Immigration Reform Will Get You CashThe Startup Act 2.0 originated by Senator Jerry Moran (R-Kan.) and Mark Warner (D-Va.) and now joined by Chris Coons (D-Del.) and Marco Rubio (R-Fla.) will be the hot topic Jan. 2013. The Startup Visa Act is out as the originators were not re-elected. However, the Startup Act 2.0 needs serious changes which will allow us to import more capital from abroad.
President Obama wants to see a Comprehensive new immigration bill and discussions will commence end of January as the Houses go into session. The competing immigration bills in 2011 and 2012 will lead to increased LP capital access from areas we did not expect. 100s of VCs are backing several immigration proposals such as:
● Securing the Talent America (STAR) Act,
● Immigration Driving Entrepreneurship in America (IDEA) Act,
● Startup Visa Act,
● American Investment and Job Creation Act
● Sustaining our Most Advanced Researchers and Technology (SMART) Jobs Act
● Startup Act 2.0,
Currently 12-14% Congressmen are backing these bills and this will be the hot topic after the fiscal cliff talks subsides and President Obama is inaugurated in January for his new term.
The compelling argument is that out of 50,000 US graduate school and PhD graduates annually, 17,000 return back to their homeland because no appropriate visa option exists for them to stay in the US to run a startup or take on engineering jobs. We are teaching and training them in the US and then kicking brain capital back abroad and US jobs are not created – rather, their firms compete with US firms. The thought process is that we should not reject brain capital due to antiquated immigration programs but encourage high performing graduate and postgraduate students to stay in the US and help spur job and innovation creation here.
The immigration programs are decades old and must include revisions to be up to par with reality. 40% of Fortune 500 US firms were started by immigrants or immigrants' children. At the peak these firms stood for $52 Billion in annual revenue.
Startups according to Kauffman Foundation's research stands for nearly all net jobs created between 1980-2005. We certainly want more to be created and the graduate school immigration is a simple re-allocation of visas allowing it.
Interestingly enough, the proposals do not necessarily increase the visas offered but rather distribute existing visa allotments differently. For instance, we have 55,000 green card lottery annually in place (a lottery part of the Immigration Act of 1990 where you 'win' green card status). Allocate some of these visas towards foreign entrepreneurs and graduate students wanting to stay in the US.
The StartUp Act 2.0 will fuel capital to VC and Emerging Managers of Private Equity Funds as it stipulates that if $250,000 with at least $100,000 is invested from US investors, it will allow foreign entrepreneurs a temporary visa to run startups in the US. Foreign students with wealthy families would be able to acquire green cards under this program named EB6 for far less money than the laborious $1 million investment that the EB5 program requires today.
However, the challenge is how the Startup Act 2.0 is written. It stipulates that you have to be a STEM graduate (Science Technology Engineering or Mathematics) with a valid visa within a year of graduation or with a H1-B Visa to qualify. It does not allow for foreign nationals without a postgraduate or a past graduate degree that occurred 1+ years ago to qualify. I suggest that the bill is amended to allow all foreign nationals with a STEM graduate degree but also foreign nationals that have existing startups abroad that can prove successful revenue and a desire to raise and launch their business in the US.
These two programs, EB6 programs and an amended Startup Act 2.0 will add capital to the decimated Venture Capital community. It will also allow new emerging Private Equity managers to offer green cards to Limited Partners, their kids, foreign companies looking to expand to the US as well as to domestic startups with foreign founders.
We will watch Senate and the House conversations on how this emerges and predict this will be a bipartisan 2013 comprehensive immigration bill that will not only create more jobs and keep brain capital in the US but also increase a momentum of retail investors and foreign institutional investors investing in emerging managers in private equity. The challenge is to discern this bill from the general population immigration topics or should it be combined into a Comprehensive bill?
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