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Kauffman Studies Show Immigrant Entrepreneurs Make Economic Contribution to the USA

Here at the Seattle immigration Law Office of Bonnie Stern Wasser, we enjoy working with entrepreneurs. Whether owned by Americans who seek to hire global foreign talent, or foreign nationals seeking to open or expand a business in the U.S., it is important for entrepreneurs to understand the range of business immigration options and startup visas for employees, executives and investor entrepreneurs as well as the impact they have on the local and national economy.

The Kauffman Foundation just released two new reports on immigrant entrepreneurs. The first one is The Economic Case for Welcoming Immigrant Entrepreneurs. The report confirms that immigrants make up a disproportionately higher rate of entrepreneurs than U.S. born owners of startups. A statistic from 2010 shows that 40% of Fortune 500 companies were started by immigrants or first generation Americans. In 2012, there were twice as many immigrant entrepreneurs than native-born Americans, with 27.1% of them being immigrants in 2012, up from 13.7% in 1996. Among engineering and technology companies started in the U.S. between 2006 and 2012, 25% had at least one key founder who was an immigrant.

In terms of job creation and economic impact, the Kauffman study found that:

  • “Immigrant founded engineering and technology firms employed approximately 560,000 workers and generated $63 billion in sales in 2012.
  • 24 of the top 50 venture-backed companies in America in 2011 had at least one foreign-born founder.
  • Immigrant founders from top venture-backed firms have created an average of approximately 150 jobs per company in the United States.”

In the second Kauffman report, Lessons for U.S. Metro Areas: Characteristics and Clustering of High-Tech Immigrant Entrepreneurs, the authors found that 20% of the high-tech work force is made up of immigrants, while 17.3% of high-tech entrepreneurs were immigrants between 2007 and 2011, up 13.7% percent and 13.5% percent, respectively, from 2000.

In the last decade, there was a 64% increase in the number of self-employed immigrants in high-tech industries compared to a 22.6% increase of U.S.-born self-employed founders in high-tech. Of the immigrant entrepreneurs in the study, most were working in the fields of semiconductor, other electronic component, magnetic and optical media, communications, audio/video equipment, and computer science-related sectors, with these concentrations of high-tech primarily in 25 cities (including Seattle and Portland here in the Northwest).

Foreign Entrepreneurs in Washington State
Here in Washington, another report, Washington: Immigrant Entrepreneurs, Innovation and Welcoming Initiatives in the Evergreen State by the American Immigration Council Policy Center shows:

  • “From 2006 to 2010, there were 45,696 new immigrant business owners in Washington, and in 2010, 15 percent of all business owners in Washington were foreign-born.
  • In 2010, new immigrant business owners had a total net business income of $2.4 billion, which is 13.1 percent of all net business income in the state.
  • Washington is home to many successful companies with at least one founder who was an immigrant or child of an immigrant, including large companies such as Nordstrom, Weyerhaeuser Company, Costco Wholesale, and Amazon.com. Those four companies together employ over 250,000 people and bring in $180 billion in revenue each year.
  • In 2010, the foreign-born share of business owners was 19 percent in the Seattle metropolitan area. In the case of Seattle, the immigrant business ownership rate was higher than the foreign-born share of the total population.”

Solutions Needed for Entrepreneurs
The problem with the existing business visa system is that many of the categories do not fit entrepreneurs as easily as they should. For example, some of the categories that seem on the surface to be the easiest to qualify for, for example, the H-1B for specialty occupation workers, requires an “employer-employee relationship.” Although there are ways for owners, equity workers and inventors to participate, it takes extra work and compromise in business formation to make this category fit for entrepreneurs. Other categories, such as the E-1 or E-2 treaty trader or investor visa are country specific requiring the majority owners to be from certain countries. And our investor visa categories make it difficult for venture capital companies based in the U.S. to have larger stakes. Moreover, the EB-5 permanent investor green card category requires either $500,000 or $1,000,000 invested per foreign investor needing EB-5 and the creation of at least 10 jobs per EB-5 investor. This program doesn’t accommodate the smaller investor/entrepreneur; nor does it accommodate third party funders in an easy manner. Finally, many of the bachelors and masters degree green card categories require recruitment of U.S. workers through a process called labor certification or PERM. PERM does not accommodate significant owners of businesses if the owner cannot be fired, making it rather unusable for significant equity owners. Despite these issues, there are other feasible visa opportunities for immigrant entrepreneurs if planned properly with an immigration expert.

There are a few “Start-Up Visa” bills pending in Congress that would 1) create new visa categories for small start-ups, 2) permitting investment to be sourced not only from the creator but also venture capital firms and reinvestment of revenues, and 3) permit foreign students to more easily transition from school and practical training to a start-up visa, and 4) smaller initial job creation minimums. Notably, a version of these fixes appear in the Senate bill passed last June, S. 744. Similar provisions appear in the House version, H.R. 15, that has never been voted upon. Other stand alone bills with various fixes to the business immigration categories include the H.R. 2131, The Skills Visa Act, H.R. 714, StartUp Act 3.0, S. 189 StartUp Act, and S. 310 StartUp Act 3.0