The no-brainer immigrant-entrepreneur visa

By Felix Salmon
February 27, 2013

Many thanks to the Kauffman foundation for crunching the numbers on a key part of Jerry Moran’s clumsily-named Startup Act 3.0 — the new visa for immigrant entrepreneurs. I don’t have an opinion on the rest of the bill, but it does have two sections which are something of a no-brainer when it comes to immigration reform. One is the immigrant-entrepreneur visa; the second is the idea of giving green cards to up to 50,000 foreign students who graduate from an American university with an advanced degree in science, technology, engineering, or mathematics — so long as they remain in that field for five consecutive years.

The immigrant-entrepreneur visa is pretty simple. You create a pool of 75,000 such things, available to anybody who’s here already on an H1-B or F-1 visa. When those people switch from their old visa to their new one, they have to start a new company; employ at least two full-time, non-family member employees “at a rate comparable to the median income of employees in the region”, and invest or raise at least $100,000. After that, they have to continue adding employees at a rate of one per year, so that after three years, there must be at least five employees. At the end of three years, you graduate to a green card, and with it the standard path to citizenship.

The visa addresses the main problem which Ross Eisenbrey has with H1-B visas: the fact that people on such visas are “more or less indentured, tied to their job and whatever wage the employer decides to give them”. The new visa would create an employer exit strategy for H1-Bs, allowing workers to leave companies which pay too little or offer too few opportunities, and instead strike out on their own.

And of course — by definition — it would create jobs. The Kauffman foundation’s math is solid, here: they conservatively estimate job creation at somewhere between 500,000 and 1.6 million new jobs after ten years, and possibly substantially more. (Those estimates don’t include jobs created by the new firms after they’ve left the program, for instance.)

I also like the fact that the new immigrants created by this program would go overwhelmingly to the parts of America where immigration is wanted and embraced: big cities and research hubs. This plan is full of positive externalities: it improves tax revenues, from all the new employment and consumption; it improves America’s share of global innovation, and of course it helps to position America once again as the land of opportunity.

The Kauffman foundation is understandably worried that the visa would unfairly punish failure in an inherently risky world, but we’re living in a world of pivots, these days, where a gay social network can become a discount shopping site — and so long as the immigration people are OK with pivoting business plans, I think the failure problem will be manageable.

Most fundamentally, however, this visa is a great idea just because without it, the incentives are all wrong. As Stuart Anderson demonstrates, “in a practical sense, it may be easier to stay in the United States illegally and start a business than to start a business and gain legal temporary status and permanent residence (green card) as the owner of that business”. If we want to reduce illegal immigration, we obviously have to make it less attractive than legal immigration: as Jeb Bush and Clint Bolnick point out, you can only realistically ask illegal immigrants to “return to their native countries and wait in line like everyone else” insofar as there is, actually, a line to wait in. Right now, there isn’t one.

The only real question, when it comes to this visa, is how it’s going to get signed into law. The proponents of immigration reform tend to fall into one of two groups: US employers, on the one hand, who are looking to increase the size and/or quality of the pool of potential employees they’re choosing from; and illegal immigrants, on the other hand, along with their families and friends, who want to stop living in the shadows. Neither group has much incentive to support an immigrant-entrepreneur visa. But let’s hope we manage to get one somehow, anyway.


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I think that the real solution for entrepreneur visas and H1B type visas is to auction them off.

If you want an entrepreneur visa, you have agree to invest x dollars, and put down a deposit. The top N bidders win the visas, all of them responsible for paying the lowest amount for a winning bid. (Dutch auction)

You then make the investment from the remaining deposit.

For the H-1B and L1, make employers bid on it on a Dutch auction as well.

People looking for cheap labor will be priced out of the market, and truly essential people will still get their visas.

You set the cap in numbers, and it eliminates a sh%$ load of fraud.

Posted by Matthew_Saroff | Report as abusive

The entrepreneur visa system sounds overly complicated to me and full of the micro-managing BS that is far too prevalent in government policy today. Why are jobs at less than the median income of a region inherently bad? (By nature, those have to be 50% of jobs. Those jobs are also far more likely to target applicants of lower education level, who have much higher unemployment rates. Instead, the goal is to drive down the already low unemployment rate of college graduates.) If the business isn’t succeeding, the owner still has to keep hiring employees or face the prospect of being deported?

