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Indians rule the US start-up arena

By A Correspondent
November 16, 2006 19:22 IST
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Immigrant entrepreneurs have taken the United States by a storm over the past decade and a half and leading the charge are Indian immigrants to the US.

Indians account for 28 per cent of all foreign-founded private start-up companies in America, according to a first-of-its-kind study, 'American Made: The Impact of Immigrant Entrepreneurs and Professionals on US Competitiveness.'

The study found that over the past 15 years, immigrants have started 1 in 4 (25 per cent) US public companies that were venture-backed, representing a market capitalisation of more than $500 billion. Moreover, a survey of today's private, venture-backed start-up companies in the US estimated that 47 per cent have immigrant founders.

Indian immigrants outshine all

While immigrant founders of US public companies come from across the globe, the most common countries of origin are India, Israel and Taiwan.

India was the most prevalent country of origin with 28 per cent followed by the United Kingdom (11 per cent), China (5 per cent), Iran (4 per cent), and France (4 per cent).

Nearly half of the immigrant entrepreneurs in the survey (46 per cent) arrived in the US as students. More than half of the founders started their businesses within 12 years of entering the United States. They hold an average of 14.5 patents. Sixty-nine per cent of these individuals have become American citizens.

However, the study also found that two-thirds of the immigrant founders surveyed believe that current US immigration policy hinders the ability of future foreign-born entrepreneurs to start American companies today.

The study was co-authored by Stuart Anderson of the National Foundation for American Policy and Michaela Platzer of Content First, LLC and commissioned by the National Venture Capital Association as part of its MAGNET USA initiative (Maximizing America's Growth for the Nation's Entrepreneurs and Technologists).

"A key lesson of the study is the importance of maintaining a more open, legal immigration system," said Stuart Anderson, co-author of the report. "Few of these impressive immigrant entrepreneurs could have started a company immediately upon arriving in the US -- many were just children, international students or H-1B professionals -- but it's clear that America helped shape them into entrepreneurs as much as they have helped shape America. . ."

Migrant entrepreneurship

The study found that 25 per cent of the venture-backed, public companies that were established in the last fifteen years were started by one or more immigrant founders.

Within the high technology sector, that percentage rises to 40 per cent. The aggregate market capitalisation of these companies, which includes Intel, Google, Yahoo!, Sun Microsystems and eBay, exceeds $500 billion.

Jerry Yang, co-founder of Yahoo!, came to this country from Taiwan at the age of ten and went on to Stanford University where he and David Filo developed the concept for the world's largest global online network, now headquartered in Sunnyvale, California.

"Yahoo! would not be an American company today if the United States had not welcomed my family and me almost thirty years ago," said Yang. "We must do all that we can to ensure that the door is open for the next generation of top entrepreneurs, engineers and scientists from around the world to come to the US and thrive. Whether they arrive as children, students, or professionals, we want the best and the brightest here. Our immigration policy should reflect that or these talents will go elsewhere."

When aggregating countries into regions, immigrants from Europe represented more than 25 per cent of all company founders.

The study also found that immigrant founders are responsible for building a high percentage of the most innovative American companies, with 87 per cent operating in sectors such as high-tech manufacturing, information technology and life sciences. These companies are headquartered across the country but are concentrated in five states: California, Massachusetts, New Jersey, Washington and Texas.

Of the more than 400,000 worldwide jobs created by immigrant-founded ventured-backed public companies, 70 per cent (more than 280,000) are in the high-tech manufacturing sector. Given the high-tech nature of the businesses started by immigrant entrepreneurs, these companies often pay higher salaries but employ fewer people overall than companies in other sectors.

Immigrants critical to the startup economy

Immigrant entrepreneurs have an even stronger presence among today's start up companies. Given the lack of public data available for these private companies, the authors surveyed more than 340 venture-backed start-ups and found nearly half (47 per cent) were founded by one or more immigrants. The trend is likely to continue in coming years as almost two-thirds of these immigrant entrepreneurs intend to start or have already started additional businesses in the United States Private start-up companies mirrored their public counterparts in location and industry concentration. Fifty-six per cent of the emerging companies founded by immigrants were headquartered in California, followed by Massachusetts and New York. Sixty-two per cent of the companies were in the high technology or life sciences sectors.

"As a nation of immigrants, the United States has harnessed the intellectual power of the best and brightest minds from abroad for 300 years. Foreign-born entrepreneurs have contributed significantly to our economy and our global leadership in innovation. It's time that we recognize their achievements," said Mark Heesen, president of the National Venture Capital Association.

"There is no question that the US. must remain a magnet of foreign-born talent if we are to maintain our competitive edge. However, current quotas on highly-skilled immigrants are insufficient and these great minds are beginning to look elsewhere to build their businesses," Heesen added.

The need to reform high skill immigration

American Made revealed an increasing concern that current US. immigration policy is jeopardising our ability to attract and retain critical talent from across the globe. More than two-thirds of immigrant entrepreneurs agreed that US immigration policy has made it more difficult than in the past to start a company in America.

Two-thirds of the private companies surveyed who use H-1B visas (temporary visa to hire skilled foreign nationals) say that current immigration laws harm US. competitiveness.

Forty per cent stated that current immigration policies have negatively impacted their companies when competing against other firms globally. One-third of the private companies said that the lack of visas had influenced their company's decision to place more personnel in facilities abroad.

"The current quota on H-1B visas of 65,000 has not been sufficient to meet the demand for highly skilled professionals," said Chad Waite, general partner at OVP Venture Partners in Seattle and NVCA Board member.

"In nine of the past 11 years, employers have exhausted the entire quota of H-1B's prior to the end of the fiscal year. In the past three years, the quota was used up prior to the start of the fiscal year. Perhaps equally troubling, the wait in skilled green card (permanent residence) categories is five years or more, sending a signal to current and future outstanding professionals and researchers that America may not be the place to make a career and raise your family."

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