Archive | December 2012

America Faces Competition in Attracting Entrepreneurs

Competitive programs that attract entrepreneurs to other countries could mean a loss of talent for the United States.

Much like how our own proposal provides incentives to keep startups local, the Chilean government has started a program to make Chile the “Silicon Valley of Latin America.”  In attempts to attract the best entrepreneurs from around the world, Chile has offered them a $40,000 grant and a one year work visa, as well as office space and fast-track paperwork that enables them to open bank accounts, in return for living in the country for six months.  Because it is fully sponsored by the government, entrepreneurs in the program have access to being in the right circles, giving them access to some of the best mentoring, venture capitalists, market information, and networking available in Chile.

Steve Wozniak, who founded Apple with Steve Jobs, believes the program is effective, saying,”I would love to go there if I were young. This is the greatest program I have ever seen of this type in the entire world. I will recommend it even to my own kids.”

In face of global competition like this, America would do well to, at the very least, allow innovative talent into the country.  In an age where countries from around the world are able to offer increasingly attractive programs, the United States will continue to lose more and more talent until it reforms its current policies.

More about Start-Up Chile can be found here.


The Decline

The trend of immigrants founding companies in the United States has begun to reverse.  In an article by Vivek Wadhwa, author of the book “Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent,”  we can see that current policies are causing fewer immigrants to create startups in the United States.

In a study from 2007, it could be seen that immigrants were key members of over 50 percent of the starups in Silicon Valley since 1995.  However, a new study has shown that this number has declined since then, as fewer potential immigrant entrepreneurs are willing to deal with the visa laws and immigration limbo.

One of the biggest problems is found in the bottleneck in the employment based visa process.  Two of the biggest contributing nationalities, the Chinese and Indians, face at least ten years in immigration limbo when applying for their green cards.  This is due to a maximum of 7 percent of these green cards being allocated to each nation, and China and India have a disproportionately large number of hopeful immigrants, comprising more than half the skilled immigrant labor force.  The current policies also force the immigrants who are waiting in “limbo” to stay in companies who sponsor their visas, limiting their potential for innovation.

Much like our own proposal, Wadhwa impresses the importance of a startup visa act, saying that keeping the talent in the United States could create hundreds of thousands of new jobs, helping the economy get back on its feet.

Immigrant Founder may be Forced to Leave

Asaf Darash, immigrant founder of the growing American company Regpack, is now being forced out of the country.

Despite creating 15 American jobs with his U.S. company, Asaf Darah faces the possibility of being deported.

After three years researching his thesis at the University of California, Israeli born Asaf Darash decided to stay in the United States.  Here, he founded  a software company, Regpack.  This two year old company is still going strong and shows impressive growth;  as of recently it was adding about 30 new clients each week.

However, now Darash has met a barrier that may prove to cripple his efforts.  Instead of focusing on running his company, he is fighting to remain in the country.

He was able to start his business because he came here as a visiting scholar.   He then applied for an H-1B visa, and which is where he ran into trouble.  He was unable to satisfy  the employer-employee relationship required for the visa, and is now facing what he calls “bureaucratic hell” as he spends all day attempting to find the correct documents and deal with lawyers.

He is also seeking an alternative route to stay in the country, by applying for the E-2 visa.  However, the process may be lengthy and he has had to take out a second mortgage on his house in Tel Aviv in order to provide enough capital.  However, there is no guarantee that he will be able to stay, as the wait for such visas is quite substantial.

Stories just like this are all too common.  Unfortunately for the United States, its own policies have ensured that immigrant entrepreneurs, people our economy needs, are unable to remain.  Asaf Darash sums up the issue well, saying that “Regpack is not going away. It’s going to grow. But the question is, will it grow here or in Israel?”

See more:

Immigrants Struggle to Find Jobs in Champaign County

A June article on CU-CitizenAccess, a community online news and information project devoted to investigative and enterprise coverage of social, justice and economic issues in east central Illinois, highlighted the difficulty immigrants are facing in the current economy in Champaign County.  More than 10% of Champaign County’s population is foreign-born (as of the 2008 US Census) and even those with advanced degrees are struggling to find employment (for more statistics and case studies, see the link below).

The Entrepreneur Visa Loan program can help alleviate this issue.  People are generally inclined to associate with those similar to them.  Thus foreign-born entrepreneurs, who remain in the community thanks to an EVL, are likely to hire or support the businesses of immigrants who may be able to relate to the challenges of being international.  Such a network can aid the unemployment concerns, especially for those with advanced degrees who are not maximizing their full potential.

Champaign County’s Rising Poverty Rate

Although Champaign County is often believed to a community, it faced some particularly tough times.  As of the most recent 2011 statistics, Champaign’s poverty rate is at nearly 25%, meaning that one out of every four people in the county are living below the poverty line.  This is up 3.6% from the previous year.  This is a call for concern that suggests a policy change to help the city rebound.

Why Leave The Rural Midwest? A Student’s Perspective

Champaign County, outside of the University, is relatively rural, with 90.5% of the total land area dedicated to agriculture (Source: Champaign County, Local Government Information Center, see link below).  For entrepreneurs and founders, this means setting up in or near a rural community.  As a student who grow up in the suburbs, I have yet to  fully understand or experience living a rural communities.  To try to understand why talented students who grow up happily in rural communities don’t want to return, I turned to my friend, Taylor Oltman.  Her story illustrates the additional challenge that rural communities face in retaining talent.

