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The U.S. Immigration System and a Workaround for Immigrant Entrepreneurs

An Overview of the U.S. Immigrant System

The United States has long been the country of choice for talented and ambitious immigrants. Immigrant entrepreneurs, in particular, are drawn to tech and entrepreneurial hubs such as Silicon Valley. There, celebrated tech visionaries such as Sergey Brin (born in Russia), Jerry Yang (born in Taiwan), and Elon Musk (born in South Africa) built iconic American companies such as Google, Yahoo, and Tesla, all of which have changed the way the world lives and works. Indeed, more than half of the country’s unicorn companies had at least one immigrant co-founder, and a quarter of engineering and technology startups had at least one key immigrant co-founder.

But to immigrate to the United States is not a simple matter. Under existing law, aspiring and established entrepreneurships can apply to one of several visa categories that would allow them to live and work in the United States. These include the following:

  • EB-1A Extraordinary Ability
  • EB-1C Multinational Manager/Executive
  • EB-2 National Interest Waiver
  • EB-5 Immigrant Investor Program

However, many of these visas are subject to strict caps and can come with strict requirements. The EB-1A visa for extraordinary ability, for example, can be granted to individuals to who have won prestigious awards such as Nobel Prize or an Olympic Medal or have made “original scientific, scholarly, artistic, athletic, or business-related contributions of major significant to the field.” The EB-5 Immigrant Investor Program, similarly, requires applicants to inject at least $500,000-$1 million in capital into the U.S. economy, with the expectation that their investment will create at least 10 qualifying full-time jobs.

Because these prerequisites would preclude most applicants, except for those who are already highly accomplished and successful in their chosen fields, most immigrants resort to the H-1B visa, a common but highly sought-after visa that is sponsored by companies for skilled labor. However, each year the cap of 85,000 visas (65,000 for individuals with job offers and an additional 20,000 for those with advanced degrees from U.S. universities) is filled within days of the application process opening. In addition, the Trump administration has increased the scrutiny applied to H1-B visa renewals and is planning to stop granting work permits to the spouses of H1-B visa holders.

 

Entrepreneurs-in-Residence

In response to these strictures, many have called for the creation of a “startup” visa, which would empower immigrant entrepreneurs to try and start their own businesses, rather than coming to the United States bound to the employer who sponsored their H1-B visa.

Until that happens though, the next best possible chance for immigrant entrepreneurs may be H1-B visas sponsored by universities through the H1-B program. Unlike company-sponsored H1-B visas, which are capped at 85,000, universities may sponsor an unlimited number of foreign-born entrepreneurs through what many are calling Entrepreneurs-in-Residence. The university technically employs the entrepreneur, who is required to complete a limited amount of mentoring, teaching, or advising. During their spare time, however, they are able to work on their own business ventures. One of these programs, GlobalEIR, currently works with seven universities to host entrepreneurs-in-residence, and to-date they have been able to secure visas for 42 entrepreneurs who have raised $29.9 million and hired 123 jobs.

The GlobalEIR program and others like them have now expanded to 14 university partners across six different states. Entrepreneurs interested in these visas should hurry to apply. Senator Chuck Grassley (R-Iowa) has recently taken notice of these programs and called them a “cynical exploitation of loopholes in the law,” which means that they may soon fall victim to the Trump administration’s attempts to reduce the number of immigrants allowed into the United States.

 

To learn more about some of the currently available programs, check out some of these sponsoring universities:

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Donald Trump and Start-Ups

Hillary Clinton received 64 million (and counting) votes in the 2016 Presidential election and one of the driving factors behind that was the uncertainty of policies in a Trump presidency. However, as the dust settles and Americans face the inevitable, we need to start to look at exactly what Trump’s America is going to look like. This post discusses the potential changes Trump’s policies have in two major areas of start-up law: trade and immigration. Many worry that the broad, sweeping language of Trump’s campaign does not bode well for Silicon Valley.

 

Potential Trade Impact

A large portion of Trump’s campaign was spent attacking U.S. trade policies — including the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP) — and promising to slap high tariffs on (mainly Chinese) imports. The reneging of trade agreements and the imposition of high tariffs could have potentially devastating effects on Silicon Valley. The tech industry is very reliant upon cheap labor in Asia (including China, Vietnam, and Taiwan) to mass produce all components for smartphones, robots, computers, and tablets. An iPhone 7 is currently costs a minimum of $649 (plus tax) and one can only imagine how a steep tariff or forced manufacturing in the U.S. would affect the price. After all, the consumer will surely bare the cost of Trump’s policies. As CNN Money reports, manufacturing jobs pay an average of $20.17/hour—almost three times the federal minimum wage of $7.25/hour. Another issue with the promise to bring manufacturing jobs back is that those jobs are not great jobs to begin with—with manufacturers earning a little over $53,000 per year, putting them firmly in the lower middle class. Compare this to workers in China who, according to China Labor Watch, earn about $750/month with overtime.

