With more foreign-born students now returning to booming economies in countries such as China and India, the local tech community has hopes for a proposed bill that pitches a let's-make-a-deal plan for immigrant entrepreneurs: Want a green card? Start a company.
Legislation soon to be reintroduced in Congress is designed to stop the brain drain suffered by Pittsburgh and other cities from spilling over the coasts and into foreign countries.
The StartUp Visa Act targets startup efforts across all sectors, but enthusiasm for the bill is especially acute in tech communities like Pittsburgh that see an outsize number of foreign-born students who want to stay and develop a company.
But these new visas -- a permanent resident card (or "green card") called an EB-6 -- aren't available to any immigrant with a good idea. To qualify, an entrepreneur would need to raise at least $250,000 from investors, and over two years create at least five full-time jobs in the United States, attract $1 million in additional investment or surpass revenue of $1 million.
The effort aligns with the Obama administration's new assault on unemployment -- and intersects with many of the trends that local leaders credit for Pittsburgh's growing tech presence: support for state-funded incubating programs, a drive in academia toward commercializing research and a city campaign to keep potential workers from fleeing for large firms in Silicon Valley.
Visa programs currently in place offer incentives to only foreign investors; this would be the first time an early-stage entrepreneur could build a business plan toward citizenship.
With so many foreign-born students coming to Pittsburgh to attend college, the local tech community is angling for the bill's passage, but critics warn that the legislation's benefits could bypass Pittsburgh and provide only a boost to areas already hogging most investment activity.
The StartUp Visa Act was introduced by Sen. John Kerry, D-Mass., and Sen. Richard Lugar, R-Ind., last February. Interest was revived following President Barack Obama's State of the Union address. The senators plan to reintroduce the bill "probably in the next month or so," said Mark Helmke, a spokesman for Sen. Lugar.
The most recent research on immigrant-founded firms, headed by Duke University researcher Vivek Wadhwa, concluded that immigrants started 14 percent of the companies founded between 1995 and 2005 in Pennsylvania. While the national average was just over 25 percent, the research team found 52 percent of Silicon Valley firms were started by immigrants.
Pennsylvania's numbers on immigrant-founded companies have most likely grown as local organizations have stepped up efforts to retain students at local colleges.
The Pittsburgh Technology Council has been following the legislation since it was introduced last year, and an open invitation from the council for both senators to visit Pittsburgh still stands, said president Audrey Russo.
When student visas expire, she said, oftentimes the worker will either have to return home or find a job at a large company that can afford the legal fees and costs that come with sponsoring a visa. The new legislation could change that.
"This targets the individuals that aren't going to a big company but have had the opportunity to get a little immersed to start testing their hypothesis," she said.
Those hypothesis-testers have become more prevalent in Pittsburgh as the University of Pittsburgh and Carnegie Mellon University continue developing programs that encourage business-minded students to have a startup business by graduation.
Programs like Project Olympus at CMU provide counseling to early-stage startups, and Olympus director Lenore Blum said she'd seen startups dissolve after immigration restrictions cut short additional funding.
The $250,000 required for the EB-6 visa must come from so-called angel investors who provide seed funding for early-stage startups, usually in exchange for an ownership stake.
That threshold might be high for life sciences companies, which typically don't raise as much in early funding as other tech specialties, said Ms. Russo.
Critics of the legislation say tying citizenship to successful fundraising can grant too much power to investors.
In an opinion piece published by Business Insider, Paris-based tech entrepreneur Pascal-Emmanuel Gobry questioned the possible motives of investor demands when deportation is at stake. Mr. Gobry said the increased pressure could coerce entrepreneurs into unfair agreements about ownership stakes.
"How many terms can a wily investor wring from this new language? How much liquidation? How much liquidation preference?" he wrote.
Statistically, angel investor activity is most concentrated in Silicon Valley, and while Pittsburgh startups have enjoyed significant success in attracting West Coast money, the distance has forced some promising local companies to move west as they chase the cash.
The imbalanced location of funding could be amplified if angel investors are hit with a new wave of immigrant applicants, said Mr. Wadhwa.
He proposes a system in which the state manages a private fund that acts as seed funding to regional startups, rather than a system he sees as giving more prospects to the already-heavy hitters.
"These investors are already inundated with startups seeking money," he said. "Why would they invest in someone across the country?"
Dr. Blum said the possibility of a statewide holding company made up of small incubators could create a system in which Pennsylvania investors help fund Pennsylvania startups.
"This would require investors in town to decide it was a good thing," she said. "This is an 'it takes a village' effort."
The EB-6 visa wouldn't be the first time the state has used the promise of a green card to buoy local business. Since 1990, the EB-5 visa program has granted a green card to any foreigner who invests at least $500,000 in state-approved projects.
"It sounds a little weird, but they can buy their way into the United States by investing," said Wilfred Muskens, the deputy secretary for international business development at the Department of Community and Economic Development in Harrisburg.
Foreigners invest $500,000 in a pool of money that is loaned to low-risk projects throughout the state -- the Bakery Square complex in Larimer (the place now home to Google Pittsburgh) is one example of a project that tapped into such funds.
Once the requisite background checks are cleared, the green card is issued and the $500,000 returned after five years.
Citizens from one global competitor have monopolized the program.
"For Pennsylvania, more than 90 percent -- if not more -- of all the money that we've raised through this program has come from China," said Mr. Muskens.
Hispanic #1 Breaking News for Entrepreneurs, Professionals and Small Business Owners - HispanicBusiness.com
SEPTEMBER 22, 2014
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