The narrow chance immigrant entrepreneurs have at breaking through

This guy did it.
This guy did it.
Image: REUTERS/Elijah Nouvelage
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Immigrant entrepreneurs embody the essence of the American Dream—the idea that it’s possible for anyone to succeed, regardless of where they come from. Yet for the majority of immigrant entrepreneurs, it’s difficult to get a visa, obtain funding, and enter the elite networks that make successful ventures work.

More than one-third of venture-backed companies that went public in the past decade were started by immigrants, according to the National Venture Capital Association (NVCA). About 50 percent of unicorns—venture-backed companies valued at more than $1 billion—have an immigrant co-founder. Cowboy Ventures founder Aileen Lee, who coined the term unicorn, wrote in TechCrunch that “immigrants play a huge role in the founding and value creation of today’s tech companies. We wonder how much more value could be created if it were easier to get a work visa.”

The percentage of immigrant entrepreneurs has more than doubled since the dot com boom, but many highly-skilled immigrants are turned away from the US each year. Republican presidential candidate Donald Trump recently called out Mark Zuckerberg and GOP rival Marco Rubio for sponsoring a bill that would increase the cap on H1-B visas, arguing that it would take away coveted tech jobs from native-born Americans. Yet data show that immigrants significantly contribute to company and job creation.

In a 2013 survey, the NVCA found that 40% of immigrant founders entered the country through employer-sponsored visas and 38% as international students; the rest were on family-sponsored or other visas. The H1-B visa process is arduous and expensive for employers, and mostly the only option for immigrant entrepreneurs, who continue working at their day jobs while launching a venture. There’s the EB-5 visa, but it has high investment capital requirements—$500,000 or $1 million depending upon the location of the investment—which allows foreign entrepreneurs to buy their way into the US.

Christian Gheorghe, now the CEO of business analytics company Tidemark, grew up in Romania and met his first business partner while driving a limo in New York City in the early 1990s. In communist Romania, “the only way to get money was through the black market,” Gheorghe tells Quartz. Selling albums on the black market enabled him to buy a computer and get to the US, where he taught himself both English and programming while driving clients around Manhattan. After helping build and sell his first company with a former customer, he landed funding from Andreessen Horowitz through a fortunate series of events and introductions. Ben Horowitz described Gheorghe to Reuters as the company’s most successful rags-to-riches entrepreneur the firm has funded.

But Gheorghe is by far in the minority. Fewer than 1% of US entrepreneurs ever receive funding from venture capitalists—nevertheless from top firms like Andreessen Horowitz. Getting that first introduction is critical, and it’s far easier for entrepreneurs who come from a place of privilege to gain access to investors through connections.

Zappos CEO Tony Hsieh, a second-generation Taiwanese immigrant, tells Quartz that gaining access to capital is less about privilege and more about two things: “(1) you’re basically the average of the five people you hang out with the most, so if you hang out with entrepreneurs then you’re much more likely to be one, and (2) your network of networks is important for access to capital, and the more diverse your network of networks is, the more successful you’ll probably be in raising funding. Statistically, I would guess that people that come from families with money are by default more likely to score higher on both #1 and #2 than people that come from poorer families, but really anyone from any background can consciously and constantly improve both #1 and #2. I definitely don’t think coming from money is a requirement for being able to raise money or becoming a great entrepreneur.”

For most immigrant entrepreneurs, breaking into these networks is really what it comes down to—and certain groups have an easier time than others.

Chris Rabb, a professor at the Innovation & Entrepreneurship Institute at Temple University and author of Invisible Capital tells Quartz: “Look at these immigrants: We’re not seeing Mexican-Americans thrive in tech. We’re seeing specific types of ethnic groups. They’re not from Laos, Mexico, Albania, Vietnam. They’re from Russia, China, India.” In other words, entrepreneurs who thrive are from wealthier countries with stronger education systems.

In its report, the NVCA stated the following: “India was the most common country of origin among the immigrant-founded venture-backed privately-held companies with 20 percent of the total. The United Kingdom was next with 15 percent, followed by Canada with 11 percent, France, Israel and Germany.” Indian-born entrepreneurs made up the majority of immigrant-led companies that became publicly-traded, followed by Taiwanese and Israeli entrepreneurs.

Alfred Lin, a partner at Sequoia Capital, tells Quartz: “We generally have been more successful with founders who had some obstacle to overcome in their life, whether it was immigrating to this country and figuring out a different world, being the first in their family to go to college, or simply showing their former doubter employers that they can disrupt an entire industry.” Sequoia’s newly renovated office on Sand Hill Road in Menlo Park, California, displays a flat-screen television highlighting bios of the firm’s most successful entrepreneurs, including Elon Musk, a South African immigrant, and Sergey Brin, who immigrated from Russia.

Lin, a first-generation Taiwanese immigrant, played a key role in taking Zappos to a $1 billion valuation. “The predominant trait shared among successful founders is a chip on their shoulder. … It can work both ways. Those from tough backgrounds have obvious things to prove, but someone who comes from a family with means may simply want to show that they can succeed even without their family pedigree.”