As research indicates that the U.S. is an increasingly difficult place for foreign founders to come and build companies and founders tell horror stories of the massive challenges they faced dealing with byzantine U.S. immigration policies, Canada is burnishing its reputation as open for business — and open for new residents.

Canada’s new startup visa has received a huge amount of attention in the U.S. as the the global war for talent heats up. Senators such as Jerry Moran (R-Kan.) have tried to address the situation via legislation like the Startup Act 3.0, but that’s a slim hope after deaths of 1.0 and 2.0.

Source: Wikipedia

Jason Kenney, Canadian Minister of Citizenship, Immigration, and Multiculturalism.

The Startup Visa provides immediate permanent residency in Canada if a founder meets just three criteria. An applicant must:

1. Secure an investment from a designated Canadian VC or fund
2. Demonstrate English language proficiency
3. Have at least one year of postsecondary education

This weekend, Canadian member of parliament and Citizenship, Immigration, and Multiculturalism Minister Jason Kenney is in Silicon Valley promoting his country’s Startup Visa.

We chatted with Kenney about the visa’s goals, his intentions, and the U.S. immigration system.

VentureBeat: What’s the ultimate goal of the Startup Visa?

Jason Kenney: We want a pathway for the world’s best and brightest to come to Canada and to harness that drive and innovation to be at the cutting edge of the modern economy.

VentureBeat: Why are you coming to Silicon Valley right now?

Kenney: The U.S. immigration system is dysfunctional, and it’s really difficult for talented immigrants to stay in the U.S. permanently. I’m coming to further raise the profile of the program and send the message that Canada’s open for business.

If you’re a young startup entrepreneur having trouble renewing your visa, come here! We offer immediate permanent residency.

VentureBeat: What’s the response been so far?

Kenney: There’s been a great amount of interest, but we only opened for applications on April 4, so it’s too early to tell. We will issue up to 2,500 per year, but I don’t anticipate it will be fully subscribed for the first year because it’s still new.

I know there’s a huge pent-up demand in the U.S., and I think the word is going to spread virally: If you want to stay permanently in NA, think of Canada.

VentureBeat: You’re offering permanent residency to anyone in who secures an investment. What about those who fail?

Kenney: Many countries, such as Australia, only offer temporary resident status. In Canada, we’re going to give you the “green card” right up front.

We know full well the rate of failure in startups is high, but if they come up here and don’t succeed, they have demonstrated they they have high human capital. And in the long run, their chances of succeeding and building a successful enterprise are high.

We want Canada to become a magnet for people like that.

VentureBeat: Why is Canada a good place to come build a startup?

Kenney: We have really strong tech sectors in Kitchener/Waterloo, Toronto, Vancouver, Montreal, and a few other places, an increasingly strong venture capital industry, and very well-run industry associations, angel associations.

Plus, we have the lowest business taxes in the developed world, and the strongest fiscal position in the developed world.

In terms of macro-economic terms, that’s important … Canada weathered the storm of the economic downturn better than any other country.

In addition, we have an immigration system that works, which means you have access to global talent … and human capital is even more important than financial capital.

VentureBeat: Any other message for Silicon Valley?

Kenney: While here we’ll be meeting with the CEOs of many major IT companies just to emphasize what a great place Canada is to invest in.

I think we’re really going to kick this into hyperdrive.

photo credit: PhOtOnQuAnTiQuE via photopin cc

This is a guest post by Boris Wertz

On Thursday, March 28, Canada announced that a new startup visa program would begin accepting applications.

Governments can be notorious for slow change, especially in the eyes of entrepreneurs who move at an incredibly fast-pace. But Canada’s federal government moved impressively quickly to implement this new visa, which is aimed at encouraging entrepreneurs from all over the globe to call us home.

What does the startup visa accomplish?

Immigrants — who are 30 percent more likely to start a business than non-immigrants, according to the U.S. Small Business Administration – can now be fast-tracked into Canada if they receive a $200,000 investment from a designated Canadian venture capital fund or $75,000 from a designated Canadian angel investor group. This makes it much easier for entrepreneurs to avoid bureaucratic red tape and the stress of immigration status uncertainty.

But the program doesn’t just make it easier for immigrants on a financial level. It makes it easier on a volume level as well. In 2012, a mere 700 of the old startup visas were issued, while the new program has carved a path for up to 2,750 entrepreneurs to launch their startups in Canada per year.

While the Canadian government is garnering praise for making the visa a reality, the truth is that in order for the program to come to fruition, everyone had to make it a priority: government, investors, and entrepreneurs worked together for two years to make things happen. Everyone, to use startup terminology, hustled.

How Summify provided the impetus for Canada’s startup visa

But what started it all? To find the answer, look no further than a Canadian startup success story: Summify. Romanian founders Mircea Paşoi and Cristian Strat overcame everything that was wrong with Canada’s old system, creating a popular company that was acquired by Twitter for a tidy sum in January 2012.

Summify’s founders came to Canada in 2010 to start their company and were quickly backed by top-tier venture capital. Yet Paşoi and Strat — who turned down Silicon Valley jobs at Facebook and Google to build a company in Canada — could only get six-month visas, forcing them to leave and return to the country repeatedly.

They also weren’t allowed to work for their own company because the old immigration law book considered the two entrepreneurs to be potential drains on Canadian society, even though the opposite was evidently true: Summify was creating jobs in Canada and attracting significant investment.

It was their story of frustration and adversity that inspired me and other Vancouver-based entrepreneurs Danny Robinson (co-founder of Perch) and Maura Rodgers (co-founder of Strutta) to lobby for an easier way for foreign technology entrepreneurs to start their company in Canada. Fortunately for us, the government expressed strong interest to push our initiative forward.

A startup visa for the U.S.?

So now you’re wondering, what about the U.S.? Where is its startup visa? And how did Canada — a smaller nation with a less established technology ecosystem — beat its neighbor to the South on this front?

It would be easy to argue that the U.S. doesn’t need any help attracting entrepreneurs. It has Silicon Valley, which was ranked by Startup Genome as (to no one’s surprise) the world’s best startup ecosystem. Entrepreneurs from every corner of the planet are naturally drawn to the Valley. But to make that argument would be to go against the very nature which made the Valley so successful: if the US sits back and watches other countries implement startup-friendly visa programs, it’s going to get left in the dust — just like when a big company is disrupted by a scrappy startup.

