Magazine

The New Face of Immigration


Mention immigrants and entrepreneurs in the same breath, and some people are more apt to think of a greengrocer or a restaurant owner than the likes of India-born Vani Kola. The 36-year-old engineer came to the U.S. as a college student in 1985 and sold her first U.S. company, RightWorks Corp., last year for $667 million. And few people will picture someone like Ilya Talman, who emigrated to Chicago two decades ago from the Soviet Union and is now a card-carrying capitalist who owns a $3.5 million tech recruiting firm. Colombian Yolanda Zambrano doesn't fit the stereotypes either. Since her arrival 10 years ago, she has transformed a piddly $100,000-a-year travel-reservations office she purchased in Worcester, Mass., in 1992, into a $5 million full-service travel agency.

Certainly the old ways are alive and well. Across the country, immigrants with entrepreneurial leanings are starting small retail or service businesses, just as they always have. But they have been joined by a new breed of foreign entrepreneurs: experienced professionals who arrive with not just skills but sometimes capital, too. The number of so-called investor visas, the L-1 visa issued to investor-entrepreneurs since 1970, has more than tripled over the past decade, from 14,342 in 1990 to 54,963 last year (chart).

GLOBAL ELITE. Attracted by the booming economy of the '90s and a less regulated business environment than that of their home countries, these new immigrants have created companies that push aggressively into the business mainstream. "This is a fast-moving, highly educated, New Economy, global elite," says Frank Sharry, executive director of the Washington-based National Immigration Forum, a pro-immigration advocacy group.

Perhaps no immigrants have had a greater impact than newcomers from Asia, who have dramatically changed the face of the U.S. technology business. In Silicon Valley, for example, Indian or Chinese entrepreneurs have founded one in four tech companies since 1980, according to a 1999 study by Anna Lee Saxenian, professor of regional development at the University of California at Berkeley. And from 1995 to 1998 alone, they represented 29% of the startups. Their effect on the economy has been "nothing short of transformational," says Sharry. In 1998, these 2,775 Asian-owned companies generated $16.8 billion in sales--17% of all sales from Silicon Valley's high-tech firms. And they employed more than 58,000 people, about 14% of all tech employees in the Valley.

While past generations of immigrants struggled for acceptance, the new immigrants fit more easily into an increasingly diverse, and accepting, America. Thanks in part to immigration laws that have become more liberal in the past 25 years, the influx of foreigners has soared to the highest level in a century--about a million people a year. Today, one out of ten people in the U.S. is foreign-born and one out of every four is a person of color, according to the 2000 Census. "That dynamic makes it easier for immigrant entrepreneurs to put down roots and penetrate the market," says Robert L. Wallace, president of the BiTH Group Inc., a consulting firm in Columbia, Md.

Indeed, across the board, immigrants are more likely than native-born residents to become entrepreneurs. For instance, 11.6% of immigrant men and 7.2% of immigrant women had their own businesses, vs. 10.4% of native-born men and 5.6% of native-born women, according to a study of 1990 Census data--the most recent available that includes incorporated businesses--by Robert W. Fairlie, professor of economics at the University of California at Santa Cruz. That year, immigrants ran about 900,000 businesses, Fairlie says.

Why are immigrants more entrepreneurial than native-born residents? Demographics give one clue: More immigrants than native-born Americans fall into the prime age range for launching a businesses--25 to 44 (chart). And almost half of all immigrants--compared to a quarter of native-born Americans--live in urban centers where there's greater access to customers and markets. Then there's the personality factor. The very qualities that lead immigrants to leave home are common to entrepreneurs. Notes Stephen Moore, senior fellow at the libertarian Cato Institute in Washington: "They are self-selected on the basis of risk-taking, motivation, and ambition."

Certainly that's the case with Kola, Talman, Zambrano, and the other entrepreneurs profiled below. What sets them apart is how they've managed to tap into their immigrant roots and perspectives to nourish and build their businesses.

A CAPITAL NETWORK

Vani Kola left her native India in 1985 to study computer and electrical engineering at the University of Iowa. You'd think that by the time she tried to launch her first startup a decade later, her American degree and her work experience as an engineer in Minnesota would have been her calling cards. In fact, her American credentials made her just like everyone else pitching high-tech businesses to venture capitalists in Silicon Valley and coming up dry. What finally put her over the top? Making the most of her Indian heritage and the powerful networking opportunity it afforded her.

