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Give Me Your Entrepreneurs, Your Innovators: Estimating Employment Impact of a Startup Visa

Startup Visas would unleash a torrent of entrepreneurial energy among foreign-born individuals in the United States, according to a white paper released by the Ewing Marion Kauffman Foundation.

The report, “Give Me Your Entrepreneurs, Your Innovators: Estimating the Employment Impact of a Startup Visa,” said that offering the visas has the potential to add, conservatively, between 500,000 and 1.6 million new jobs over the next 10 years.

The visas, included in the bipartisan Startup Act 3.0 bill recently introduced in the U.S. Senate, would be available to a fixed pool of 75,000 foreign-born individuals who already hold H-1B visas or F-1 student visas and who start companies in the United States.

In the first year of business, these entrepreneurs would be required to employ at least two full-time, non-family workers and to invest or raise an investment of $100,000 or more.

By meeting the first-year requirements, recipients would be granted a three-year visa extension. If, over that three-year period, the business owner has hired, on average, one additional employee each year, he or she may apply for permanent status.

Using the most recent data from the U.S. Census Business Dynamics Statistics, the study’s authors evaluated the Startup Visa’s job creation potential under three possible scenarios.

Assuming that, if Startup Visas were available in 2014, 75,000 would be filled, BDS statistics indicate that, after four years, 37,108 firms still would be operating. The openings created by failed companies over the previous three years would have been filled by new Startup Visa applicants.

After 10 years, nearly 100,000 companies will have reached four years and aged out of the visa program. New companies also would have been added over the 10-year period, growing the denominator of new firms by more than the number of available visas.

Under two scenarios, the report demonstrates that companies founded by Startup Visa holders would create between 500,000 and 889,000 jobs, equating to 0.5 percent to almost 1 percent of GDP, respectively.

The third scenario assumes that half of the age four firms would be technology and engineering firms established by H-1B holders, who typically are employed in science, technology and engineering.

Previous research has shown that immigrant-founded technology and engineering startups employ an average of 21.37 people per firm.

This scenario would create, at minimum, 1.6 million jobs over 10 years, or 1.6 percent of GDP, among companies that age out of the Startup Visa program. Adding job counts from younger companies established as new visa slots open and jobs created after Startup Visa companies age out of the program could raise these estimates considerably.

A National Foundation for American Policy analysis of the top 50 venture-capital-backed companies in 2011 revealed that 24 were founded or co-founded by immigrants.

At an average company age of 5.8 years and 153 employees, this small sample of immigrant-founded companies added 27 new employees per year, indicating the potential such companies — or even a sliver of Startup Visa companies — have for extraordinary job creation in the United States.