Startupvisa.com, a site dedicated to raising awareness about the situation, contends that U.S. immigration policies are “now hurting our competitive edge in the global economy.”

Last year, four of the world’s five top-ranked startup ecosystems were American cities. But Canada has two cities in the top 10 (Vancouver and Toronto) and a third in the top 20 (Waterloo). If Canada continues to beat the US to the punch on important issues such as these, it won’t be long before the tables are turned.

The importance of foreign entrepreneurs building their companies in the US cannot be underestimated. Few realize that nearly half of Silicon Valley startups are founded by immigrants. Without them, the Valley would not be the world-leading startup ecosystem that it is today.

But there’s a problem — this trend is reversing. From 1995 to 2005, foreign entrepreneurs founded 52 percent of Valley startups, according to the Kauffman Foundation. Yet since then, they’ve founded just 44 percent. A startup visa would get immigrant entrepreneurship back on track and allow Silicon Valley and the rest of America to retain its competitiveness.

Unfortunately, there’s a major drag on the U.S. initiative’s progress in the form of political battles. While in Canada everyone generally agreed the startup visa was simply about improving entrepreneurship, in the US the initiative became a political issue. And we all know, things don’t usually don’t move forward so long as they’re mired in politics.

Many Americans have made the startup visa a priority, like Canadians did — just not enough of the ones who have the power to make it a reality. With the legislation already out there, foreign entrepreneurs are now stuck in limbo as it sits in the House and the Senate. At this point, they still don’t know whether politics will push it past the finish line or kill it.

In the meantime, they can always apply for a Canadian visa.

Boris Wertz is one of the top tech early-stage investors in North America and the founding partner of Version One Ventures. His portfolio encompasses over 40 early-stage consumer internet and mobile companies, including GoInstant (acquired by Salesforce), Indiegogo, Top Hat Monocle, Indochino, Summify (acquired by Twitter), Wattpad, Sparkbuy (acquired by Google), Julep, Suite101, Yapta, Chloe & Isabel, Edmodo, and Flurry. Before becoming an investor, Boris was the Chief Operating Officer of AbeBooks.com, which was sold to Amazon in 2008.

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You guessed it: startups.

U.S. immigration rules are extremely challenging for foreign-born engineers and founders to navigate, with many spending years and thousand of dollars working through the byzantine maze of rules and regulations … all while their businesses potentially languish and cofounders, employees, and customers suffer the consequences. Silicon Valley has been prominent in the fight – particularly around the Startup Act – to admit immigrants who want to start businesses and create jobs.

The precisely what Engine is working toward as well, with the backing of technorati like Google, SV Angels, 500 Startups, and many other technology-focused startups and organizations, such as Mozilla, Yelp, and the Startup Genome.

The problem, Engine’s Michael McGeary says, is that the startup community is typically underrepresented in government. Today’s speech is just the first step in redressing that imbalance and putting immigration — as well as startups’ other major concern, software patents — on the top of the government priority list.

Here’s the full text of McGeary’s presentation:

REMARKS, AS PREPARED FOR DELIVERY MR. MICHAEL MCGEARY and ENGINE ADVOCACY BEFORE THE HOUSE COMMITTEE ON SMALL BUSINESS

Chairman Rice, Ranking Member Chu, Members of the Committee, thank you for having me here with you this morning.

I want to spend my time talking about issues that will impact the true engine of economic growth in this country: our startup community. Startups promise the rebirth – - and rejuvenation — of the American economy. Far from the idea held by many about startup life — of bespectacled youths in ironic t-shirts gallivanting around Downtown Palo Alto or the Flatiron in New York, spending their days writing code for the next great game about unicorns which we can all play on the subway on our way to work — the startup community in America reflects the best of American business. It’s dedicated men and women, working in coffee shops, and co-working spaces, office parks, and garages in Kansas City and Austin, and Nashville, and yes, San Francisco and New York, creating economic growth and multiplicative effects not seen in any other industry, helping power not just their own business, but in many cases countless others across the country.

These men and women have created all of the net new job growth in this country for the last quarter century, and according to our recent study, Technology Works, are projected to create 4.3 jobs in local communities for every job created in a technology concern.

It’s for these reasons, and so many others, that a few of us got together to form Engine Advocacy. For those unfamiliar with Engine, we got started about a year and a half ago with the intention of connecting the startup community with government at the federal, state and local level. We did so with an eye towards turning some of the workarounds, good ideas and innovative solutions to common problems faced by the startup community, into new legislation or government programs that can help make it just a little easier to start and run those businesses here in America.

We do that in a number of ways for a community that has largely been under represented in the halls of government. Our work is balanced between direct advocacy, convening our members from all over the country with leaders in government, and educating all of the players by arming them with good stories and strong data that point to the impact that startups can have in driving economic growth.

And that’s why I came here today. If you took a survey of startup founders and entrepreneurs, investors, technologists, developers, engineers, and the myriad others working in startups today, they would tell you that two issues more than any others threaten the promise and progress of their companies. These issues — immigration reform and software patent reform — are Engine’s immediate priorities and will form the basis of our advocacy work this year.

First, immigration: despite our historical competitive edge, we in the United States are facing a growing gap between the jobs we can create and the skills and employees needed to fill them.

In the long term, we need to continue to work to evolve our American education system to help power that growth and give young people the skills they need to compete in a global marketplace. But in the short term, we must also realize that our most valuable resource, talent, is already on our shores attending the University of Wisconsin, or Kansas University, or Stanford, and that, unfortunately, we seem to be looking for ways in the current system to send these smart, talented, entrepreneurial individuals either back to their countries of origin, or to places like Canada, Chile and South Korea where they have hung out the welcome sign to these promising minds, as we did for so long at Ellis Island and Angel Island. It’s imperative that we find a way to keep knowledge here, working and building business in America so that our economy can continue to grow and our businesses continue to thrive.

Second, for those who do stay and others who start business, another spectre is lurking, threatening to choke off innovation nearly at its source — the danger of patent trolling. According to recent findings by the Electronic Frontier Foundation, patent trolls, forgive me, “Non-Practicing Entities” account for 56 percent of all lawsuits filed against innovators. This environment creates a legal and regulatory thicket which many young companies of two and three people find incredibly hard and costly to navigate.

