Congress Mulls Startup Visas, but Obstacles Loom

Startup visas got a hearing on Capitol Hill today, but that’s as far as the idea may go this Congress.

Proposed legislation would provide visas to foreign entrepreneurs who have secured venture capital backing to start businesses in the U.S. If the businesses create a certain number of jobs here, the foreign entrepreneurs would be granted unconditional permanent-resident status.

Several versions of this idea are knocking around the Senate and the House. The Kauffman Foundation has endorsed it as a way of boosting entrepreneurship in the U.S. The Small Business Administration included it as one of 200 ideas that would reduce barriers for business formation—ideas that came out of roundtable sessions held around the country as part of the Startup America initiative.

Today, two venture capitalists testified in favor of startup visas at a hearing held by a subcommittee of the House Judiciary Committee.

Shervin Pishevar, managing director of Menlo Ventures in Menlo Park, California, served as an example of the job-creating potential of allowing more foreign entrepreneurs to set up shop in the U.S. His family came to the U.S. from Iran in 1979, and Pishevar went on to become a serial entrepreneur, starting a company in his senior year at the University of California at Berkeley that evolved into WebOS Inc.

“I feel incredibly blessed that I had the opportunity to grow up in the United States and become an entrepreneur in the most promising country in the world,” Pishevar said. “When I think about the fact that others like myself—with the same commitment and passion for technology and innovation—are not being permitted into the country which I now call home, I can only shake my head and ask why?”

A study commissioned by the National Venture Capital Association found that 25 percent of U.S. public companies that were venture-financed since 1990 were founded or cofounded by immigrants. Two-thirds of these immigrants, however, thought that current U.S. immigration policy makes it more difficult than in the past to start a business in America.

“The current path to a green card is fraught with complex requirements, limitations, and delays,” testified Jason Mendelson, managing director of the Foundry Group, a venture capital firm in Boulder, Colorado. “Today, foreign-born graduate students who earn their advanced degrees here in the U.S. and want to stay and build businesses here are not encouraged to do so.”

“Make no mistake: The next Google or Intel is at high risk for being located on foreign soil if we do not open our doors to the immigrant founders who today are deciding where to call home,” Mendelson said.

Startup visas are designed to address this problem by modifying a current program that grants up to 10,000 green cards a year to foreigners who invest in U.S. businesses. That program is underutilized—only 2,480 of these investor visas were awarded in 2010. Advocates of startup visas are suggesting transferring some of these visa slots to entrepreneurs.

That’s not a good idea, said Daniel Healy, CEO of Civitas Capital Group, who manages a regional center for the city of Dallas that has used the EB-5 foreign investor visa program to create nearly 1,500 jobs at projects ranging from a call center to a boutique hotel.

Applications for foreign-investor visas are accelerating dramatically, he said, and will pick up additional speed now that the U.S. Customs and Immigration Service is streamlining the process for getting the visas.

“I strongly urge Congress to resist any proposal to reallocate EB-5 visas to any other category,” Healy said.

This opposition could hurt the chances for startup visas, but the biggest hurdle may be House Judiciary Chairman Lamar Smith, who has jurisdiction over immigration legislation.

The Texan Republican isn’t convinced startup visas are a good idea.

“While we can benefit by bringing entrepreneurs to America with their bold ideas, such a program could be susceptible to fraud and abuse,” Smith said at today’s hearing. “How is the government to determine which economic vision is feasible and which is pie in the sky? How will it root out schemes proposed simply to procure a visa?”

Unless startup-visa advocates can win Smith’s support, it’s hard to see a path forward for this idea.

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Kent Hoover is the Washington bureau chief for bizjournals.