July 13, 2016

How States, Cities, and Universities Can Retain Foreign Entrepreneurs



American colleges and universities attract and educate some of the world’s most talented and ambitious foreign graduate students. But thanks to restrictive immigration laws, many of these brilliant, highly-trained individuals are forced to head straight to the nearest airport upon graduation.

They take a lot more than their suitcases home with them. They take the valuable skills, talents, and ideas incubated by America’s graduate programs. What’s worse, the innovations and businesses, which would have created good American jobs, materialize instead on foreign shores.

Better legal immigration options for foreign students would alleviate shortages for skilled worker, boost economic growth, and promote job creation for all Americans. An innovative program in Massachusetts shows how it can be done.

It’s called the Global Entrepreneur in Residence Program (GEIR), and it’s becoming a model for capturing more of the value of America’s world-leading universities by keeping  job creators on American soil. GEIR is aimed at retaining the entrepreneurial foreign graduates who, despite their talents, lost the lottery for H-1B visas.

The concept is simple: universities are granted an exemption from the H-1B high-skilled worker visa cap. By working part-time at the university and part-time on their start-up, a foreign student can stay in the U.S. and build a business, facilitating job creation for locals.

THE PROBLEM:

The visa for high-skilled foreign workersthe H-1Bis capped at just 85,000 per year. However, firms file in excess of 300,000 H-1B visa petitions each year, and a lottery system determines who gets them. The application process is restrictive and expensive. Because applications are submitted only once per year, fast-moving start-ups are forced to make hiring decisions around an arbitrary deadline.

The experience of Massachusetts shows why current visa policy is such a big problem. There are about 50,000 foreign college students at Massachusetts colleges. Every year, it’s estimated that more than a thousand entrepreneurs leave the state due to the national limitation on H-1B visas.

The Government Accountability Office (GAO) has noted several “cases in which entrepreneurs attempting to establish very early-stage technology start-ups were unable to obtain H-1B or other work visas for themselves and either relocated the project abroad or had to abandon the start-up.”

Furthermore, the Boston Federal Reserve found that New England has the highest concentration of regional employment in STEM fields nationally and some of the highest demand for H-1B workers.

High-skilled visa reform is badly needed, but Congress shows no signs of making meaningful reform a reality any time soon. That is where GEIR comes in.

THE SOLUTION:

The good news is that some entities, including universities and nonprofit research organizations, are already exempt from the H-1B visa cap. Several years ago, this little-known fact piqued the interest of Jeffrey Goldman—a Boston-based immigration lawyer—and Jeffrey Bussgang—venture capitalist and Harvard Business School lecturer.

They asked: could universities use the cap exemption to sponsor graduates of advanced degree programs who want to build their businesses in Massachusetts but would otherwise be unable to due to the lack of H-1B visa slots?

“I teach at Harvard Business School,”Bussgang said. “And at the end of my class I would have all these incredibly brilliant students come up to me and tell me about their startups that they were working on, and yet they couldn’t stay to launch those startups here in the U.S.”

The Massachusetts Legislature provided a framework for the program in 2014, with initial GEIR programs taking root at UMass Boston and UMass Lowell. Though initially funded entirely by the state, the UMass programs have shifted to a public-private partnership with modest public funding and a growing effort to enlist private philanthropy. More recently, Babson College in Wellesley became the first private college to establish a program.

In order to qualify for the program, candidates must be in a leadership position at an early-stage venture, have a masters degree or higher in a STEM or business field, and have their company headquartered in Massachusetts.

The entrepreneurs-in-residence spend part of their time (eight to ten hours weekly) mentoring aspiring entrepreneurs amongst the university’s students, faculty, and alumni and teaching classes which triggers the exemption as university employees. The other half of their time will be spent building their company, incubating new ideas, and creating value and jobs for the people of Massachusetts.

Once the startup firm develops sufficiently, it can apply to directly sponsor the entrepreneur-in-residence for an H-1B visa. Because the entrepreneur has work authorization from the participating university, the startup’s application to sponsor the entrepreneur is not included in the lottery process—the startup’s ability to sponsor the H-1B visa is therefore judged strictly on the merits of the application rather than the luck of the draw.

The Massachusetts Technology Collaborative vets applicants and the participating universities sponsor them. The GEIR program now has two corporate partners. This public-private program has the support of the Governor’s office and the investment community in Massachusetts.

In less than two years, twenty entrepreneurs have received visasa 100 percent success rateand the companies those students have created produced 261 jobs and raised $118.5M in private investment.

NOT JUST FOR NERDS IN MASSACHUSETTS:

The GEIR program tends to focus on entrepreneurs in high technology that will generate high-skill job positions. But this program isn’t just a win for Silicon Valley-type techies in their t-shirts and sandals making the next Facebook or Snapchat.

As the work of UC Berkeley economist Enrico Moretti suggests, the addition of high-tech jobs to cities ultimately leads to the creation of 5 additional service jobs, ranging from lower-skilled jobs in security to higher-skilled jobs in design and architecture.

Similar programs elsewhere show promise. Colorado and New York have already picked up on Massachusetts’ example. Working on its own, the University of Colorado Boulder launched an entrepreneur-in-residence program in 2015 with philanthropic support from venture capitalist Brad Feld.

In early 2016, seven City University of New York (CUNY) campuses announced they are collaborating with New York City’s Economic Development Corporation to launch the International Innovations Initiative NYC (IN2NYC), a program for foreign entrepreneurs that shares similarities with GEIR. It’s the first city-run program and seeks to allow 80 entrepreneurs to work at CUNY institutions while building their business for two years.

The New York program seeks to “create quality 21st-century jobs for New Yorkers” and “support the CUNY system by attracting international talent and fostering entrepreneurship among its student and faculty population.”

Retention programs like these could also work in other places. The approach could work well in areas where academic institutions already draw top foreign talent for advanced degrees in STEM fields, such as Raleigh-Durham, Chicago, or Southern California. It could work even better in places where the industries generating new and growing firms are well-matched to the research and training programs at local academic institutions: be it healthcare in Atlanta or Nashville, or software in Austin or the San Francisco Bay Area.

Creating Jobs Through Better Immigration Policy

Each year, American universities educate hundreds of thousands of foreign students, many of them pursuing degrees in science, math, engineering, and technology—fields that are central to innovation and economic growth. Doing more to retain the exceptional foreign graduates who wish to stay in the United States—particularly those with a demonstrated ability to start new companies and create jobs—would be an unambiguous economic good.

Entrepreneurs will start companies somewhere. By making sure it happens in the U.S., the entrepreneur-in-residence approach emphasizes a better sense of entrepreneurship at world class American institutions and contributes to the growth of new firms, jobs, and tax revenues that will reverberate through local economies.  

Existing policy amounts to the de facto deportation of some the world’s smartest and most creative mindsblocking tangible benefits and jobs for Americans.

So long as Congress remains stalled on H-1B reform, programs like Massachusetts’s GEIR offer a feasible stand-in for states, cities, and universities interested in retaining foreign entrepreneurs with promising business ventures that can help supercharge local economies. It’s time to unleash foreign entrepreneurs on the American economy.