Does the Shortage of H-1B Visas Hinder Startup Growth?

Talent can make the difference between a successful or failed entrepreneurial venture. Immigration policy can affect both the ability of industry leaders to begin their own businesses in the United States, as well as affect employers seeking the talent needed to strengthen their startup.

An article in The New York Times highlights the challenges facing startups and small businesses seeking H-1B visas for current and prospective employees. The article shares the story of Théo Négri, a French software engineer at a San Francisco startup, who had to return to France after his H-1B application was denied. Upon his return to France, Négri wanted to uncover why his visa was denied. Négri found the small number of visas available through the visa lottery system made it hard for startups to receive a visa.

Currently, H-1B visas are limited by an annual quota of 85,000 (65,000 for first time foreign worker applicants and 20,000 for foreign students graduating from American universities with advanced degrees). This year, the lottery process began April 1, 2015 and reached capacity by April 7, 2015. In 2015, the United States Citizenship and Immigration Services (USCIS) received close to 233,000 H-1B petitions during the filing period.  

Large companies, with larger employee bases, will use up a majority of the visas, leaving fewer opportunities for startups to secure a visa for their potential employee. These large companies are at an advantage in securing H-1B visas for their workers for several reasons.

  • First, larger companies are more likely to have the funds to pay the application fees ($4,000 for each application) and associated legal fees for the positions rather than a startup.
  • Second, startups are less likely to be able to project their growth and related employee needs, which can make it hard for them to meet the deadlines for an H-1B visa that is awarded only once annually. A startup that needs additional employees to scale may be unable to wait until the application period the following year.
  • Finally, larger companies often have the advantage of international locations. They can place an employee at an overseas location where they can be on the payroll and do productive work, while waiting on the U.S. visa process. Startups, most likely, do not have this option.

The tech industry has lobbied for several solutions to address the loss of employee talent due to immigration policy. Many in the tech industry support the increase of H-1B visas as a solution to help startups recruit and keep foreign talent. Facebook founder Mark Zuckerberg supports ways to keep foreign students studying STEM at American universities in the United States after graduation.

Immigration policy does not just affect a startup’s ability to access employee talent. It also can determine whether an entrepreneur can start a business in the United States at all. Immigrants are almost twice as likely to start businesses in the United States as native-born Americans, with many of these firms creating large numbers of jobs. However, due to U.S. immigration law, many foreign nationals are unable to gain a visa as the founder of a business in the United States. Instead, foreign nationals, including those educated and trained in the United States, are forced to relocate and create jobs and innovations overseas

There are many solutions that have been discussed for how to address the lack of visas for immigrant entrepreneurs. A Kauffman Entrepreneurship Policy Digest outlined several options being discussed at the federal and state level, including:

  • A startup visa, which would allow non-citizens to start and operate a business in the United States.
  • Expanding the ability of student visa holders to start a business through Curricular Practical Training/Optional Practical Training (CPT/OPT), regardless of their field of study, and applying the seventeen-month extension granted to STEM majors to foreign students studying non-STEM fields would open up business opportunities.
  • Some states, like Massachusetts and Colorado, have established Entrepreneurs in Residence programs to help immigrant entrepreneurs stay in the United States.

While there are many paths and policy options to help immigrant entrepreneurs and their employees continue to make their economic and innovative contributions nationwide, there has been little legislative progress toward a solution to the problem.

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