Monthly Archive for November, 2012

What the startup visa should really look like

US immigration is a subject that all foreign entrepreneurs in the United States have lost quite a bit of sleep over. Over the years, I’ve spent days researching, talking to lawyers, listening to stories of survival — and despite solving my own situation, it’s still to this day something that sits at the back of my mind as I’m constantly counseling entrepreneurs with their own situations. The reason this is so hard is because  the only way I could be an entrepreneur in the US (in the mould I wanted, which is a bootstrapping one), I needed to work for a US corporation and at night build my businesses: which is exactly what I did and how I did it (two years in the making). Its taken three years to get to a point where I can now focus on what inspired me to move to America: to build a big, global enterprise.

The entire startup visa movement frustrates me because it’s dependent on raising funding: I believe the best businesses bootstrap and raise funding when they actually need it. Hopefully this post can lead to a more productive dialogue in government policy, coming from someone that directly is impacted by all these discussions.

The options
The US visa system has a few categories that entrepreneur’s can “hack” to make them legal.

  • H1B: this is the standard work visa that foreigner’s go on, with several variants like the E3 visa (which Australian’s uniquely get). Of the H1B’s, about 65,000 new visa’s are issued every year and most of the people that have them work for big corporations. To satisfy the requirements of the visa, you need to file a petition which means three separate advertisements go out in newspapers allowing American citizen’s to apply for the job — only if no one applies and accepted that the petition satisfied.
  • O1: awarded to individuals with extraordinary ability.
  • L1: Individuals who are executives, managers or staff of a US affiliate (ie, a multinational).
  • E1 and E2: A treaty visa only available to a few countries (ie, the next in line  E3 mentioned above was due to the US-Australia free trade agreement), and which are the trader and investor visa respectively. With the E2, the rule of thumb is if you bring in about 100k of capital into the country…however, it’s more complicated than that. It’s the closest thing to a entrepreneur’s visa, but it has some difficult hurdles.
  • EB-5: This is a greencard (or permanent resident) which is probably the best type of visa for an entrepreneur as it gives them complete freedom. The catch? You need to bring $1 million into the country first.

Pretty much all the above employment-based visa’s (H1B, E3, L1) require three things. The first is that the foreigner needs to be paid above the prevailing wage for similar employees in that occupation and city. (The thinking here is that a foreigner needs to be paid more than local’s, so that firms are not motivated to hire cheap labour to the disadvantage of US citizens.)

The second is that the person satisfies educational and work experience. You need to have a US equivalent undergraduate degree or 12 years work experience (a year in college is calculcated as three’s in the workforce for every year of study) in the field you are working in. Actually, the L1 is exempt from this, which is why it’s the main alternative for people without degrees…though it comes with the challenge  of an existing business in your home country that’s been operating for over a year.

The third is that a US firm is “sponsoring” you. Basically, what this means is you have a job offer.

This all sounds reasonable. right? The US should get to cherry pick well educated foreigner’s working at companies that have a real need and which won’t disadvantage  US citizens. Yes, it should — but when you get into the details, this is when this system falls apart.

Problems with the visas
Did you know a fashion model can easily get a O1 if she has appeared in a few print magazines, but an entrepreneur has to basically have won a noble prize? I could write a book about the issues each of the above visa’s have, but I want to keep this post light as it’s a complicated subject.

The first big issue, is that the entire visa system biases established large corporations. To explain this point, I can share with you how hard it is to be a foreign startup employee by the simple requirement of being “sponsored”, which means you need to have a job waiting for you. If you’ve ever applied for a job, you’ll appreciate it’s not that easy…and if you live in another country, I can assure you, finding these jobs is even harder. Multi-nationals have professional departments where they can talk to overseas colleagues and get recommendations, but if you’re applying to work at a startup in the US you’re starting from scratch with the added communication barrier. You’ve basically got to come on “holiday” to the US and prove yourself in what is a cliquey community, so that a startup will hire you.

So why does it matter that the visa system biases the large corporation? Because startups breed startups themselves and are the best training ground for the next generation of entrepreneurs. Startups are not like normal businesses and founders are more selective about the people they hire, given how much risk there is. The extra effort of hiring someone from overseas (relocation costs, lawyer costs on visa’s, etc) only to find they are a dud, means it’s a bigger commitment to take on a foreigner. Again why is this relevant? Because making the visa process easier for startup employees, will indirectly lead to a lot more startups as foreigners tend to be a lot hungrier and research has shown a lot more entrepreneurial.

The second big issue is that you need to be paid a salary if you are to employ yourself in your business. Why is that a bad thing? Because it means I need to hire one less person. To work fulltime on my projects which have become two operationally independent businesses, I need to pay myself above the prevailing wage, which means I have to hire one less person that probably would free my time to grow the business.

