Disclaimer (right at the outset) – I should point out that in no way do I want to seem dismissive of an honest effort and come across as a cynic. I am an optimist and hope that only good comes out of this. I came from India and have been in California for the past 8 years, so I’m most definitely not driven by an attitude to defeat this! But I’d like to comment on what I think is not the right approach.
Recently the Startup Visa legislation bill was introduced in Washington by two senators, backed by reputable VCs and Angel investors. It has been heralded as something remarkable that will bring skilled foreigners to American shores and create many jobs, thus furthering America’s competitive edge. I think it’s a step in the right direction. The US has long been welcoming to talented people from all around and that has helped her drive scientific and economic progress. However, beyond the intention being noble, I think the bill is a dud. It lacks any profound thought and definitely lacks a connection to ground realities, IMO. If I were to sum up why I think so in a few words, it would be that the bill is a top-down solution to a complex problem, not a carefully constructed bottom-up one.
1. The bill seems to have been envisioned entirely from the vantage point of an investor.
The bill is entirely centered around the singular act of raising money. More and more, startups are needing less money to get started, at least in the web world. I think VCs and angel investors have forgotten how incredibly difficult it is to raise money, to the tune of $250k and $1mil as the bill states, especially for first time entrepreneurs. For someone without a successful exit in the past, this is a remarkable challenge. Yes, in silicon valley, money flows easy from time to time when the next hyped up thing comes – centered around buzzwords as social, media, location, networking, gaming, and such. However, not all entrepreneurs are keen to jump on this bandwagon.
Also, not all entrepreneurs who want to build sustainable businesses want to raise money. Mind you, they want to build businesses in the US and create jobs here, but raising money isn’t something at the top of their to-do list. What is wrong with someone who wants to follow this approach? For instance, a brilliant designer just wants to build a boutique design firm. Is it horrendous if his business generates 4 jobs and revenues of $700k? Does that contribute any less in value to the economy? I don’t see how.
In reality, raising money is much easier said than done. And imagine doing this when the immigrant is actually sitting 5000 mi away in some other country! 250k, 1 mil? Big deal, come hither, we shall give you the money! We have lots of it!
What if the enterprise had 2 or 3 founders? Now they each need to raise $250k ?
2. First rule of innovation – Fix what is broken, first and foremost. Invent new things to break post fixing the former.
The present immigration system is broken. Hundreds of thousands (most affected from China and India among others) of engineers and smart folks (with advanced degrees from American universities) are stuck in decade long backlogs to get their permanent residencies. I surmise there are likely at least 50,000 of these highly skilled, passionate, and talented immigrants working in jobs but harboring an entrepreneurial drive.
I think this effort would have been well served if powerful VCs, entrepreneurs, and investors had used their clout and influence to address the choking limbo that many of these people are stuck in. Seriously, there is a 10 year worth pool of potential entrepreneurs right in your backyard. Drive immigration reform to hand them green cards (as Vivek Wadhwa has suggested) instead of inventing something new that is half-baked. I think many who are stuck in the line would agree that this seemingly simple act would stoke the fire and spawn many, many new ventures.
You’re just adding to the problem and making it worse by driving a bill like this.
3. Been there, done that.
This bill will carve out a new EB-6 category, mostly similar to EB-5, except that the investing threshold is lower.
I have a simple question – Can you name one (again, just one) Fortune 500, or 1000, or Fortune 5000 company formed by someone who immigrated using the provisions laid under EB-5? Right. I didn’t think so.
Could somebody point out one novel idea in this bill? One. Yes, I got the memo on lowering investment thresholds. That’s easy to do. Tell me what is brand, spanking new about this bill. Tell me that one line in the bill that was the result of intense and careful thought and discussion.
4. It’s a pressure cooker, man.
It’s no secret that the odds of a startup failing are high, regardless of venture backing. Startups with funding on the order of many millions of dollars fail. In fact, 9 out of 10 will fail.
Let’s say for argument (and optimism) sake that 5 out of 10 EB6 starts don’t fall flat on their face in the first two years. For these 5, in all honesty, how many of you really think turning $1 million in revenues in less than 2 years is child’s play?
What happens when the startup fails to meet these “goals” (as if a startup story ever plays out by goals and expectations)? The entrepreneur is told to go back to where he came from? For what? For trying? For making a heroic effort and failing? Don’t you exactly need to retain people like that?
What if this same startup were on track to turn a million in revenues in year four?
And what of the other 5 of 10 startups that just fail outright in their first two years? Tell those talented people that you bet on to go back? Yes, I’m starting to see the sense in this.
5. Lastly, I think the bill will be used more for personal gain than supporting the desired outcome of creating more jobs.
I probably have a few other thoughts about this bill lying around somewhere in my head. I have no intention of putting them to paper at this point.
I was expecting that when months of effort by some of the valley’s most respectable VCs and Angels is brought to light, that it holds solid thought and reasoning behind it, not an uncooked, stale medley of garden vegetables.
What do I think is the right approach?
Over the past 2-3 decades, many immigrants have set up successful companies in the US, all without the benefits of a “startup visa”. My own uncle is one of them, who left India for his doctoral studies in the US and now runs a successful MM dollar chemical testing and drug formulation lab. Part of the reason behind this has been that it was easier to obtain permanent residency a decade ago. That has come to a grinding halt now.
I think efforts should be made at retaining the many thousands who come to the US for advanced studies and making it easier for them stay back. Human capital is the asset. The right solution would be to attract and let qualified, talented, intelligent, and educated people. Enable them to stay here without hassles (no long drawn out green card processes), visas with expiry dates, and dependence on employers as sponsors for the green card. Let them contribute to technological/scientific/economic progress, sans the strings, either by being employed or starting companies. Free market capitalism and entrepreneurial instincts would automatically set the job creation wheels in motion.
Sure, an investment-based category (such as EB-5 that already exists) is a good idea. But simply tweaking a few things in this existing category could create what the “startup visa” movement is trying to do. There just is no need to create a “revolution” around it, especially when nothing new is being tabled.
I would love to hear your comments about this.