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.

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