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Want to be like Silicon Valley? Welcome immigrant entrepreneurs

Exploring how the percentage of immigrant entrepreneurs varies across states and metropolitan areas.

Immigrants are a major driver of the American entrepreneurial economy. More than 40% of Fortune 500 companies were founded by immigrants or their children, over 50% of American billion-dollar “unicorn” startups have at least one immigrant founder, and immigrants are nearly twice as likely as the native-born to start a new company.

And thanks to newly released data from the Annual Survey of Entrepreneurs (ASE), we now know that, perhaps unsurprisingly, the San Jose metropolitan area – often considered the heart of Silicon Valley – is the metro with highest share of immigrant entrepreneurs in the U.S.

Both our research compilation on immigration and the Growthology post on immigrant entrepreneurship show the importance of immigrant entrepreneurs to the economy. In this blog post, we further explore firms owned by immigrants using the recently released Annual Survey of Entrepreneurs (ASE) data. The ASE is the largest annual survey of American entrepreneurs ever done, and is produced by the Census Bureau in a public-private partnership with the Kauffman Foundation and the Minority Business Development Agency.

Here, we are using data on individuals who were not U.S. citizens at birth as a proxy for U.S. immigrants. Although there are some caveats associated with this assumption, in most cases, non-U.S. citizens at birth are arguably likely to have immigrated to the U.S. if they own a business here.

Metro trends on immigrant entrepreneurship

Figure 1. Source: ASE

As shown in Figure 1, the top five metros with the highest percentage of immigrant business owners are San Jose, Miami, Los Angeles, San Francisco, and New York. The five metropolitan areas with the lowest percentage are Louisville, Birmingham, St. Louis, Pittsburg, Indianapolis, and Minneapolis metropolitan areas – with a tie for fifth lowest.

There is, of course, a very strong correlation between the percent of immigrants in the population and the percent of immigrant entrepreneurs. [1] Nonetheless, in most metros (40 out of the 50 we have this data for), immigrants have a disproportionate presence in the entrepreneurial community – i.e., immigrants make up a larger share of entrepreneurs than they make of the population. You can see this disproportionate presence on what we calculated as a multiplier below, simply a ratio of share of immigrant entrepreneurs over share of immigrant population. You can hover over data points in Figure 2 for the measure.

Figure 2. Source: ASE and ACS

State trends on immigrant entrepreneurship

Figure 3. Source: ASE

Next, if we look at state trends, as shown by Figure 3, the top five states with the highest percentage of immigrant business owners are California, New York, New Jersey, Florida, and Hawaii, while the five states with the lowest percentage are South Dakota, North Dakota, Montana, Nebraska, Iowa, and Wyoming.

For most people, this picture of immigrant entrepreneurship is not surprising. Larger states and metropolitan areas have a greater share of their business owners identifying as immigrants. But there is an interesting comparison to draw to the state-level data from the Kauffman Index of Startup Activity. The Kauffman Index, taking into account startup density, the percent of a state’s population that are new entrepreneurs, and the percent of entrepreneurs that chose to do so out of opportunity rather than necessity, highlights that some states with the smallest percent of entrepreneurs that are immigrants still display strong entrepreneurial energy. Of the top five states in the Startup Activity Index, Nevada and Texas are states with above-average immigrant entrepreneur representation, while Montana, Wyoming, and Oklahoma are not. This is evidence that entrepreneurship in each location won’t look exactly the same, and that each location can take advantage of their unique strengths to grow through entrepreneurship.

The ASE data provide us with detailed information on immigrant business owners, and enable us to dig into trends on immigrant entrepreneurship across various parts of the U.S. We will explore this topic further in our soon-to-be-released research brief on immigrant entrepreneurs.

[1] Immigration population data sourced from the American Community Survey (ACS).