreneurs take risks and build value.
Bob Litan, the Kauffman Foundation's vice-president for research who helped conceive the idea of the startup visa, told me that he strongly supports the new legislation. "Today we are sending away the job creators. We need to keep them here so we can grow our economy," he says. He says he believes the new legislation contains adequate protections against abuse, yet provides the means for entrepreneurial foreign students and skilled workers to obtain visas that allow them to stay and build companies.
More than half a million doctors, scientists, researchers, and engineers in the U.S. are stuck in "immigration limbo." They are on temporary work visas and are waiting for permanent-resident visas, which are in extremely short supply. These workers can't start companies, justify buying houses, or grow deep roots in their communities. Once they get in line for a visa, they can't even accept promotions or change jobs. They could be required to leave the U.S. immediately—without notice—if their employers lay them off. Rather than live in constant fear and stagnate in their careers, many are returning home. So are the foreign students who dominate our graduate and postgraduate science and engineering programs.
This legislation offers all of them a chance to stay if they take the entrepreneurial path. It will likely open the floodgates to immigrant entrepreneurship. I expect to see thousands of new startups, a handful of which may become a Google or an Apple. The really good news: Unlike the billion-dollar bailouts and government subsidies we are used to, this program will cost taxpayers nothing.