Even though NAFTA, enacted in 1994, actually increased the amount of manufacturing jobs in the United States, Trump is correct about manufacturing being drawn away from the U.S. CNN Money reports that the U.S. has lost 5 million manufacturing jobs since 2000. However, this is a general trend that goes back to the 1960s. At that time, manufacturing jobs made up 24% of the labor market; this decreased to 19% in 1980; to 13% in 2000, and now to just 8% in 2016. However, the problem with Trump’s thesis is that technology has taken on a huge role in the manufacturing sphere — with robotic manufacturing becoming more and more the trend and the jobs associated with those robots requiring more and more education — leaving those who are not educated even less likely to find jobs.

This trend has even taken place in China where we see companies like Foxconn Technology, best known for their mass production of Samsung and Apple parts, replacing as many as 60,000 workers with robots in just one factory alone. As the Washington Post explains, “[This] is the natural dynamic by which market economies become richer as productivity improves. Improvements in agriculture productivity led to a wave of migration of farm workers to cities, where they provided the manpower for an industrial economy that eventually became so productive that we could afford to buy more health care, education, and yes, government.”

In short, Trump’s promises to limit trade are going to be more helpful as campaign rhetoric than actual policies. Manufacturing in other countries gives U.S. consumers and businesses access to low priced goods, which in turn drive the price of those goods down in the U.S. market. These policies have a chance to have a devastating impact on the American economy as a whole, but especially for Silicon Valley technology hardware firms.

 

Immigration and Visas

Another one of Trump’s main issues was immigration; more specifically, the need to limit future immigration and reverse past immigration. Silicon Valley as a whole has pushed hard to expand the use of H-1B visas beyond the 85,000 cap. The H-1B visa is a non-immigrant visa that allows U.S. companies to employ “foreign graduate level workers in specialty occupations that require theoretical or technical expertise in specialized fields such as in IT, finance, accounting, architecture, engineering, mathematics, science, medicine, etc.” To obtain an H-1B visa, an employer must offer a job to the worker and apply for a H-1B petition with the U.S. Citizenship and Immigration Services.

Silicon Valley relies heavily on immigrants — according to Bloomberg News, over 50% of U.S. tech startups valued at $1 million or more have at least one immigrant founder. Additionally, immigrants are heavily involved in the workforce in Santa Clara and San Mateo counties, which are prominent in Silicon Valley. Bloomberg reports that over two-thirds (67.3%) of the workforce in computer and mathematics fields are foreign-born, 60.9% in architecture and engineering, 48.7% in natural sciences, 41.3% in medical and health services, 41.5% in financial services, and 42.7% in other occupations. In short, immigrants make up a substantial portion of all workforce areas in Silicon Valley.

This is in addition to the so-called “startup visas,” which the Obama Administration pushed through without Congress. These visas are given to entrepreneurs who own at least 15% of a U.S. startup, and who can demonstrate the company’s growth potential, have investments from qualified U.S. investors, and provide a “significant public benefit” to the U.S. Visas are granted for two years, but the recipient can apply for an additional three years as the company proves its benefit to the American public. The recent announcement of these startup visas was well received in the tech world.

Trump has flip-flopped back and forth on whether H-1B visas are a way to bring in skilled workers or a way to bring in cheap international labor. According to the Verge, workers on H-1B workers had a median salary of $75,000 as of two years ago. In the Verge, Economist Rob Atkinson argued that the most likely outcome in a Trump White House is that “H-1B visas “will be restricted, limited, and harder-to-get” and that tech companies will “have to go through more hoops to prove there’s not an American that can get the job.” Trump’s tough talk on immigration and handing visas to skilled workers could eventually have the effect of sending jobs outside the country. If the U.S. government prevents Amazon and Microsoft from hiring the best engineers, it is only logical that they might look to set up bases in other countries (such as Canada) where their access to the world’s talent pool would not be limited.

 

Conclusion

Donald Trump’s rhetoric regarding trade and immigration in his campaign have many worried about the impact his policies will have in Silicon Valley. Silicon Valley (and the tech industry as a whole) rely heavily on cheap manufacturing abroad and imported brain power to fuel the tech industry. A fight to keep manufacturing alive in America despite its inevitable death could just wind up costing the U.S. in the form of higher priced goods. And an attack on immigration fueled by the H-1B visa could “brain drain” the U.S. and drive some of the most innovative minds (and their companies) away from the U.S.