Feb 24, 2014 - 2:15pm

Brain Drain: Broken U.S. Visa System Drives Start-Ups To Other Countries

In America’s start-up culture, immigrants play a vital role in launching and sustaining new companies. But the broken U.S. immigration system is stifling that dynamic—an ominous sign for the nation’s ability to compete on the global stage.

Vivek Wadhwa, an entrepreneur and author of “The Immigrant Exodus,” notes that the percentage of Silicon Valley start-ups founded by immigrants has actually declined since 2005. The top reason, he says in an interview with NPR, is “because we won’t give the foreign people who are already here visas to start companies.”

Wadhwa points to the example of Anand and Shikha Chhatpar as a cautionary tale. The Chhatpars are Indian engineers, educated at the University of Wisconsin-Madison, who launched the company Fame Express to build Facebook apps. The company thrived, but the couple couldn’t navigate the muddled U.S. visa process to obtain permanent residency.

“So now they’re living in India, paying Indian taxes employing Indian workers,” Wadhwa tells NPR. “It’s a big loss for America. This is the stupidity of our immigration system.”

It’s well-documented that immigrants to the United States have a strong record of entrepreneurship, launching businesses and creating jobs at a surprisingly high rate.

In a 2013 study by the National Foundation for American Policy, immigration scholar Stuart Anderson points toward the growing “economic influence” of foreign-born entrepreneurs in the U.S. economy. He found that from 2006-2012, 33 percent of venture-capital-backed companies that went public in the United States had at least one immigrant founder, including well-known companies like Facebook, LinkedIn, Zipcar and Tesla Motors.

But less scrutiny has been given to the U.S.-educated entrepreneurs who take their energy and expertise abroad to create companies elsewhere. Many of these entrepreneurs might prefer to live and work in the United States, but the broken U.S. immigration system throws up significant obstacles.

Consider the example of engineer Richard Choi, who left his native South Korea to attend school in the United States in 2002. Choi aspired to start his own company. But, like the Chhatpars, he couldn’t navigate the minefield of U.S. visa laws, as he tells Inc.com:

Choi thought about starting a company after graduation, but he had a problem: His student visa had expired. He didn't have the $1 million in cash necessary to qualify for an investor visa, so he figured his only option would be to get a job and hope that his employer would sponsor his application for permanent residence. He went on a dozen interviews at American medical-device companies, but none were interested, and he finally enrolled in a master's program at Cornell to stay for another year. When it was over, he gave up on the States, returned to Korea, and took a job at the pharmaceutical division of SK, one of the country's largest conglomerates.

That was just a pit stop for Choi, who later started his own company developing smartphone apps—a company that might have been headquartered in the United States if the nation’s immigration policy were more rational.

Or consider the case of Lifestock, a biotech start-up established to develop humane cultured-meat products from stem cells—essentially, growing meat in a lab. The company is likely to take its business elsewhere, due to the Silicon Valley research team’s disparate citizenship origins.

“The [Lifestock] team includes members from Canada, Russia, Australia, Greece, Italy and the U.S.,” explains a report in Entrepreneur.com. “Because of the difficulty that most of them would face securing U.S. visas, they will likely continue their research outside the U.S., taking their innovations with them.”

Washington’s failure to move on common-sense immigration reforms is only exacerbating the problem. Meanwhile, other countries aren’t standing still in the race to attract job-creating talent. For example, in March 2013, the Canadian government launched a new “start-up visa” aimed at attracting entrepreneurs looking to start companies.

“Canada is open for business to the world’s start-up entrepreneurs,” Jason Kenney, Canada’s minister for citizenship, immigration and multiculturalism, said in announcing the start-up visa. “Innovation and entrepreneurship are essential drivers of the Canadian economy. That is why we are actively recruiting foreign entrepreneurs - those who can build companies here in Canada that will create new jobs, spur economic growth and compete on a global scale - with our new start-up visa.”

U.S.-based entrepreneurs continue to sound the alarm. Alex Mehr, one of the founders of the online dating site Zoosk.com, left his native Iran to study software engineering at the University of Maryland. When launching Zoosk, he was determined to do so in the United States—but he warns that many promising young entrepreneurs today won’t make the same decision.

"You're losing them to Canada, or Germany or the U.K.," Mehr says in a 2012 interview. "They're going elsewhere because of the immigration policy. These are the type of people who would be entrepreneurs. To me, that's a loss for this country."




More Articles On: 

About the Author

About the Author

Freelance writer