Through her Indian connections, Kola heard about an influential networking group of South Asian entrepreneurs called The Indus Entrepreneurs (TIE) in Santa Clara, Calif. She pitched them her business plan for RightWorks, a company that would produce an e-commerce software product for business-to-business transactions. Kola says she found TIE's members were high-caliber people willing to give plenty of time--and apparently money: She raised more than $3 million in seed funding from TIE investors. "Vani's degree of tenacity and focus is among the best I've ever seen," says Suhas Patil, a veteran TIE member who mentored Kola and invested in RightWorks.

Thanks to that first round of funding, which helped her build credibility with investors, Kola went on to raise more than $60 million in venture funds. In the end, the payoff was huge. Last year, Kola sold RightWorks, a 350-employee, $40 million company, to ICG for $667 million. (She declined to disclose her stake in the business.)

After the sale, Kola was ready to call it quits. "I had done what I wanted to do with the company," she says. "I had had all the travel and aggravation I could handle, and I thought, I'm never going to be a CEO again." But a few months later, after backpacking in Alaska and traveling with her two daughters to India, Kola was back in the Valley. Inspired by discussions with TIE members, she launched NthOrbit, which is developing software for supply-chain management. Some TIE members have even joined the NthOrbit management team.

Kola has shown her gratitude to this 5,000-member worldwide networking powerhouse by becoming a TIE mentor herself. "The biggest joy I get is in creating. And it's looking to the future that makes me a good entrepreneur."

TRAVELING TO THE TOP

Colombian Yolanda Zambrano may be an accidental entrepreneur, but there is nothing haphazard about her efforts to build a thriving business that takes full marketing advantage of her own ethnic niche.

Zambrano, who had worked in a travel agency in Colombia and started studying accounting in college there, came to Worcester, Mass., as a newlywed in 1990. In the beginning, she spent most of her time learning English in the hopes of continuing her college studies. But two years later, she seized the chance to help out an acquaintance in a local travel reservations office. Just three weeks after that, the owner, a fellow Colombian, offered to sell her the business. Surprising herself, Zambrano took the bait. "I didn't have the money or the experience. I had never even thought about this," she says. "But then I thought, well, why not?"

Putting down a $2,000 deposit with her husband, she agreed to pay an additional $12,000 in installments. Zambrano could easily have followed the path of the previous owner--taking in reservations and then completing the transaction with a larger, licensed agency that could issue the tickets. But it wasn't long before Zambrano sensed the opportunity to use her bilingual advantage to turn this little $100,000-a-year operation into something much bigger. Her goal: to offer travel packages to Latin America with everything from airline tickets to tours, hotel reservations, and money-transfer services. First, she had to scrape together $20,000 to apply for a license as a full-service travel agency--by borrowing from her mother-in-law, maxing out her credit cards, and securing a small-bank loan. "I was awake till 3 a.m. every night for three months filling out the 50-page application form for the license," Zambrano says. "I just couldn't spare another $5,000 to pay a lawyer to handle it."

Then, while she waited for the license, disaster struck: A big bilingual travel agency opened up across the street, siphoning off most of her business. But Zambrano, working solo, held on--just barely--thanks to a handful of loyal clients. Once she got her license, however, in November, 1994, Zambrano began to hire employees and she recaptured old customers by emphasizing her personalized service. To bring in new ones, she vigorously networked through local Hispanic organizations.

Within five years, Zambrano built Alpha Travel Agency into a thriving $5.5 million business. She kicked off 2001 by winning the Small Business Administration Minority Enterprise Development Week Small Business Person of the Year award for New England. In April, she opened a new branch in Southbridge, Mass. What's next? Targeting African immigrants and African Americans, she has started offering travel packages and money-transfer services to Africa.

THE HOMETOWN ADVANTAGE

"I've always had a sense of guilt towards Pakistan from being part of the brain drain," says Rashid Khan, who headed to Cambridge, Mass., in the 1970s to study computer science at Massachusetts Institute of Technology and chose to settle in the U.S., rather than put his skills to use at home. Now a successful entrepreneur, he doesn't feel guilty anymore, thanks to the strong ties he has forged with Pakistan.

