American Made 2.0 How Immigrant Entrepreneurs Continue to Contribute to the U.S. Economy by Stuart Anderson NATIONAL FOUNDATION FOR AMERICAN POLICY NATIONAL VENTURE CAPITAL ASSOCIATION About the Study This study commissioned by the National Venture Capital Association was prepared by Stuart Anderson, Executive Director, National Foundation for American Policy, a non-profit, non-partisan public policy research organization. 2 Contents Executive Summary 4 Section I: Immigrant-Founded Public and Privately-Held 10 Venture-Funded Companies Section II: Private Company Perspectives on U.S. 18 Immigration Policy Section III: U.S. Immigration Policy and Proposed Changes to 21 the Immigration System Conclusion 27 About the Author 28 Endnotes 29 3 Executive Summary Entrepreneurs are the heroes of a market-based economy, driving innovation and job creation. This NVCA study shows if entrepreneurs are indeed heroes, then immigrant entrepreneurs have made heroic contributions to America’s economy. The analysis concludes the contributions of immigrants to the United States would be even greater if Congress adopted the right policies on startups and high skill immigration. In 2006, the National Venture Capital Association released American Made: The Impact of Immigrant Entrepreneurs and Professionals on U.S. Competitiveness. It received significant attention as the first study to examine the role of immigrants in starting venture-funded companies. The study found immigrants started many U.S. venture-backed companies that became publicly traded and that these companies had achieved a significant market value, representing a benefit to the American economy, employees and investors. The new study used the Thomson Reuters database and performed extensive research to determine the nativity of the founders of U.S. venture-funded companies that became publicly traded between 2006 and 2012. It also updated data on companies with initial public offerings prior to 2006. In addition, privately-held venture-backed companies were surveyed for their views on current immigration policy and potential reforms to the immigration system. The report is divided into three sections. The first section analyzes and presents data on immigrant founders of publicly traded venture-funded companies. The second section presents the results of an NVCA survey of privately-held companies. The final section discusses U.S. immigration policy and innovation. The study also contains profiles of outstanding immigrant founders of venture-backed companies. 4 American Made 2.0 – Executive Summary Key Findings Immigrant-Founded Public Venture- - Venture-backed public companies with Funded Companies at least one immigrant founder and the - Successful startup companies illustrate the largest market capitalization include increasing importance of immigrants to Google, Intel, eBay, Facebook, LinkedIn, the U.S. economy. Data on initial public SanDisk, Altera and Tesla Motors. LinkedIn, offerings (IPOs) show a sharp increase in the Facebook and Tesla all had their initial economic influence of immigrant founders: public offerings since 2010. The combined 20 percent of venture-funded companies market capitalization of immigrant-founded with an initial public offering prior to venture-backed companies with initial public January 1, 2006, had an immigrant founder. offerings between 2006 and 2012 exceeds But between 2006 and 2012, immigrants $167 billion. started 33 percent of U.S. venture-backed companies that became publicly traded, - Immigrant-founded venture-backed public a total of 92 such companies. Prior to companies employ approximately 600,000 1980, only 7 percent of U.S. publicly people worldwide, the majority in the traded venture-funded companies had an United States. The companies employ an immigrant founder or co-founder. average of 2,579 employees, with 457 the median number of employees per company. - Venture-funded companies with at least Among the largest employers on the list are one immigrant founder that went public Intel, Google, Sanmina, eBay, PAREXEL, between 2006 and 2012 include such well- and Yahoo!. Immigrant-founded companies known names as Facebook, LinkedIn, Zipcar that went public since 2006 employ 65,588 and Tesla Motors. people, with annual sales of over $17 billion. - The value created to date by immigrant- - Among all venture-backed publicly traded founded venture-backed companies is companies with immigrant founders 21 extraordinary. Venture-backed publicly percent had a founder from India, 10 traded immigrant-founded companies have percent from Taiwan, 10 percent from a total market capitalization of $900 billion Israel, 8 percent from the United Kingdom, (as of June 2013). If immigrant-founded 7 percent from Germany, and 6 percent venture-backed