Hardik Desai conceived a startup while he was studying for an MBA at the Fisher College of Business at Ohio State University (OSU) in 2008. Based on research that the university was conducting, Desai came up with a new way to diagnose a group of diseases including painful bladder syndrome and irritable bowel syndrome. He and his team wrote a business plan for a company they named IR Diagnostyx. The plan won third place in a 2009 business school competition at OSU’s Center for Entrepreneurship. The panel of VCs and entrepreneurs provided Hardik strong encouragement to start this company.
But the U.S. government wouldn’t provide Hardik with a visa to start the company. Hardik had no difficulty in getting an H1-B visa that allowed him to work, but immigration rules did not allow him to work for a company that he started. So, he abandoned his entrepreneurial dreams.
I tell Desai’s and others’ stories in my book “The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent.” In the book, and on my team’s Web site, www.immigrantexodus.com, we have documented dozens of stories of entrepreneurs like Hardik who could be boosting U.S. innovation and creating the jobs our country desperately needs.
Indeed, a research project I recently completed at Duke University with UC-Berkeley School of Information Dean AnnaLee Saxenian and Stanford Law School Professor F. Daniel Siciliano shows a depressing trend: The tide of immigrant entrepreneurship, which was sweeping the U.S. and fueling its tech boom, has peaked and may be receding.
Previous research projects I led had documented that, from 1995 to 2005, 25.3 percent of all technology and engineering startups nationwide and 52.4 percent of those in Silicon Valley were founded by immigrants. More than a decade earlier, from 1980 to 1998, Saxenian had documented that the key immigrant-founding groups, Indian and Chinese, had founded 24 percent of the Valley’s startups. This means there was a very positive trend of growing immigrant entrepreneurship.
Our earlier research had documented that, on average, immigrant founders started their companies 13 years after entering the U.S., and they typically came here to study or work. In the late 90s and early 2000s there was an influx of skilled workers in response to the Y2K crisis and a booming tech economy. The U.S. boosted the number of H-1B visas issued from 65,000 to about 200,000 for several years. Given this, the United States should have a greater increase in immigrant entrepreneurship. But this hasn’t happened.
In a paper titled “America’s New Immigrant Entrepreneurs: Then and Now”, which the Kauffman Foundation released Tuesday, we report that the proportion of immigrant-founded companies nationwide has dropped from 25.3 to 24.3 percent. In Silicon Valley, this is down from 52.4 percent to 43.9 percent. The proportion of companies founded by Indians has increased from 26 percent of the immigrant founding pool in 2005 to 33.2 percent and Chinese from 6.9 percent to 8.1 percent. Missing are the Taiwanese—their proportion dropped from 5.8 percent to 1.1 percent. This is probably because, as Taiwan became a developed nation and improved its universities, fewer Taiwanese have been coming to the U.S. to study and work.
This is a harbinger of what lies ahead for immigrants from India and China. To put it simply, our flawed immigration policies have been giving these nations an unintended gift: American-educated and American-trained entrepreneurs.
Anand graduated from the University of Wisconsin–Madison in 2001. He told me of how, at school, he had immersed himself in the culture of startups, entering business plan competitions and collaborating with fellow students and professors to brainstorm business ideas. He interned with Pitney Bowes, among other organizations, and he received eight utility patents from the U.S. Patent and Trademark Office.
During his junior year, Chhatpar founded BrainReactions with two other students. The company provided a platform for students to help large corporations solve problems and innovate. Anand says the business served dozens of notable clients.
After meeting his wife, Shikha, at the University of Wisconsin–Madison in 2008, they teamed up to start another business, Fame Express. The company built Facebook game applications and, according to Anand, the apps were played online by 20 million people around the world and garnered 900,000 fans. He says that during the first two years, Fame Express grossed about $1 million in revenue and he and his wife paid more than $250,000 in taxes. Anand was featured in numerous media outlets including CNBC-TV18’s Young Turks, U.S. News & World Report, and BusinessWeek. In September 2010, the Chhatpars returned to India for a legally mandated period, while awaiting paperwork from the U.S. Citizenship and Immigration Service (USCIS), which would clear a path to citizenship.
Two months later, their petition for EB-1 status was denied, despite the fact that they already had employees in the United States, were paying considerable taxes, had a clear track record of starting companies, and BusinessWeek.com had once featured Anand as one of the “Best Entrepreneurs Under 25.”
This didn’t make sense to me, so I brought the Chhatpars’ case to USCIS Director Alejandro Mayorkas on May 2, and he forwarded the correspondence to one of his associates. I was copied on at least forty messages back and forth between the department and Chhatpar. No one disputed the merit of their case, but even Mayorkas’ team could not cut through the immigration bureaucracy.
Today, the Chhatpars are living in Bangalore, running both Fame Express and BrainReactions. They say they have hired four computer programmers to develop India-focused Web sites. They are paying taxes to the Indian government, hiring Indian programmers, and boosting the Indian economy. They would rather be creating products for the U.S., hiring American workers and paying U.S. taxes. But our government won’t let them. Such is the senselessness of our immigration policies and why the U.S. is experiencing an immigrant exodus.