The Startup Visa is Bad for America
Why I’m glad Trump put the new ‘startup visa’ rules on hold.
In his final hours in office, Barack Obama signed hundreds of executive orders — one of these orders required the Department of Homeland Security to create a so-called “startup visa” for immigrant entrepreneurs. The problem with these new “startup visa” rules is that they were written by people who work in the Department of Homeland Security. It is crystal clear that these people have no idea how startups work — much less startups founded by immigrants. The “Startup Visa” is simply window dressing designed by the Obama administration to help Democrats win in 2018 — the rules did NOTHING for immigrants seeking to start companies here in the United States. The Trump administration has put almost all of Obama’s last minute orders on hold — including the “startup visa” rule changes. Before you start complaining or protesting take a minute and read the rules. I think you’ll realize they are bullshit.
First, if you’ve ever tried to start a company you know just how hard it is to raise institutional capital for your idea. Most of us must rely on our own savings and the savings of our friends and relatives. The “startup visa” program requires immigrant entrepreneurs to raise at least $500,000 from qualified venture capital firms (these firms must have a proven record of successful investment). Investment from their own bank accounts or friends and family would not be considered “investment” under the “startup visa” rules. Very few startups (much less immigrant startups) would meet this hurdle. In fact, the average check size after seed is only $250,000 and is usually made by angel investors — investors that don’t meet the requirement under the rules.
Second, the startup geniuses at the Department of Homeland Security determined that to qualify for the “startup visa” program the startup would need revenue and it would need to grow that revenue by at least 20% per year or face termination. The DHS folks need to get on a plane and head out to Silicon Valley. Very few early stage startups have ANY revenue until their second or third year. If DHS were designing the “startup visa” program to attract high growth startups they’re going about it all wrong. In most cases generating early revenue is a HUGE mistake. The startup is all about the pivot and requiring immigrant startups to generate early revenue and focus on revenue growth will almost certainly result in mediocre results.
Third, to qualify for the ‘startup visa’ program a startup would need at least five full-time (paid) employees. Most early stage startups have two or three co-founders and several freelancers. The co-founders typically work for free or at below market rates. Requiring early stage startups to have five full-time employees at market rates make getting started almost impossible. The rules require that the startup continue to add employees throughout the program regardless of whether or not it is best for the enterprise.
Fourth, the rules only allow the startup to have three immigrant co-founders. Why not four or five? If more immigrant entrepreneurs are better why not bring as many over as possible? Forcing teams to leave their co-founders behind is shortsighted and counterproductive. Keeping teams together is important especially in the early stages.
Fifth, and perhaps worst of all, the rules require that when (and I do mean when) the startup fails the entrepreneurs and their families leave the country IMMEDIATELY. The rules allow DHS to terminate the “startup visa” at any time without notice if the startup fails to meet the funding, employment, or growth requirements. Furthermore, the rules allow DHS to terminate the “startup visa” for any reason whatsoever. Really? They don’t need a good reason nor do they have to give notice? Again, the DHS folks don’t realize that failure is PART of the entrepreneurial process. If we force immigrant entrepreneurs to succeed 100% of the time or face deportation how can we ask them to take risks? Entrepreneurs rarely succeed on their first or second try — it takes most of us three or four times at-bat to get a hit.
The “startup visa” program signed by Obama just hours before he left office is NOT good for immigrants. It is NOT good for America. It is political bullshit. Implementing the ‘startup visa’ makes us feel good, but it distracts us from actually doing something about the problem/opportunity. We need more immigrant entrepreneurs here, but we should let them be entrepreneurs when they get here. Congress needs to pass immigration reform and we’ve got to make it MUCH easier to bring smart, educate, entrepreneurial people here to the United States. Immigrants are awesome!