It would be a better and simpler solution simply to allow those with H1B visas to transition to permanent status over a period of a few years. That limits the opportunity to game the system that would arise from immediate mobility and mitigates the indentured servant issue. It also fosters economic efficiency: after a time someone with an H1B visa can pursue the most attractive opportunity, whether that is starting a business, moving to another employer, or remaining at a current employer.

Similar thought on STEM graduates – let them stay regardless of whether they “remain in that field”. Unnecessarily complicated, and I don’t even know how that would be defined in a lot of cases. Would a physicist working at Google be employed “in that field”?

Posted by realist50 | Report as abusive

Auctioning off the HB1′s seems like a pretty good idea to me.

Just giving the Tier 1 (say top 100 schools) STEM graduates green-cards seems like a pretty good idea too.

The idea of younger cheaper smart foreigners displacing older smart more expensive natives is a talk radio myth. These STEMers are the lifeblood of innovation… and innovation is the only thing left that gives us our special rights to live at 4x the global median wage.

Posted by y2kurtus | Report as abusive

No brainer, indeed! So to avoid having to return to Bangalore I’ve got to borrow (ahem, “raise”) at least $100k and employ two people not my grandmother? Then add another employee every year–or I get deported? And someone (FS, even!) actually thinks this is the way viable businesses get started?

Posted by Eericsonjr | Report as abusive

Business doesn’t need more people with college educations, they need more people with college educations who are simultaneously gullible with regard to the typical american businesses manipulation and use processes. Americans have seen the scams already but the foriegn kids will either take a while to catch on or learn to lie well.

Posted by brotherkenny4 | Report as abusive

“No-brainer” always seems to scare me in these articles. Here’s why it might scare a reader–at least one who doesn’t believe more offshore outsourcing is fundamentally good for the US:

The visa is based largely on extending H-1bs. This is first and foremost the outsourcing visa. I find it very likely that 25,000 of these visas wind up going to forming a micro-consulting company, very possibly fronted by a Google, Ms, etc. that even hires two new H-1bs or best case two of the five newly laid off former employees, then sends the rest of the work offshore.

As to the stapling GC’s, we’re essentially adding 50,000 additional young workers–many of whom probably go right into IT and offshoring–on top of the flood we’re already getting. This may be what these pieces tell us we need but that’s not what you’re going to hear from hardly anyone in the field.

Without a LOT more to address abuses skilled immigration has been over the past 15ish years, most any “reform” is just another nail in the coffin of IT and STEM as viable careers.

Posted by John80224 | Report as abusive

@realist50 I believe the median wage is meant to be median wage for the job being performed (though we’ve seen plenty of abuses of this safeguard in IT). This is intened to avoid hiring people at a wage that suppresses the going rate.

Posted by John80224 | Report as abusive

If you are on a H1B/L1 or F visa, you probably don’t get paid that much (F1 – nothing). So this investment requirement selects for the children of wealthy people, rather than just ingenuity.–
And why just STEM graduates? Why can we not apply the same scheme to MDs graduating from recognized medical schools (and who passed the boards)? They can easily form medical practices, employ a RN and clerical staff… and medical care would become so much more available. Or to law school graduates? Or MBAs? Aren’t they trained in entrepreneurship?
And finally, what is ‘remain in the field’? Are you disqualifying mathematicians who open a real-estate office? (as the alternative for these is teaching, for ~40k$/year at a community college?) Much better business than anything technical, which has a small chance of success.

Posted by AinCa | Report as abusive

Odd. My prior comments were deleted.

Anyway, @Realist50, while not quite stated that way I believe the median wage is for median wage within that particular field/job. It is a semi-ineffective way of preventing wages from being depressed.

The problem with the startup visa is that there’s nothing preventing it from just offshoring more jobs. I’m guessing many domestic companies are already considering programs to help these fledgling companies raise the money.

And the auto-green card is little more than a slush fund to open up the visa cap–only it also automatically brings in the additional workers permanantly.

Posted by John80224 | Report as abusive

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