We must find smart ways to protect innovative intellectual property, and as the constitution says, to promote science and the useful arts. The current system in place does no such thing — in fact, it even threatens to chill innovation as young companies find fewer and fewer avenues for capital as the prospect of patent troll lawsuits grow.

In the end, what’s good for startups is good for small business on the whole, because startups power small business. Consider the single mom making jewelry in Boise who is able to sell to consumers all over the world thanks to Etsy. Or the rural doctor in Kansas who is better and more readily able to diagnose cardiovascular problems in a patient because of increased computing power, and new data culled from existing MRI scans paired with three-dimensional flow visualization — a technology being pioneered in our own office in San Francisco by Morpheus Medical. And the bakery in my neighborhood in San Francisco’s Sunset District that accepts credit card payments via Square on their iPad rather than having to buy a costly point-of-sale system. The promise and potential of America’s entrepreneurial future is also so much more — we can create gaming apps that distract and delight, but also technologies that save lives, bring people closer together, and allow us to see our world, and ourselves, from a reframed perspective.

Startups can power the next generation of growth in the American economy if we let them, and it will be in working with this committee and other allies in Congress which can allow for that future, our future, to be prosperous.

Thank you.

photo credit: laverrue via photopin cc

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Mark Zuckerberg: Billionaire, social network tycoon, and now, activist.

Last week the San Francisco Chronicle reported that the Facebook CEO was planning his own advocacy group, and now a new report from Politco says the group is getting it own lobbyists: big shot firms Peck, Madigan, Jones & Stewart and Fierce, Isakowitz & Blalock. 

While we don’t know many details about Zuckerberg’s group (like its name, for instance), the selection of the two firms — and their lead lobbyists – meshes well with one the main issues the group will focus on: immigration, which has become a major issue for tech companies.

Zuckerberg’s interest in immigration is unsurprising. After all, making it easier for people to enter and work in the United States would certainly give tech companies like Facebook access to more bright minds.

So while immigration in the United States has as of late been focused on our southern border, Zuckerberg’s interests are much larger — and potentially hugely beneficial to Facebook.

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In order to ensure that America remains a hub of innovation and entrepreneurship, he emphasized the importance of education, economic, immigration, and patent reform, and said he strongly supported teaching compute programming in schools.

He even endorsed video games thanks to a recent encounter with Facebook founder Mark Zuckerberg.

“The concept of vocational education got a bad rap at some point because of the perception it was tracking folks into blue collar jobs, but all those categories have eroded,” Obama said.

Look at Mark Zuckerberg. I was sitting next to him at dinner a couple of years ago, and he said he taught himself programming primarily because he was interested in games. If we set programs in high schools that engage kids because they get it, they won’t be just sitting there slouching in back of rooms while someone is lecturing.

Given how pervasive computers and the internet is now, how integral it is in our economy, and how fascinated kids are with it, I want to make sure they actually know how to produce stuff and not simply consume stuff.

For people who already live in the U.S., education is a key factor in supporting economic growth, not to mention the startup scene. Despite high unemployment rates, technical talent is in high demand. America’s performance in math and science is mediocre at best, and women and minorities are significantly underrepresented in technical fields. Furthermore, higher education is prohibitively expensive for a large portion of the population who still need practical skill sets and income.

Another barrier to a growing tech scene is immigration law. Immigration is a hot-button issue in the technology industry as talent developers, designers, and entrepreneurs from around the world have trouble legally working in the United States. The president said that the lack of immigration reform over the past few years has more to do with the legislative, rather than the executive, branch.

“I am not the emperor of the United States. I am the president,” Obama said. “Congress has not changed the broken immigration system.”

Obama continued:

I want immigration reform in the next four or five months. Every day we wait, there are more stories that break our hearts. We will have an economy stifled by deporting folks and a bottle-necked legal system that forces people to work illegally. It prevents us from recruiting and keeping top-flight engineers and tech people who are ready to work here or invest here. But because our legal immigration system to broken, we don’t track them. We train them here and then send them back to their countries. The opportunity for reform has never been higher.

One of the participants was a pink-haired entrepreneur who asked the president about software patents and the threat of software patent trolls. Startups have a strong need to defend themselves from copyright or intellectual piracy, but they often can’t afford to engage in legal battles. Obama said that while progress has been made on this front, patent reform is only “half way” to where it needs to go:

We want make sure patents are long enough that intellectual property is protected, without being so long that innovation is reduced. Tech is changing so fast. We want to protect privacy civil liberties and ensure the internet stays open. I am an ardent believer that what is powerful about the Internet is its openness and capacity for people to get out there and introduce new ideas with low barriers to entry, but I also want to make sure people’s intellectual property protected. We have to refine the legal process to keep up with the tech.

Obama also addressed raising the minimum wage, clean energy, and even fielded a question about why the U.S. Treasury is still minting pennies. [Why, indeed? --Ed.]

Overall, the level of intelligence and curiosity in the questions (from a small audience selected by Google, presumably) was far higher than anything seen from the press pool at a White House briefing

These hangouts are part of a weekly series in which the president answers questions from Americans, and this one follows his State of the Union speech earlier this week. Obama is a particularly tech-savvy president, and his team makes good use of social media, including Reddit and Twitter.

This guest post is written by Vivek Wadhwa, VP of innovation and research at Singularity University.

“We all know that today, we have an immigration system that is out of date and badly broken; a system that is holding us back instead of helping us grow our economy and strengthen our middle class” said President Obama in a speech in Las Vegas, Nevada on Jan 29. He emphasized that the time had come for common-sense, comprehensive immigration reform and repeated, “The time is now … now is the time,” cited data from my research, and talked about skilled immigration as if he was reading paragraphs from my book, Immigrant Exodus.

His speech comes on the heels of a bipartisan agreement by a group of Senators called the ‘Gang of Eight’ to reform the immigration system. For the first time in years, the Democrats and Republicans are working together to fix the immigration mess. There is real hope that new immigration legislation may get the ball past the goal line, give the U.S. economy the boost that it badly needs, and lift millions out of a miserable life in the shadows.