Taylor is a junior in Mechanical Engineering, with a minor in Technology and Management from Effingham, IL.  These are her thoughts:

I didn’t always know I loved growing up in a small town. In high school, like everyone else I talked to, we complained to our parent we had nothing to do. I envied my friends who lived 5 minutes from the mall, as the closest one was over an hour away. Not until I left for school was I really able to see how blessed I was growing up where I did. In leaving a small town you see what else is out there, its the classic the grass is greener on the other side. I was lucky enough to get to go to Chicago and St. Louis for weekends growing up so I got my taste of the “city life” and after spending 3 weeks in Sydney, AU when I was 16 I could not wait to get out of the small town. I thought there was so much more out there to do. After leaving I realized I just grew up different. My friends and I had the freedom to roam, drive up and down backroads all night, we could get away with anything from painting trains and tunnels to toiletpapering and saran wrapping peoples houses and trucks, and just sit out by bonfires and swim in ponds with good friends. These are things the suburbs and city cannot offer. Although I love being 5 minutes away from a mall here at school, I think spending your youth and teen years in a small town teaches you strong values in morality and hard work, as well as a huge sense of community. Which I feel like is lost in large towns and big cities. The community I lived in watched out for each other, stepped up to help out when help was needed (and people knew when, cause its a small town: everyone knows everyone and everything, things are not kept secret for long). Good and bad, the community watched out for each other and wanted each person to succeed. 

Since leaving I have been able to see the good and bad aspects of the rural lifestyle. Some people never leave and find success and influence within the town, but some of the most interesting people I have met are those who left and came back, or somehow just ended up there. By leaving and going both to college and to the big city a person gains experience: the opportunity to meet people who are not like you (since for the most part most people in my town were white German Catholics, with a fairly recent family history of agriculture or construction. (Even one of the most successful companies , and industrial development company [Agracel], in our town, started off investing in farmland.) By meeting people with mounds of experience and diversity as well as working in different industries and areas a person can gain so much knowledge that if they decide they would like to come back one day they have so much more to offer the community, than if they had simply stayed and come back to work straight out of school. It is usually the people who leave and come back that can provide the most development within the community and really help the community thrive. Growing up in this comfortable community it can be a bit uncomfortable for people to go to a city and be surrounded by people they don’t know (and who don’t know them). They don’t have access to nature like their used to. The loss of comfort is a big deterrent for some. And since many people are interested in Ag or construction these companies usually are located in smaller cities (like CAT in Peoria or John Deere in Iowa, they are not located in big cities). 

A huge region for not going immediately back to a small town after graduation is I already know what it has to offer. (I’ve met the people, learned what they had to teach..) It doesn’t have that much to offer to people in their mid-to-late 20‘s.It lacks the nightlife and large young professional population that the city has. for the most part if you’re not dating someone when you graduate you’re probably not going to find them in a small town.. Since most people who are college educated leave for a few years before returning home. 

IN SHORT.. I want to go to the city to broaden my horizons, learn more than I might learn immediately returning home, and experience the life of a true young professional. Plus the city has a certain mystique to it, those sparking lights are pretty attractive for a while, then if I decide to settle down in a small town and raise a family like I was raised, I won’t have to wonder what I’d be missing.  

Taylor’s story is fairly common.  Just from conversation, it’s clear that many talented studies will leave Champaign for the “sparkling lights” and “mystique” of a bigger city.  This brain drain is exactly why Champaign needs to invest in a powerful initiative to provide incentives that attract talent, name the Entrepreneur Visa Loan program.

Max Levchin: A Founder That Got Away

paypal-verified21Forbes recently documented his path of co-founder of PayPal and Yelp, Max Levchin.  Born in the Ukraine, Max moved to Chicago during high school with his family to escape an Anti-Semitic sentiment.  Max studied at U of I in Champaign-Urbana, but felt the urge to leave for Silicon Valley even while still attended.  He eventually graduated and immediately moved out to Palo Alto, California where he was immensely successful.

The Forbes article describes his desire to head west.  In summary, he wanted to take advantage of the entrepreneurial network that the article calls the “Silicon Valley Startup Commons.”  (for more information, see the link to the article below)

While his rags-to-riches story is compelling, it is a sign of a missed opportunity for Champaign-Urbana.  Upon moving west, Levchin recruited two other U of I engineers to move west and join the PayPal team.  The success of PayPal and the associated job-creation could have been a part of the Champaign-Urbana community had the company been founded there.  In addition, many ex-PayPal employees shared the entrepreneurial mindset and eventually left to begin other successful start-ups in the community (including U of I alum Steve Chen, co-founder of YouTube).  For examples of the successes of PayPal employees see the second link below.

Forbes article:

Ex-PayPal  employees:

Interview with Vivek Wadhwa

In an interview, Vivek Wadhwa, professor at Duke University and author of The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent, explains why current American policies are failing immigrant entrepreneurs.   It has become incredibly difficult for foreign entrepreneurs to immigrate to the United States.  Wadhwa identifies the problem to be an insufficient number of visas available.  Like us, he realizes that current policies make it too difficult for foreigners to contribute to the American economy, and that new laws will be required to fix this issue.


The Movement of Founders

The Movement of Founders

In The Atlantic Cities, Richard Florida looks at a Kauffman Foundation report on founder mobility.  The most striking conclusion is the net flow of innovative talent away from college towns.  Champaign-Urbana ranks third on this list with a net flow of -15 (0 of 15 founders educated at U of I remained in the area).  See Table 6 and Figure 4 below for a quick summary of additional information.