Khan went on to earn two graduate degrees, including an MBA from Harvard Business School, and started two companies, including Boston-based Sintech Inc. in 1983, which he sold for $5 million in 1988. Now, Khan is running his second company, Ultimus Inc., which makes workflow-management software, from his North Carolina headquarters. But for product development Khan depends on his 35-person satellite office in his hometown of Rawalpindi, near the capital, Islamabad. "Ultimus today would not exist without the Pakistan office," he says. While Khan's software developers are paid competitively by Pakistani standards, he says he is reaping huge savings on labor costs, helping to make his company profitable and debt-free.

How is Pakistan benefiting--beyond the jobs Khan has created? Khan provides an internship program and intensive on-the-job training. "There's an excellent pool of talent there," Khan says."They are like uncut diamonds."

THE LANGUAGE OF SUCCESS

When soviet emigr? Ilya Roitelman left his native Kiev and headed for Chicago in the 1970s, he wanted nothing more than to start a business and put Communism far behind him. Like many immigrants before him, he tried to fit in by changing his name. When he became an entrepreneur, he split his last name in two and dubbed his company Roy Talman & Associates. "I changed the Telman part to Talman so I could say, `It's Talman, just like the bank,"'--the Chicago-based Talman Savings & Loan Assn. But he also would learn a valuable lesson of capitalism along the way: To succeed, a business must stand out from the crowd.

Talman earned his MBA at the University of Chicago. In 1982, while still a student, he and a partner launched a software business to computerize employment agencies' records. When customers didn't materialize, they used the software to launch their own recruiting firm, focusing on administrative staff. That business also languished. Next, on his own, he tried recruiting in technology--his real area of expertise. Finally, he could offer his clients something unique. The big payoff came in the late '90s, as the demand for tech professionals exploded. From 1998 to 2000 alone, Talman's revenues doubled to $3.5 million. The recent tech downturn, he says, has been "challenging," and his revenues are down 18% this quarter. But Talman isn't worried: "I still remember that sinking feeling in my stomach when I was trying to get out of the old Soviet Union," he says. "After that, I'm not going to lose sleep over this."

POWER BROKER

Abdo G. Sabban, who fled war-torn Lebanon in the late 1970s, learned quickly that being an immigrant in America cuts both ways. When he arrived with $250 in his pocket, his Arabic easily landed him a teaching job at Berlitz. Later, he brought Lebanese performers to the U.S. And in the late 1980s, when he finally fulfilled his goal of starting his own real estate business, he picked up an Arab clientele without much sweat. But branching out beyond his ethnic community meant facing prejudice head-on. One prospective client told him he'd "never do business with an Arab."

Sabban never forgot that stinging comment, but it didn't stop him from pushing into the mainstream. "I knew I could be the master of my own destiny with my own business," he says.

In the '90s, as real estate development took off in the Washington area, Sabban expanded his sales force and his clientele. He hired a number of American brokers, who brought in American clients, although his personal clients are still mostly Arab. Sabban says he doesn't encounter prejudice anymore. Today, his brokerage serves U.S. senators and prominent businesspeople in Washington. Last year, his firm participated in the $2.85 million sale of a Washington house to the Clintons. Just goes to show, even if an immigrant can't become President, there's nothing to stop him from doing business with one.

ANGELS FROM ASIA

Retired from a long career in investment banking at Bank of America and Lehman Brothers Inc. in Singapore, Francis Khoo had thought he would relax into the life of an angel investor. But things weren't working out at one of his companies, Agat? Technologies Inc., a Cerritos (Calif.) startup that was developing a portable hard drive.

The company had eaten through most of its cash, so Khoo called upon his extensive network of Asian investors to save the day. He managed to raise $8 million in two months. But Khoo felt Agat? needed more than fresh capital--it also needed his business experience. So Khoo rolled up his sleeves, obtained an L-1 visa for investors, and moved to California to run the company. "This was a challenge I couldn't refuse," he says. Khoo's global vision was to join ideas and capital from Asia with Silicon Valley's dynamic tech environment. "It's a good combination," he adds.

Under his leadership, the company successfully launched the Q drive, a tiny, portable hard drive the size of a door key, late last year. In the first three months of this year, Agat? sold 15,000 units. Agat? projects sales of 150,000 to 200,000 units by yearend through partnerships with companies such as Compaq Computer Corp. Will Khoo return to Singapore someday? Perhaps. He hopes to set up an Agat? office there in the future. For now, East and West are meeting in California. By Naween A. Mangi


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