Immigrant Entrepreneur Visas: A Solution in Search of a Problem?

By Stanley Renshon and Stanley Renshon on December 27, 2010

In a burst of ironic serendipity, the Wall Street Journal published two articles on the perilous state of the American economy and the idea, now gaining traction, that immigrant entrepreneurs are one solution to our economic problems. The more recent article, from earlier this month, is headlined "New Pitch for Start-Up Visas." It details the travails of one Canadian entrepreneur who has "already hired two employees and secured $300,000 in funding for his start-up, and hopes to have a staff of 40 or more full-time workers by this time next year." However, as the articles notes, "his long-term immigration status is up in the air."

Not to worry. Senators John Kerry (D., Mass.) and Richard Lugar (R., Ind.) have introduced The StartUp Visa Act that "would grant permanent residency – that is, a green card – to any foreign-born entrepreneur whose new business attracts at least $100,000 in venture capital or angel backing out of a total $250,000 in equity financing, while creating five new jobs within two years."

This bill is a modification of the current EB-5 visa that offers a green card to foreign entrepreneurs whose businesses have an upfront investment of $1 million and employ at least 10 workers. (CIS Fellow David North has written about this program several times, most recently here.) However, "less than half of the allotted 10,000 EB-5 visas were issued, largely reflecting a dearth of qualified candidates."

The proposed bill is likely to fare no better. Bob Litan, a researcher at the Kauffman Foundation that advocates for entrepreneurial visas, told the Journal "that only a handful of immigrant entrepreneurs will qualify."

Economic opportunity lost? Maybe not. Another Journal article from this past August was headlined "Start-ups on a Shoestring," and was subtitled "The tales of three entrepreneurs who launched companies – for less than $150." The actual figures were $40, $110, and $145, respectively. The bottom line of the article? "With creativity, commitment and resilience, an entrepreneur can turn even a small investment into an impressive business."

Which brings us back to those immigrant entrepreneur visas. The Wall Street Journal reports that "foreign entrepreneurs have long played an outsized role in the U.S. start-up sector, especially in the tech industry," and further, "Immigrants are nearly 30% more likely to start a business than nonimmigrants."

Yet there is less here than meets the eye. A Small Business Administration study of "high-impact high-tech" companies found that "About 16 percent of the companies in the nationally representative sample report at least one of their founders is foreign born." Yet it was also the case that, " Most foreign-born founders report they have lived in the United States for decades – the average duration is 25.9 years; 77 percent of the foreign-born high-impact, high-tech entrepreneurs are U.S. citizens."

These data suggest even in the high-tech industries where immigrant entrepreneurs play a "significant role" according to the SBA study, their role is limited (16 percent of the companies sampled report that at least one of their founders is foreign-born). That means that in the total universe of founders, less than 16 percent are foreign-born. Moreover, among that group, "most report that they have lived here for decades." That seems to suggest we simply cannot count on new immigrant entrepreneurs to have an instant and substantial impact.

Of course, the focus on "high-tech" industries may well be misplaced. Recall that the December Wall Street Journal article notes that, "Immigrants are nearly 30% more likely to start a business than nonimmigrants." Here the journal seems not to be talking about ‘high-impact, high-tech companies," but the local cleaner, grocery, nail salon, and other business that give new immigrants a chance to be their own bosses and build business equity (and even that is unclear, considering earlier CIS research showing lower levels of self-employment among immigrants than among the native born).

The United States already admits more than a million new legal immigrants every year, and it is from among these new immigrants that the 30 percent figure is likely derived.

Special StartUp Visas overlook the real source of overall American economic success – the desire to improve one's circumstances and a political and economic environment where it is possible to do so.