The third issue is that it’s not practical. The E2 visa for example was designed for an industrial age, where you would take leases out on offices and invest money in capital expenditure on a store front. (In the information economy, the biggest expense are employees.) More problematic with the E2, is that you need to have an *already existing* business in the US, and of the $100,000 you need to invest in the economy (it’s more complicated than that, but it’s a good standard number), you need to have already *committed* to spending the cash. To rephrase this, you need to have already signed a lease to an office (which you can’t do without a credit history and operating history), spent a bunch of money, and THEN you will be eligible to get the visa. It’s a domino effect here, like the fact you can’t get  a social security number without a visa, which means you can’t open a bank account, which means you can’t get US customers to pay you. And what business man would sign a 12 months lease during their three month “holiday” to show a commitment of funds, when they don’t even have the assurance they can let back into the country?

The fourth issue is that it limits the types of people that are eligible. I used to have a portfolio company (a dozen employees, over a million dollars in capital raised) that couldn’t keep their 19 year co-founder in the country and who’s making headlines in Silicon Valley with his work, simply because he doesn’t have a degree (and so it invalidates that important test for an employment visa). This makes perfect sense for employees who are resources to grow something, but for entrepreneurs that start something? They are the rebels. The college drop out mythology of Silicon Valley where companies like Dell, Facebook, and other household names led to the creation of billion dollar businesses is incompatible with the fact foreign entrepreneurs need to have a degree.

A solution
The reason visa law is such a problematic area is because US citizen’s view foreigner’s as stealing jobs, who in turn vote out politicians who are seen as not creating jobs for them. It also creates a risk where a new liability gets brought into the country, as residents can claim their share of social security which is already bankrupt. I totally understand that.

However, this is where there is a fundamental misunderstanding about the threat of foreigner’s and what they need. Using me as proof, this year, I’ve had three American citizens on my payroll and I plan to increase that as my cashflow grows. When it comes to entrepreneurs, all we really want is the freedom to operate in the United States. I quite happily will pay taxes and not get any rights to pensions, so long as I have the freedom to live in the US and start my businesses. What entrepreneur’s need is a self-employment visa, where they don’t need anything but themselves and time to create the value they are motivated by.

It really is simple to solve this: give entrepreneurs freedom to travel in the United States, to get into agreements, and to interact with the US economy. Require them to check in every so often to prove they are not secretly working at Burger King and using that money to party in Vegas. Restrict any rights to benefits (like social security) and have them pay taxes.  And allow them to graduate into new visa’s (like a greencard) once certain milestones have been hit like revenue thresholds (tax paid) and employment (aggregate demand in the economy increases).

Immigration is so complicated that its taken me 1800 words to write this and I have only skirted the issues. But the solution is honestly simple: enable foreigner’s to generate wealth and jobs by removing the roadblocks. Give them freedom to operate, that’s it.

We no longer live in an isolated world and the freedom of the labor force to move around the world is one of the great benefits of globalisation. If the US can recognise that, it will remain the land of opportunity attracting the world’s best to continue America’s status in the world economy. But until then, I’m going to continue watching the sorry state of the US economy by politicians who are left with no option on how to get out of this mess and shutting the door on the very people who can help save America.

The long term emotional mind

Last night I was at a dinner on a long table of accomplished entrepreneurs and some investors, having an open discussion about entrepreneurship with the guest of honour Kevin Rose. Among many discussion points, the question was asked to the table: what traits do you look for in a founder?

Before we get to that, let’s start with what does it actually mean to be an entrepreneur? Well, quite simply someone who organises resources to create a product that customers pay for. A lot of people have enterprising personalities and so could fall under this definition, but a successful entrepreneur in my eyes is someone who is able to make an income from a product they created (whether from cash flow or from investment). How much income, well that’s a personal question but the point is you’re making money because of you.

But what is it, from a DNA point of view, that makes someone a successful entrepreneur? Someone who takes on “risk”? Someone who is a generalist in their skills? Good at delegation? Yes and no: these are descriptive traits that don’t define the entrepreneur. I think there are actually two things that makes someone a successful entrepreneur, and both these points I learned by one of the most successful entrepreneur’s I know, Steve Outrim.

The first is thinking long term. At a table with people like Gower Smith, Sam Morgan, and several other accomplished people I’ve come to respect — Outrim asked the question on what was the single most important trait in success and he identified the ability to think long term as the key to his success, which everyone nodded in agreement.

The second nugget of wisdom, was shared earlier this year by Outrim at a house warming party to a few of us and he was insistent that was understood him. He pointed to his head: it’s the ability to not let anything affect you mentally. It was a point that took me some reflection to truly appreciate the implications of what he meant.

Think about that. Even if you don’t have your own business, let me help you relate.

On thinking long term, what do you plan to do with your life? For some of us, that freaks us out and for others we have a meticulous plan on what. Entrepreneurs think about their company and 10 years from now. A long term vision, with assumptions that need to get validated, which translate into activities today to enable those assumptions.

