Note to Washington: About half of VC-backed company founders are immigrants

For those who live and work in Silicon Valley, the positive impact of foreign nationals on the region is obvious. The area has long been a magnet for the best and brightest students, entrepreneurs and professionals from all over the world to thrive. Just look at some of the companies that were founded by these individuals and you start to get a sense as to their value — to our lives and to our economy.

Imagine if Jerry Yang had stayed in Taiwan and had not been able to immigrate to the US as a child? Or Andy Grove remained in Hungary? Or Sergey Brin was now living in Russia? Companies that have changed the way we live, work and think would certainly not be headquartered here — and maybe wouldn’t exist at all.

The venture capital community has long understood the importance of making sure the cream of crop continues to come to the US to build businesses. In the past, based on anecdotes, we had estimated that at least half of our member’s portfolio companies had at least one immigrant founder. But no one ever made a serious attempt to quantify it until now.

Today the National Venture Capital Association (NVCA) is releasing a study that reveals some astounding numbers regarding the national prevalence and the contributions of immigrant entrepreneurs to our economic health — and highlights again the urgent need to fix our immigration policies before the US loses its global innovation leadership.

NVCA has been involved for years in the effort to reform H1-B visa and green card policies. But given the increased rancor of the immigration debate this year, the focus on illegal immigration, and the strong sense within the venture community that these issues impact US competitiveness we decided we needed hard data to really make the case. The study speaks for itself in terms of the dramatic impact immigrant entrepreneurs have had on the US economy.

In terms of positive impact, the numbers are impressive:

— Companies founded by immigrants and initially backed by venture capital account for more than $500 billion of total U.S. market capitalization.

— Over the past 15 years, in fact, immigrants have started 25 percent of all the venture-backed companies that have gone public.

— Immigrant-founded, venture-backed public companies today employ an estimated 220,000 people in the United States and over 400,000 people globally

Quality may be more important than quantity, however, as these companies — concentrated largely in cutting edge sectors — tend to generate white collar jobs that pay high salaries, which in turn help to create wealth and raise living standards.

We also looked to test the premise that half of the current venture-backed companies had at least one immigrant founder. We surveyed these companies and garnered more than 340 responses from around the country. It appears our intuition was in the ballpark. Of those responding to the survey, nearly half (47 percent) of the founders of private companies were immigrants, and almost two-thirds (66 percent) of the immigrant have already started or intend to start more companies in the United States.

While the successes have been great for our industry and the US economy, they also suggest an alarming reality: The US is essentially stunting its own growth by not reforming its immigration system with the proper urgency.

Responses to the NVCA survey bear this out:

— More than 2/3 of immigrant entrepreneurs agreed with the notion that U.S. immigration policy has made it more difficult than in the past to start a business in America.

— Sixty-six percent of respondents who use H-1B visas indicated that “current U.S. immigration laws affecting skilled professionals harm American competitiveness.”

— Among companies who use H-1B visas, nearly 40 percent said the lack of H-1B visas has “negatively impacted [their] company when competing against other firms globally.”

— One-third of the respondents indicated that the lack of H-1B visas had influenced their firm’s decision to place more personnel in facilities abroad.

Fortunately, it’s not too late. According to the research, 95 percent of the immigrant founders in private companies would still start their companies in the United States if given the choice today. By raising the H-1B cap, among other measures, we can ensure that America continues to draw the world’s best and brightest minds — and thus share in the wealth that they create as crucial participants in the US innovation economy.

To view the entire report — including methodology, etc. — please go to www.nvca.org/pdf/AmericanMade_study.pdf