Felicis Ventures Blog

Want to Fix the Economy ? Think Immigrant Entrepreneurs

There is a plethora of ideas on how to revive the economy. To me it boils down to one simple strategy: Support the entrepreneurs, especially the immigrant ones. The stimulus grants the government is handing out to different industries remains a band-aid solution and basically just re-allocates existing resources. Supporting the entrepreneurs, on the other hand, is likely to result in new jobs, create *new* capital (ie new resources). Google is a phenomenal example with nearly $100 Billion in market capitalization created in about 7 years along with 20,000 employees. According to Economist,US is the only country in the world, where start-ups generated net employment gains after 2/4/7 years from their foundation. Again, the same report highlights that 10-35% of all US companies were founded by immigrant entrepreneurs.

Immigrant founded companies in the US created $500 Billion in market capitalization while companies started by foreign-born entrepreneurs generated nearly $ 17 Billion in sales and employ 220 thousand people in the US. That's just the immigrant entrepreneurs.

There's increasing sentiment in our community that supporting entrepreneurship is a much more preferable way to reviving the economy than bailing out large dinosaurs like GM which need to go into bankruptcy to reorganize so they can become viable companies again. Thomas Friedman certainly defends this perspective in this post - arguing for funds to be directed to venture capital. Don Dodge, goes a step further, and posits that just spending $1B in incubators like Y Combinator or TechStars would yield not only immediate employment but probably even more potential upside in terms of wealth to be created. He also lists several government programs like R&D or seed capital tax credits that, if applied with less strings attached and more uniformly across states, could turn into great solutions.

There's no doubt in my mind that the writing is on the wall and the numbers tell a story. This is a country built by entrepreneurs, in fact, mostly immigrant ones. There's no doubt that the same group is key to reviving our economy.

Return to the Melting Pot

"We used to be a melting pot but now seem to have some trouble with that" - Alan Greenspan told USA Today last week, referring to the increasing lack of skilled foreign workers as a result of the insufficient H1-B quotas set by the US government. Currently, the United States Citizenship and Immigration Services (USCIS) caps the US work permits for foreigners at 65,000 per year. 150,000 applications were filed in a matter of 48 hours between April 2nd and 4th of this year for those 65,000 spots in 2008. The lucky winners will be selected randomly. Given the booming demand for engineers in Silicon Valley and highly skilled workers elsewhere in the US, limiting the number of foreigners looking for employment in the US seems to be woefully misguided.

Microsoft Chairman Bill Gates suggested dropping the quota completely in his address to the US Senate on March 7th. He's absolutely right. A recent study called Silicon Valley's New Immigrant Entrepreneurs points out that highly skilled immigrants make significant contributions to the economic development of California, as opposed to taking jobs away from native-born workers. Anna Lee Saxenian who conducted the study found that high-tech businesses run by foreign-born workers account for more than $16.8 billion in sales and over 58,000 jobs.

Immigration is such a complex and sensitive issue that none of the US Presidential Candidates have taken a stance on it, despite intense media attention on the topic. The "Melting Pot" is one those unique qualities that makes the US vibrant, competitive, and globally appealing. We should be looking for ways to strengthen it rather than seeing it disappear in our lifetimes.

Immigration's impact on US economy: $500B in market cap

There is no doubt that immigration is on top of many agendas around the country, including Washington DC. When I was visiting DC in November 2005 with Lead21, almost every Congressman and Senator we met with made a remark about immigration - but mostly limited to the public concerns about cross-border issues with Mexico. Disappointed, I left our capital wondering why no detailed reports have been published to quantify the actual [and positive] impact of immigration on US economy.

Fast forward 12 months, Venture Beat ran an awesome piece today on the impact of immigration from the perspective of venture capital. It's eye opening to say the least: the study by NVCA found that:

• Venture backed companies started by immigrants contributed $500 Billion in market capitalization to the US economy
• A quarter of of the venture-backed companies that were started in the last 15 years and have gone public were started by immigrants
• Immigrant-founded companies employ about 220 thousand people in the US

This is probably just the tip of the iceberg, as the positive impact of immigration, called "America's Secret Weapon" by Deepak Chopra, an immigrant himself, is likely to exceed all of the above numbers because of the multiplier effects, especially since most high-tech jobs are white collar, high income and result in additional wealth creation as the beneficiaries of those public companies boost the economy by investing in return in new start-ups and spending locally.

When I was frequently asked about Google's secrets of success by visiting delegations from Europe while at Google, my favorite answer was immigration. Most people from Europe didn't realize that some of America's most successful companies like Google, Intel, and Yahoo, not only were started by immigrant entrepreneurs but also employed a large number of immigrants. We had people from tens of countries, as early as when we had merely 100 employees at Google.

I hope the NVCA study mentioned by Mark Heesen becomes another wake-up call for our politicians in DC: immigration is one of the biggest contributors to the success and resilience of the US economy. As such it should not be viewed as a threat but as a competitive advantage that needs to fostered and reinforced, not shot down.