The Senate agreement provides a sensible path to clear the green card backlog by eliminating nationality quotas, no longer counting spouses and dependents against the employment cap, and “recapturing” over 300,000 unused employment visas. It dramatically increases the number of H1-B visas and makes it easier for workers on these visas to switch companies— so they are no longer in “indentured servitude” to their employers. And most importantly, it authorizes employment for the spouses of H1-B workers so that professionals with great potential are no longer confined to their homes and locked out of the economy. It has been disgusting to see the treatment that a great country like the U.S. has given to group that is mostly women.

The president added a very important program that the Gang of Eight Senators forgot: the Startup Visa. This is something that Silicon Valley has long been demanding. Talking about students graduating from American universities, he said, “Right now in one of those classrooms, there is a student wrestling with how to turn their big idea, their Intel or Instagram, into a big business. We are giving them the skills to figure that out, but then we are going to turn around and tell them to start the business and create those jobs in China, or India, or Mexico, or someplace else. That is not how you grow new industries in America. That is how you give new industries to our competitors.”

I have been hopeful before that reform would happen. And I was bitterly disappointed when petty partisan politics caused several bipartisan agreements, over the past few years, to fall apart. It could well be that this happens again.

But there is a big difference this time.

After the Republicans had their butts kicked by Hispanics and Asians over the anti-immigrant rants of extreme segments of their party, they badly want to make amends. The conservative family values and fiscal prudence that the Republican Party espouses are very much in tune with Hispanic and Asian values. The Democrats should not have the strong voting advantage that they do with these groups. Now, Republican Party bosses need to level the playing field for their electoral candidates, and the president owes a debt that he needs to repay. So both sides of the political spectrum have a motivation not to act in a self-defeating way.

Having said that, I know that the public can count on its elected leadership to snatch defeat from the jaws of victory; to take something that is sensible and screw it up. It is entirely possible that by the time the wheeling and dealing is done in Congress, we get legislation that makes both sides unhappy and doesn’t solve the real problem. Look at what happened with another bill that originally made so much sense: Obamacare. Even its supporters apologize while defending it.

Let’s hope our president can indeed pull off a miracle and get a sensible comprehensive immigration bill through the House and Senate. Such a bill would, without doubt, do wonders for the U.S. and for the skilled immigrants who want to make the U.S. their home and contribute to its success.

[Top image credit: Alex Helin/Shutterstock]

Today we tell the sad tale of how one startup went down. Taploid, a DEMO company that hoped to be the tabloid of the social world, is folding up today after running out of money, hitting walls with U.S. immigration, and failing to get acquired.

“If you want to get acquired and half of your team is in another country … fat fucking chance,” said Taploid cofounder and chief executive Redg Snodgrass in an interview with VentureBeat. “Basically, right now the company’s out of money … and we’re all going to go in our own separate ways and take up different consulting gigs.”

Taploid’s technology was on track to be acquired by social news organization Topix. Snodgrass and Topix chief executive Chris Tolles were in talks about a potential “aqui-hire,” or an acquisition that focuses on the employees as opposed to the technology. The acquisition looked like the light at the end of a short tunnel for a company with seemingly good engineers and funding. Snodgrass and cofounder Andrew Scott had decided to not get visas for their engineers early on, instead investing the money in their technology. Snodgrass told VentureBeat he wasn’t trying to build an acqui-hire company, though that’s what it came down to.

“We tried to be as lean as we could and we scraped and scrimped on the wrong things inevitably,” he said. “Would I have done something different, would have I spent $10,000 to get them the visas? I didn’t make that call.”

Snodgrass explained that there are only certain times of year that his engineers could apply to get a visa, which was too long a timespan for the fast-paced acquisition. If Topix had acquired Taploid without the visas locked down, there’d be no guarantee that the engineers would even get visas and be able to come back to Silicon Valley.

“I think that this is an ongoing issue in Silicon Valley, having come from Sun Microsystems where two of the founders were … non-U.S. citizens,” said Tolles in an interview with VentureBeat. “I would say that it certainly was a real deal-breaker. … The country would benefit quite a bit from more straightforward immigration laws. Especially for high-tech workers.”

Source: Meghan Kelly

Taploid CEO Redg Snodgrass at the DEMO conference

Visas are a big issue for startups that often pull engineering talent from all corners of the world. If the startup doesn’t get off the ground or get paperwork filed in time, they may lose valuable employees. In this case, three of Taploid’s engineers are currently living in London after having expended their legally allowed visiting time in the U.S. without obtaining a visa that would let them to stay longer.

“It was just really frustrating. I think everyone thought we had a really good thing between Topix and us, but because of the current visa restrictions, it just takes a very long time to do anything,” said Ed Parsons, the lead engineer at Taploid. “America has so much demand … you can do whatever you want in terms of supply.”

When asked what U.S. Citizenship and Immigration Services would say to those who call for visa reform, public affairs officer Sharon Rummery told VentureBeat, “We never talk to the possibility of changes to law. We only talk about changes to law if they’ve been signed by the president.”

Taploid launched this year at the DEMO conference and is a Facebook app that centers around your friends’ gossip. It attempts to be a tabloid for today’s generation — headlines about your friends delivered to your email, as opposed to headlines about celebrities sitting in the grocery check-out line.

When you approve the app on Facebook, Taploid’s engine looks at all the data your friends make available to you and then uses those to compile funny, interactive “stories” about them. For instance, if you friend just got engaged, Taploid will show you a headline about his engagement and let you pick whether the marriage will flame or flub.

At the time of writing this post, Snodgrass said he’d spoken with half of his investors who were all “very encouraging” and “understanding.” For the time being, he will help The Grow Conference, a startup conference in Vancouver, with its operations. He leaves the deal with some parting advice for future entrepreneurs:

“One thing you need is you have to have an attorney, it’s not something you can do yourself. One of the more frustrating things is that even with an attorney, it’s just all ambiguity.”

Disclosure: Redg Snodgrass has worked with VentureBeat on our conferences in the past.

Photo of Redg Snodgrass, Ed Parsons, and Andrew Scott via Meghan Kelly/VentureBeat

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This post is written by Samantha Huang, a research assistant at Stanford Law School. 