public companies were a each from Canada and France. Among the country, then the value of its stock exchange companies with an IPO since 2006, India would rank 16th in the world, higher than was the most common country of origin for the exchanges of Russia, South Africa founders, with the United Kingdom and and Taiwan. Germany next, followed by Taiwan, France, Canada and Israel. American Made 2.0 – Key Findings 5 - Among all venture-backed companies with - Thirty-three percent of the entrepreneurs an immigrant founder that became publicly in the survey were foreign-born, matching traded 57 percent were located in California, the proportion among venture-backed 16 percent in Massachusetts, 4 percent in companies with an initial public offering New Jersey, and the remainder in other since 2006. states. Almost half of the venture-backed publicly traded companies with immigrant - India was the most common country of founders with initial public offerings origin among the immigrant-founded since 2006 were located in California. venture-backed privately-held companies Massachusetts was the second most common with 20 percent of the total. The United headquarters, followed by Maryland, Kingdom was next with 15 percent, followed New York and Texas. by Canada with 11 percent, France, Israel and Germany. - Among companies that became publicly traded prior to 2006, 42 percent of - Forty percent of the immigrant founders immigrant-founded venture-backed public in the survey entered the United States as companies were in high-tech manufacturing, employment-sponsored immigrants, 38 24 percent in information technology, percent as international students, 13 percent 21 percent in life sciences, and the rest in as family-sponsored immigrants, and the rest professional/technical services, finance/ in another category. insurance, e-commerce and other services or manufacturing. - Sixty-one percent of the privately-held immigrant-founded companies held one or - For the immigrant-founded companies with more patents. an initial public offering between 2006 and 2012, the leading sector was biotechnology, - Software, with 41 percent, was the most representing 27 percent of the total. Software common industry among the privately-held was next with 19 percent, followed by venture-backed companies with immigrant semiconductors with 12 percent and medical founders responding to the NVCA survey, devices and equipment with 10 percent. followed by biotechnology (11 percent), Networking and equipment, along with IT services (9 percent), business services telecommunications, represented 6 percent (6 percent), consumer goods/services (5 of the total. percent), media/entertainment (5 percent) and energy/clean energy (5 percent). Immigrant-Founded Private Venture- Funded Companies - Thirty-six percent of the privately- To provide greater insight into privately-held venture- held venture-backed companies with backed companies, NVCA sent surveys on immigrant immigrant founders in the survey were entrepreneurs and immigration policy to venture located in California, 29 percent were in capital members, who then forwarded the surveys Massachusetts, 10 percent in New York, 5 to companies in which they have invested. NVCA percent in Pennsylvania and the rest in received over 600 responses. other states. 6 American Made 2.0 – Key Findings Private Company Perspectives on been exhausted before the end of the fiscal U.S. Immigration Policy year. Fifty-seven percent of the companies - Among all private company founders, both replied that “projects had been delayed native-born and foreign-born, 79 percent because of the lack of H-1B visas.” Forty- believed, “The process for a foreign-born three percent of the companies said the lack entrepreneur to enter and remain in the U.S. of H-1B visas influenced the company’s to start a business is too difficult.” decisions to place or hire more personnel in facilities located outside the United States. - According to the NVCA survey, 90 percent of both native-born and foreign-born - While those who oppose expanding H-1B company founders believe a startup visa temporary visas often argue they are category would benefit the U.S. economy. preventing the “outsourcing” of jobs to other Two-thirds of immigrant entrepreneurs countries, numerous companies say it is the replying to the survey said, “A startup visa current restrictions on H-1B visas that push category would have been helpful when jobs offshore. starting their company in the United States.” U.S. Immigration Policy and Proposed - The Ewing Marion Kauffman Foundation Changes to the Immigration System concluded a startup visa with an annual Reforms to U.S. immigration policy must address quota of 75,000 could create “nearly 1.6 four major problems for employers.