The emotional mind, is a tougher one to explain but something all true entrepreneurs will relate to more. As a point of comparison, imagine you are in a relationship and you have your heart broken: most of us have experienced that at some stage in our life. It’s horrible and like a gas that infects your thoughts that you can’t control. Likewise, the feeling of being in love (if you’ve truly experienced it) can uplift you in ways that words cannot explain. Both those highs and lows reflect your emotional self, what all normal human beings experience. Let’s call them “intense” thoughts.

For the entreprener, that experience happens on a daily basis: you start the day with your heart broken and you end the day on a high. Imagine going through intense thoughts every day for years at a time? Can you imagine what impact that has on a person?

Bravery, commitment, and intelligence (specifically, the ability to learn quickly) are three other traits that I think define a sucessful entrepreneur. But its the ability to think long term and deal with the demons in your head that I think separates the boys from the men.

Indeed, I believe the role of a CEO is very similar: my experience is that the best CEO’s think strategically into the long term, but also, have a strong emotional control of their mind. But a CEO is also a job.

Think about it as an employee, where you worry about your bonus or getting promoted. That anxiety is what entrepreneurs face, but from the other perspective: making sure there is enough cash in the bank to pay their staff bonuses and have them rewarded so they can keep them on deck. As an employee, you can face resentment if your expectations are not met; as a CEO founder, you could face jail time if you don’t manage expectations.

I will leave you with this one thought, which is how do you develop these two essential traits which are more than just skills but a state of mind. As Confusion says:

By three methods we may learn wisdom: first, by reflection, which is noblest; second, by imitation, which is easiest; and third, by experience, which is the most bitter.

Fixing government with the Internet

” We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.–That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, —That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness

— Declaration of Independence by Thomas Jefferson

One of the most interesting innovations in the evolution of democracy, is the concept of representative democracy: whereby a few are elected to make decisions on behalf of the population. The lower house of the Westminster System typically has representatives from electorates which are  groups of people clustered in geographies that form a critical mass, whereas the upper house represents a different class: in England, a plutocracy but in America, it was revised to give each of the states an equal vote (though, in is still a plutocracy with just a more accountable way of election).

Overall, I think this is a good model to keep. But with the growth of the party system around the world (which has become the way government is done, a critical function that ironically not defined in most constitutions), it has become broken: using America as the case in point, the Republican control of the lower house during Obama’s first term (and Democrat control of the Senate) had politics get in the way and risked the future of the country at a time when unity was needed the most. As Jefferson said, when a government becomes destructive of the ends, it’s the right of the people to alter or abolish it. The party system is failing our democracy.

The Pirates

A lot has changed in the last 10 years, let alone 100 and 1000 years when a lot of our democratic tradition has been written. In particular, the Internet has become a new force in our society that has transformed every industry that comes in its way. It will only be a matter of time when the government gets its own shake up and that time may becoming. Gregory Ferenstein wrote an interesting post recently on innovations thanks to the Internet, with the most interesting one below:

Pirate Party

They’re less fun than a boat full of drunken sailors, but more influential in Germany than many third parties are in the United States. After winning 15 parliamentary seats in Germany, the Pirate Party has developed an intriguing crowdsourced platform of decision-making known as “liquid feedback.” The trust-based voting system permits members to leave decision-making to those they know are more knowledgeable, while preserving the inclusiveness of direct democracy. The Pirate Party is currently expanding its ranks throughout the globe.

The liquid feedback platform may be the most powerful way to fix the current system of government. Imagine that we all have equal votes, but you trusted my views on the economy more than your own views — you could allocate your vote to me, where I could make it for you. Now let’s say I came to trust an economist on matters of policy, so I would allocate my vote, which includes yours, to that economist when she makes decisions (so in effect, her votes also counts on your and my vote). And so on: what we have here is representative democracy in it’s most beautiful form. It’s only now with the Internet can we allow a system like this to exist.

This is a system that could be built into the current governance of our society. And even better, it it doesn’t need to be written into the constitution, for it to have an impact: it could be done in parallel. A shadow government could emerge where people could nominate their votes to people who end up becoming super delegates on issues. The influence these delegates could be so powerful that it could trigger a vote of confidence on our elected leaders, not to mention additional accountability on their decisions as they are compared to a benchmark by the populace. Maybe even our elected representatives in the legislature could take inspiration for their decisions not by the party they are a part of, but by what the super delegates vote.

And perhaps, this could be the way we fix our democracy. Not by changing the system laid out by the constitution of great democracies in the world like America and Australia, but by changing the way our representatives organise their votes. No more liberal, labor, democrat and republican — but a liquid party, where the people who we elect into government under this banner promise to follow the direction of the population through the votes of the super delegates. Delegates determined by the liquid democracy platform that we all have access to anytime we want to vote on an issue.