At the immigration law firm where I worked during graduate school, I saw case after case of extremely talented individuals who, despite their many contributions to the U.S., faced the threat of returning home because of their immigration status.

One such case involved the immigration struggles of a highly successful postdoctoral fellow from a top-five university whose work had led to a patent for a medical treatment for metastatic cancer. Another client, the founder of a multimillion dollar high-tech startup, had fallen out of legal status because immigration law lacked clear-cut visa categories for early-stage entrepreneurs. After working on such cases, I periodically would joke to clients that I wasn’t sure if the law firm could help them, as the immigration agency would not even allow cancer curers to remain in the country.

When Vivek Wadhwa invited me to become a researcher for his study on immigrant entrepreneurship, I already had experienced my fair share of visa horror stories faced by talented foreign-born innovators. I consequently came to the project with my own suspicions that immigrants were forgoing the U.S. for other opportunities abroad.

Our research team, supported by Duke University, Stanford University, and the UC Berkeley School of Information, found that for the first time in decades, the rate of expansion of immigrant entrepreneurship has plateaued and even started to decline. Of technology and engineering companies established from 2006 to 2012, the proportion of such companies with at least one founder who was foreign-born has decreased from 25.3% to 24.3%. These findings suggest that high-skilled immigrants have begun to leave the United States for other countries, taking their business with them.

Most alarming are the results from our special analysis of the high-tech hub of Silicon Valley. From the 1970s to early 2000s, the region boasted the greatest growth rates of immigrant entrepreneurship. However, since 2005, the rate of growth of immigrant-founded tech companies in the region has dramatically decreased 8.5 percentage points to 43.9%. As the economic health of Silicon Valley often serves as a litmus test for determining the strength of the U.S. economy, such an astonishing drop in immigrant entrepreneurship may also mean trouble for the nationwide tech industry, which has relied extensively on the contributions of foreign-born innovators.

Notably, not all our findings paint such a bleak picture. While most immigrant groups demonstrated a decline in entrepreneurship rates, Indian and Chinese founders are establishing engineering and technology companies in the U.S. at a higher rate than before. Both groups historically have exhibited a nearly unparalleled level of participation in the U.S. technology industry, and Indians have dominated the Silicon Valley tech scene since the 1990s. Of the total of immigrant-founded companies surveyed in our study, 33.2% possessed Indian founders, compared with 26.0% in 2005. The proportion of Chinese-founded startups increased from 6.9% to 8.1%. Chinese and Indians, the two most visible immigrant groups in the tech industry, appear to have resisted the general trend of stagnation of the rate of immigrant entrepreneurship in the U.S.

However, beyond India and China, the top two immigrant-founder-sending countries, our findings become increasingly complex. The case study of Taiwanese founders is illustrative. In 2005, Taiwanese founders comprised the fourth largest immigrant-founder group. Today they rank twenty-second. This drastic drop in entrepreneurship by Taiwanese immigrants is especially alarming in light of the influential role they have played in the advancement of the U.S.’s component technology field. While we may only speculate about the causes of the decline in Taiwanese entrepreneurs, one compelling explanation is that as Taiwan becomes an increasingly attractive forum for entrepreneurship and innovation, high-skilled Taiwanese have begun to seek out the opportunities available in their home country. The efforts by the Taiwanese government beginning in the 1980s to create the supportive infrastructure necessary for entrepreneurial development finally seem to have stemmed the “brain drain” problem that had once debilitated the country throughout the 1970s and 1980s.

Today the Kauffman Foundation releases the findings of our study, which was headed by Berkeley School of Information Dean AnnaLee Saxenian, Stanford Law School Professor Daniel Siciliano, and Stanford University Rock Center Fellow Vivek Wadhwa. The report shows that we sit on the brink of a historically unprecedented decline in immigrant entrepreneurship. As high-skilled immigrants leave the U.S. for increased opportunities at home, they take their specialized knowledge and businesses elsewhere. In failing to retain them, the U.S. loses many valuable entrepreneurs and innovators. As our study demonstrates, the maintenance and expansion of the U.S. economy and tech industry require a serious commitment to immigration law reform. With the process of the reverse brain drain already underway, legislative change must occur sooner rather than later to stop the further loss of tech talent from the U.S.

Vivek Wadhwa has also published a book on this subject, The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent, which suggests ways to fix the problem.

Samantha Huang is a research assistant at Stanford Law School and is completing a degree at  Berkeley Law School, where she focuses on the promotion of technology entrepreneurship, and innovation through law.

[Top image credit: Komar/Shutterstock]

[This post is part of a series produced for VentureBeat by Singularity University.]

Around the world, you regularly see stories about an attempt to create ”The Silicon Valley of <fill in country>,” but you rarely read about a successful new competitor to Silicon Valley. Many theories have been advanced about the reasons for the success of Northern California in so many fields — areospace, semiconductors, chips, PCs, software, biotech, and of course the various iterations of the Internet (boom, web 2, and social) along with less certified booms in cleantech, cars, pharmaceuticals, robotics, and more.

Theories have pointed to the presence of Stanford and its ecosystem or to Hewlett-Packard and its leadership. The large VC community is seen as both a driver of the success and a positive feedback consequence of it. The liberal/libertarian/hippie culture is cited, and some give credit to the major government spending of the early era as the essential kickstarter. And once Silicon Valley was built, there’s no doubt that the large pool of talent, its philosophies, and the easy access to capital have helped sustain it.

Brad Templeton – Chair of the Networks and Computing Track at Singularity University

All these factors play a role, and most of them have been duplicated (especially government-funded incubators) in the failed attempts to duplicate Silicon Valley around the world. But one factor usually has not: Silicon Valley’s unique immigrant population.

I came to an important realization about this when attending a high-end conference for PC and Internet executives in the late ’90s. A speaker wanted to make a point about immigration to the room, which was full of founders and top executives from the high-tech companies, mostly of Silicon Valley.

He said, “If you were born outside the United States, please stand up.” And more than half of those in the room, including myself, stood up.

We looked at one another, stunned by the realization.

This is no anecdote. A study by Wadhwa et al from Duke University concluded that 52% of startup founders in the USA were immigrants, and that immigrant-founded companies created over 450,000 jobs in 2005.

