Riptides: An ABS Ventures Blog

April 10, 2012

Innovation Immigration

ImageWith the upcoming Presidential election, the debate will begin again on comprehensive immigration reform. Much of that debate will likely center on illegal immigration. But for those of us in the startup/venture world, it is the immigration policies related to skilled foreign nationals where the focus is most needed. The current rules and regulations that govern whether a skilled foreign professional can legally work in the United-States have an impact on the country’s ability to compete globally. If the U.S. wants to maintain its status as the world’s leading innovator, changes need to be made. The world’s leading innovator has an immigrant dilemma.

According to a fascinating study by the National Venture Capital Association (NVCA), over the past 15 years immigrants have started 25% of U.S. public companies that were formerly venture backed. In addition, more than 50% of the employment generated by U.S. public venture-backed companies has come from immigrant-founded companies including companies like Intel, eBay, Yahoo!, Sun Microsystems, Juniper, NVidia and Webex.

There is no question that immigrants have played an important role in driving many of the major innovations that have occurred in the technology, manufacturing and medical sectors—all important and fast-growing areas of the U.S. economy. But as the study demonstrates, the contributions are hardly inevitable.

There are signs that current immigration laws are inadvertently having a stifling effect on innovation. The principal visa used by startups to hire skilled foreign nationals is the H1-B. This visa can be used to employ a skilled foreign national for up to six years. It is important for U.S. employers because it is not practical to hire someone on a green card since the wait is usually 4 or more years. The problem is that Congress originally set a low annual limit for these visas back in 1990 and has increased their number sporadically since then. In almost every year of the last decade, employers have expended the entire quota of H1-B visas prior to the end of the fiscal year. And in most of the past few years, the visas were fully allocated prior to the start of the upcoming fiscal year!

For startups, CEOs and investors, the inadequate number of available visas has led to a number of problems. According to the NVCA study:

  • Companies using H1-B visas said the lack of an adequate amount of visas had negatively impacted their company when competing against other firms globally
  • Companies feel that the lack of visas for skilled professionals has influenced their decision to place more in facilities abroad
  • More than two-thirds of immigrant entrepreneurs agreed that US immigration policy has made it more difficult than in the past to start a business in America

At ABS, we have seen these issues first-hand in portfolio companies. At times, CEOs have needed to hire engineers with specific skillsets but could not hire willing, qualified foreign nationals because there were no available visas. This is frustrating and counterproductive, as skills shortages lead to product delays which then cascade through an organization creating many other issues. This is not a good state of affairs if we want the U.S. to maintain its tech lead.

The restrictive policies on high-skill immigration are leading to more innovation happening outside of the U.S. To be sure, this is not caused entirely by U.S. immigration policy, but it is clearly a major contributing factor. In today’s fast-paced global economy, many other countries – not just a few – are vying for the brightest and talented individuals.

While the U.S. might be the first choice for most, it is no longer the only choice. And the alternatives are getting better and better as a result of continued advances in technology and the availability of capital globally. Increasingly, foreign entrepreneurs that would have started have in starting businesses in the U.S. are choosing to do so elsewhere. The result is that businesses that would have created a multitude of U.S. jobs, generated taxes for local, state and federal government and other benefits are foregone. This is unfortunate and short-sighted.

Of course, there is a balance needed to ensure that immigration policy is not unfairly taking jobs away from Americans. And there are valid concerns around this which should be addressed. But in the technology sector, there does not appear to be enough Americans with the requisite skills/experience to fill the jobs that are available (this brings up a whole separate set of issues relating to the status of math and engineering education in this country—alas, a topic for another blog).

In the end, a balanced approach to skilled foreign national immigration can be found that will eliminate the current frustrations of startups, their management and investors. Otherwise, we might need to get used to seeing the next Google, Facebook or Cisco coming out of Bangalore or Shanghai—with the U.S. watching from the sidelines.

What have your experiences been related to hiring skilled foreign nationals for your business? If you are on a visa and working for a startup, what has your experience been like? Are there other immigration issues relating to entrepreneurship that should be addressed?

Note: The NVCA Immigration study mentioned above, titled  “American Made- The Impact of Immigrant Entrepreneurs” can be found here.

December 9, 2009

Notes from a Successful New England Venture Summit – 2009 Edition

Sanger 70x70I think one would have that yesterday’s New England Venture Summit in Dedham was one of the more successful east coast venture events of 2009. Kudos to Joe Benjamin and his team at YoungStartup Ventures for producing a conference which had great energy. Judging by the estimated attendance at the door, the event also appeared to have had a record turnout, in spite of all the uncertainty currently permeating the venture industry.  The panels were good, the presenters on a whole quite solid. It was really a pleasure serving again as co-chair for the event.

Although I haven’t had a lot of time to process my thoughts coming out of the Summit, here are a few of my first-blush takeaways. (more…)

December 2, 2009

2009 New England Venture Summit – Last Day for Online Registration!

Filed under: ABS Ventures — Jim Sanger @ 12:00 pm

Sanger 70x70Just wanted to remind everyone that today is the last day to register online for this year’s edition of the New England Venture Summit, being held next Tuesday, December 8 at the Hilton Boston-Dedham.  With the Boston region’s resilient innovation community showing clear signs of bouncing back, it should be an exciting event.

I understand that places are almost sold out.  However, as Co-Chairman of the event, I’m able to offer readers of my blog a special discount of $200 off the current rate — feel free to use the following code and you’ll save $200 off the current fee.   Discount Code: “absventures”

But this is for today only.

To register now and confirm your place visit, follow this link:

Hope to see you at the event!

October 26, 2009

Qualys CEO on SaaS and Cloud Computing

Sanger 70x70Philippe Courtot, CEO of Qualys, recently penned a nice piece on SaaS and cloud computing for IT Advisor, the official journal of the UK’s National Computing Centre. IT Advisor is not widely distributed in the States, so I thought I’d give it a mention here. (more…)

September 30, 2009

Is IT Spending Ready to Bounce?

Sanger 70x70At the Dow Jones PEA Conference a couple weeks ago, Jim Breyer gave an interview in which he questioned the short-term optimism that has swept up many observers of the current economic recovery. But Jim also noted that, over the longer term, pent up demand will lead to a surge in IT infrastructure spending, as corporate IT budgets loosen again. Jim felt that this surge, starting perhaps as soon as next year, will be particularly good for those mid-stage venture-backed companies positioned to take advantage of it.

My sense of what’s happening with our own portfolio companies suggests a similar perspective. (more…)

September 29, 2009

Why M&A Will Lead the Way

Bill Burgess 70x70There has been much discussion over the last several years lamenting the state of the IPO market and the trauma of taking a company public. The prevailing wisdom is that the cost of going public (SarbOx, etc) and the unattractiveness of the market are forcing companies to sell out. It is a sad story but only partially true. (more…)

September 10, 2009

Puttin’ on the Hits (Part 3): The Impact of Hit Centric Venture Capital on Tech Companies

Sanger 70x70Extending the argument I’ve made in previous posts on the same subject (Part 1 and Part 2), this post explores the impact of the hits model of venture investing on early and mid-stage tech companies (more…)

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