I had seen some inkling of this before. In 1980, I came to the valley for the first time to work for the first PC software company (Personal Software Inc, later known as VisiCorp), which had itself moved there from Boston and Toronto — yes, it had an immigrant founder. I was surprised how everybody I met in high tech was from “somewhere else.” Not necessarily from outside the USA, but almost universally from outside of the area.
We used to joke how you could not find a native.

But it was no joke. And I’m sure that if you asked a crowd of high-tech founders in Silicon Valley to stand up if they were born outside the valley, the vast majority of the room would stand. The key aspect of Silicon Valley is that most of these people gave up a life somewhere else – often somewhere outside the USA — to come to California so they could start or participate in something big. The Kauffman Foundation recently released an impressive video demonstrating this phenomenon:

It’s not that the natives of Silicon Valley aren’t smart, wealthy, forward thinking and well educated. Of course they are. So are people in many other places in the world. But the valley has also pulled in the best and brightest of the world, and in particular the most driven. By selecting for drive, the valley is repeating the thing that made the USA and Canada great a century ago as nations of immigrants. While the century-old lesson is oft mentioned, I wish those who are espousing anti-immigrant policies could see the room of high-tech job-creating immigrants standing up. I wish they could see that this immigrant-driven success is happening now, as we speak.

The bad news for those who wish to duplicate the valley is that this is not an easy factor to reproduce. If you can’t build a high-tech valley with your own people, how do you build it with others? Silicon Valley’s other edges — including things like its wonderful climate and Californian surroundings give it a leg-up in attracting immigrants. At the same time, its astronomical housing prices and the anti-immigrant sentiment in the USA push back pretty hard.

As more evidence for this idea, note that other places that have achieved high-tech success, such as Israel and Canada, are young, immigrant-driven countries. The process of building a high-tech center in your town is going to be a slow one. You need to do many things, including most of the popular ones cited above, but you also have to change your immigration policy, and wait a long time to bring in those immigrants.  For now, it seems Silicon Valley is going to keep repeating itself in the success column.

Brad Templeton is director of the Electonic Frontier Foundation and chair of the Networks and Computing Systems Track at Singularity University.

[Top image credit:  jejim/Shutterstock]

Ever since I became an academic six years ago, I have been one of the biggest critics of U.S. competitiveness policies. I documented, for example, that we had our data wrong when it came to India and China’s advantages in engineering education and R&D, that we didn’t understand how to build innovation centers, and that our assumptions about entrepreneurs and entrepreneurship were wrong. I have been particularly vocal about America’s flawed immigration policies. I quantified the amazing contribution that skilled immigrants make in the technology industry and raised the alarm about the reverse brain drain that is in progress. I testified, assertively, to Congress, and have been badgering our political leaders to act on these important issues.

My father, a retired Indian diplomat, called me on several occasions to plead that I tone down my criticism. He worried that I would anger U.S. government officials and they would find some way to have me deported. Indeed, this would have been the case in many countries, where I could have ended up in a Gulag — or worse.

But what happens in America?

The Government gives me an official recognition — Outstanding American by Choice — for my “commitment to this country and to the common civic values that unite us as Americans.” When I received the call from U.S. Citizenship and Immigration Services Director, Alejandro Mayorkas, I had tears in my eyes. He told me that the government appreciated all of my efforts to make the country more competitive and that my criticisms of his department had motived his team to work harder to improve the system.

This is the greatness of America and why this country leads the world: Disagreement and debate are cherished. Challenging the norms, thinking outside the box, and questioning those in power is encouraged and celebrated. The louder you speak the more prominence and respect you are given. Society’s heroes aren’t merely revolutionaries or political figures, but opinionated, non-conformist entrepreneurs like Steve Jobs and Mark Zuckerberg.

This is what distinguishes American children from others and why they grow up to be innovators. From childhood, they are encouraged to pursue their dreams and to challenge authority. So they challenge their parents, then their teachers, and then their government. And they learn to work with each other and compete. There are no barriers to success. If you work hard, think smart, and persevere, you achieve success. And this success is celebrated. Reaping fortunes through entrepreneurial success even has a special label: it’s called the American Dream.

America’s unique strength is that it also welcomes foreigners. Yes there is some discrimination and there are a few hurdles to leap over. But once you surmount these, you are treated like everyone else. You are given the same respect and have the same opportunities. You can compete in any field. And this is what has been happening through American history: wave after wave of immigrants has landed on American shores, embodied its values, and helped birthright citizens to work harder and think smarter.

Today, America is in a slump. The ups and downs of the economy and rise of new global competitors are discouraging and often cause American’s to lose hope. But, as someone who came to the U.S. by choice, and who has studied the warts of this country and its competitors, I have no doubt that the U.S. will continue to prosper and lead the world.

It has to — no other country has the ingredients for long-term success.

Washington Post columnist Vivek Wadhwa is a visiting scholar at the School of Information at UC-Berkeley, director of research for the Center for Entrepreneurship and Research Commercialization at the Pratt School of Engineering at Duke University, and senior research associate for the Labor and Worklife Program at Harvard Law School.

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Capital image via Blacknell/Flickr

Copyright 2012, WashingtonPost

A group of VCs, academics and thought leaders recently petitioned Mayorkas about the roadblocks to foreigners creating startups in the United States.

To their surprise, Mayorkas responded immediately and quite positively, asking for more advice and promising swift action to welcome more foreign entrepreneurs.

Vivek Wadhwa, an entrepreneur, academic and columnist, was on the list of signatories petitioning the director and said he was surprised at Mayorkas’ response.

In an email exchange with VentureBeat, he said, “I expected this would be a battle I would have to fight through the media and through policy makers. I believe that Alejandro is serious in his intent and genuinely wants to fix the problem. The question is whether the bureaucracy will let him.

“If he does follow through, it will make a real difference. Great job-creating entrepreneurs … won’t be deported, they will be welcomed.”

This issue has been raging since at least the Startup Visa Act was first introduced in Congress in 2010. The Act has yet to undergo judiciary committee review.

In a VentureBeat post on American brain drain, Wadhwa wrote, “During the last 20 years, we admitted record numbers of international students and highly educated foreign workers on temporary visas. But we never expanded the number of permanent resident visas that allow them to stay permanently.”

For this reason and others, Wadhwa continued, “72 percent of Indian and 81 percent of Chinese returnees said that the opportunities to start their own businesses were better or much better in their home countries.” As a result, he said, America is losing new jobs and new businesses.

Last month, USCIS announced an Entrepreneurs in Residence initiative, spearheaded by Mayorkas. The goal of the initiative was “to ensure that our policies and processes fully realize the immigration law’s potential to create and protect American jobs,” as Mayorkas said at the time.

As part of the EIR initiative, USCIS asked industry experts to recommend policy changes that would have a positive impact on American entrepreneurship. In response, a group of leaders ranging from investors such as Fred Wilson and Brad Feld to academics such as Benn Konsynski and AnnaLee Saxenian to the United States Chamber of Commerce wrote Mayorkas an open letter.

In this letter, the group recommended improved training materials and certain “changes to the Adjudicator’s Field Manual (AFM) to guide adjudicators in assessing petitions by prospective entrepreneurs under the Startup Initiative.” In simple terms, the group found that the process of setting up a legal business and establishing residency in the U.S. was needlessly complicated for foreign entrepreneurs of small startups.

First, the group recommended a basic training video for government officials who decide on whether or not a foreign entrepreneur passes muster. These adjudicators, the group said, needed simple education on what a startup is, its phases of development and how it grows into a full-fledged business.

Second, the group stated that the manual for adjudicators needed some changes along the same lines, “to promote and encourage foreign entrepreneurs to start businesses in the United States, as well as facilitate the process of adjudicating those petitions.”

“We believe these changes will help level the playing field for entrepreneurs interested in starting businesses in the United States,” the group concluded.

In response, Mayorkas has written, “Your ideas are excellent, and I would like to follow up on them immediately.”

Mayorkas said the training video specifically was a good idea and that he wanted “a suggested training video outline identifying the major points you believe need to be communicated to adjudicators handling entrepreneurs’ petitions.”

As for the manual for adjudicators, Mayorkas wrote, “I will schedule and host a public engagement focused on the discrete sections of the Adjudicators’ Field Manual that are most relevant to entrepreneurs’ petitions, with the goal of revising those sections as needed. If you have suggested revisions already in mind, I would appreciate receiving them.”

The director finished, “I want to move as quickly as possible. We are focused on ensuring that the law’s full potential to attract foreign entrepreneurial talent is realized.”

Image courtesy of prashant_zi.

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In fourth day of outage, Sony says it is beefing up PlayStation Network security — It was a big week for outages at a number of online services. Sony’s PlayStation Network went down for several days, and the company said it would improve security as it worked to rebuild the system.

Possible iPhone 5 photos leaked — Blurry images of what could be Apple’s next version of the iPhone have been posted online that reveal subtle design changes to the device like a wider screen, curved back and thinner body.

Did Sony shut down PSN to prevent “extreme” piracy? – As the Sony outage continued, a moderator at a Playstation fan site claimed that the company shut down its Playstation Network after a new custom firmware version for the console let users download games and content with a fake credit card number. Now that the outage is over, VentureBeat’s Dean Takahashi has argued that what Sony does next is crucial to its future in games.

Why I regret switching to Verizon’s 4G network — When Verizon suffered a nationwide outage of its 4G network that lasted more than 24 hours, it was, for me, only the latest round of disappointment in the carrier’s network.

Amazon’s outage in third day: debate over cloud computing’s future begins — As Amazon’s web services outage passed its third day, the debate on the future of cloud computing was well underway.

And here are five more posts we think are important, thought-provoking, or fun:

Square’s Keith Rabois: Websites are dead, reinvent for mobile — Rabois, a startup veteran who’s now chief operating officer at Square, didn’t mince words on Monday when he talked about the potential of mobile startups.

Why Indian and Chinese entrepreneurs are leaving America — Scholar Vivek Wadhwa argues that skilled immigrants are leaving the U.S. in droves. This is because of economic opportunities in countries like India and China, a desire to be closer to family and friends, and a deeply flawed U.S. immigration system.

Hacker Geohot denies involvement in PlayStation Network attack, blames Sony’s hubris — George Hotz, aka Geohot, said in the blog post that Sony invited the attack by making enemies of hackers.

Kixeye re-brands and pivots into hardcore social games with Battle Pirates — Kixeye, once known as Casual Collective, has pivoted in a big way into social games on Facebook for hardcore gamers.

Magnet Systems snags $12.6M from Andreessen Horowitz as social enterprise booms — The company says it aims to make the public cloud less of a conundrum for companies worried about the security of how their information is stored.

Some call this a “brain drain” others say it is “brain circulation.” It is without doubt, good for these countries and it is good for the world. But this is America’s loss: innovation that would otherwise be happening here is going abroad. Without realizing it, we are exporting our prosperity and strengthening our competitors.

There are no hard data available on how many skilled immigrants have already left the U.S. My estimate is that 150,000 have returned to India and China, each, over the past two decades. The trend has accelerated dramatically over the past five years; tens of thousands are now returning home every year. Most authorities agree with these estimates. For example, the Chinese Ministry of Education estimates that the number of overseas Chinese who returned to China in 2009 having received a foreign education reached 108,000: a sharp increase of 56.2% over the previous year. In 2010, this number reached an all-time high of 134,800 (a significant proportion studied in the U.S.).

Why is this important? Because, as research conducted by my team at Duke, UC-Berkeley, Harvard, and New York University has shown, 52.4% of all startups in Silicon Valley, from 1995 to 2005, were founded by immigrants. With all these immigrants leaving, and the next generation of foreign-born entrepreneurs trapped in “immigration limbo,” we won’t have as many immigrant founded startups in the future. The xenophobes who are lobbying against skilled immigration will cheer; but there won’t be more jobs for Americans; just less startups in the U.S. and more abroad. The U.S. pie will be smaller.

My team researched the backgrounds of immigrant founders, and the U.S. immigration backlog. We learned that the majority came to the U.S. as students; 74% held graduate or post graduate degrees, of which 75% were in science, engineering, technology, or mathematics. On average, immigrants started their ventures 13 years after entering the U.S.

During the last twenty years, we admitted record numbers of international students and highly educated foreign workers on temporary visas. But we never expanded the number of permanent resident visas that allow them to stay permanently. The result is that we have a backlog of more than one million skilled workers—doctors, scientists, researchers, and engineers, who are trapped in immigration limbo. They are working for the same companies and doing the same jobs as when they filed their paperwork for gaining permanent residence; this may have been 10-15 years ago. A foreign student who graduates with a masters or PhD in engineering from Duke or Stanford and joins the queue today will have to wait 10-20 years, perhaps longer, to gain permanent residence. They can’t start companies or progress their careers during the most productive period in their lives. Why would anyone put up with that?

Indeed, a survey we conducted of 1,224 foreign nationals who were studying at U.S. universities in 2009, or who had just graduated, revealed that they believed that the U.S. was no longer the destination of choice for professional careers. Most did not want to stay for very long. Fifty eight percent of Indian, 54% of Chinese, and 40% of European students said that they would stay in the U.S. for at least a few years after graduation if given the chance, but only 6% of Indian, 10% of Chinese, and 15% of European students said they want to stay permanently. The largest group of respondents— 55% of Indian, 40% of Chinese, and 30% of European students—wanted to return home within five years. This is very different than what used to be the norm in previous decades: the vast majority of Indians and Chinese stayed permanently.

Our surveys, in 2008, of 1,203 Indian and Chinese immigrants who had worked in or received their education in the U.S. and returned to their home countries revealed that although restrictive immigration policies had caused some returnees to depart, the most significant factors in the decision to return home were career opportunities, family ties, and quality of life. The move home also served as a career catalyst. For example, only 10% of the Indian returnees held senior management positions in the U.S., but 44% found jobs at this level in India. Chinese returnees went from 9% in senior management in the U.S. to 36% in China. The vast majority thought that quality of life, professional advancement, and family ties were at least as good at home as in the U.S.

The majority of the people we surveyed said they planned to start a business within five years. When we published our research, many experts said that this is where returnees would face the greatest frustration—that the weak infrastructure in India; authoritarianism in China; and corruption and red tape and lack of funding in both countries would be a severe handicap. In other words, when it came to competition from startups in India and China, the U.S. had nothing to worry about.

So, last September, we initiated a project to learn how the entrepreneurship landscape in India and China compares to the U.S. We wanted to learn why these entrepreneurs returned, what their perceptions of the entrepreneurial climate in their home countries were, what the advantages and disadvantages of working in India and China were over working in the U.S., and what types of ties they maintained to the U.S.

We were really surprised at what we learned. In the next installment, I’ll discuss our findings.

Vivek Wadhwa  is a visiting scholar at the School of Information at UC-Berkeley, director of research for the Center for Entrepreneurship and Research Commercialization at the Pratt School of Engineering at Duke University, and senior research associate for the Labor and Worklife Program at Harvard Law School.

[Image via spierzchala/Flickr]

Don’t even get me started about the sorry state of American technological and economic competitiveness and our complete ignorance of what really made the U.S. a great and growing country since its inception.

We are so caught up with balancing what is politically correct, what is politically achievable and not disrupting paths to reelection that we have forgotten what it’s like to have dreams and to work towards a significantly better or, at least different, future.

Because we, as a nation, are so stuck dealing with the present, we have found ourselves mired in a tar pit of legislative nonsense that is slowly killing our chances to be competitive with the rapidly expanding world around us. And yes, being economically competitive is, in fact, necessary if we want to maintain our current societal dreams and values.

Because of the work of a variety of smart and dedicated people, including Paul Graham and my good friend, Brad Feld, one small, but critical cog in the complex machine of government regulation has been given a chance to turn. Late last month, Senators John Kerry (D) and Richard Luger (R), the two ranking members of the Senate Foreign Relations Committee proposed legislation to create a Startup Visa.

Simply put, anyone from anywhere who starts a company in the U.S. and is able to reasonably capitalize it can get a visa to stay in this country to develop their business here, on American soil with American employees, paying American taxes.

That’s a no-brainer you say? You might be surprised to learn that the country is routinely kicking entrepreneurs out, telling them to start their businesses elsewhere.

These aren’t people who are taking away American jobs. They’re entrepreneurs – people who are creating new technologies, services, products and . . . wait for it . . . jobs. It’s a meritocracy, folks, the best stuff wins. Anyone is allowed to play. That is, for now, if you live here.

The new legislation is supported with over 100 signatures from leading venture capitalists and angel investors throughout the country.  I’m honored that my name is included on the list. Not because I’m an investor looking for more deals, but I’m an American with an insanely strong desire to see this country continue to set the pace for the rest of the world when it comes to opportunity and leadership.

Relatively speaking, the streets of the US are, in fact, paved with gold. I’d like to see us keep it that way and to provide opportunities for even more Americans to be able to mine it.

The text of the proposed act is embedded below, if you’d like to give it a thorough read.

Startup Visa Act Final Final 1 http://d1.scribdassets.com/ScribdViewer.swf

Image by murphydean via Flickr.

The U.S. Department of State and U.S. Citizenship and Immigration Services (USCIS) has cut off requests from foreign nationals to change their employment status for the rest of 2007, in a move that could impact many high-tech start-ups that depend on such workers.

If a Silicon Valley company brings in a worker from India on a temporary visa, for example, and wants to hire them permanently, any requests won’t even be considered until next year. A worker with a job offer on table won’t know whether they’ll have an option to take that offer for several months — raising significant hurdles for fast moving start-ups. This also comes at a time when some companies are seeking to bring people back to the U.S. after hiring them abroad. We mentioned the example of Riya earlier this morning: After seeing wage inflation for its Indian workers, Riya decided to move those workers back to Mountain View, Calif.

A departmental “visa bulletin” said the change was due to “the sudden backlog reduction efforts” by immigration offices during the past months, which resulted in the “use of almost 60,000 employment numbers.”

A posting on the web site of law firm Duane Morris called this an “unprecedented action” and went on to say that the American Immigration Law Foundation is contemplating litigation due to the impact on “eligible applicants and sponsoring employers.”

The bulletin said that employment preference numbers will once again be available beginning October 1, 2007, when the department’s 2008 fiscal year begins.

Via Y Combinator News.