Power to the Immigrant

The best ideas require people willing to take a chance on those ideas. The best people require someone to take a chance on them.

Without a doubt, countries are strengthened by the contributions made by immigrants. Defined by hunger and the drive to seek a better life in a new land, immigrants are inspired to work hard in search of new opportunities. Oftentimes, you hear of stories, perhaps parents, or grandparents working two to three jobs, 20 hours a day or whatever is necessary to build the first generation of a family name in a new home. That mentality and hunger is invaluable and becomes engrained in day-to-day life.  

In the U.S, immigrants represent about 13.7% of the country’s population overall, 20.2% of the self-employed workforce and 25% of America’s entrepreneurs. Even more impressive, according to the National Foundation for American Policy study from 2022, immigrants founded or cofounded 55% of the United States’ billion-dollar companies. However, there is a large gap between the demand of immigrants seeking to come to America, and the supply of visas available. More on that later.

“The American Dream” propels many immigrants to America’s shores in the possibility of offering a better future for children, and hence is exemplified by their work ethic. Studies show that children of immigrants surpass their parents and move up the economic ladder. Why? Immigrants thrive in business because of the many skills they pick up navigating a new world, showcasing constant resilience. It’s not always easy. Whether fleeing dangerous conditions at home, or looking for new opportunities, immigrants leave behind friends, family, possessions and more, entering unfamiliar territory and sometimes starting from scratch. I look to my parents as inspirations. They fled Ukraine in 1990, post Chernobyl and part of the Soviet migration to Israel. While living in Israel, they went through the Gulf War. In search of seeking a new beginning, they immigrated to Canada, entering foreign territory for the promise of a future, and leaving everything behind.

AI Generated Flag Including Ukraine, Israel and Canada

Social science research has confirmed that where children grow up influences their opportunities in life. Parents that settle in high-opportunity areas, flush with great jobs and people, offer better prospects for mobility in the next generation. Growing up as a first generation Canadian and child of immigrants, I feel very fortunate to have the opportunities I did growing up.

Measuring the Impact of Immigrants Through Entrepreneurship

People with a high tolerance for risk (something like immigrating to a new country) tend to be more willing to take on the daunting journey of being an entrepreneur. Immigrants, in theory, would be more likely than others to start businesses because of their appetite for risk, and are prepared for the hardships that accompany the journey. Data shows that every year from 1996 to 2016, the pace at which immigrants started businesses outpaced U.S.-born individuals. In the U.S, immigrants are almost 2x as likely to become entrepreneurs as native-born citizens, according to the Kauffman Foundation’s Index of startup activity. Further, ~64% of these companies were founded or cofounded by immigrants, or the children of immigrants while 80% have an immigrant in a key leadership role!

Examples? The list is endless. Some of the names include: Sergey Brin (Google) from Russia, Elon Musk (Tesla, SpaceX, Neuralink, and more) from South Africa, and Arianna Huffington (Thrive) from Greece, among many more. You can also thank immigrants for the Covid-19 vaccine, as Pfizer, BioNTech and Moderna were all founded or cofounded by immigrants. Success is also built upon diversity and 40% of immigrant entrepreneurs in the U.S are women, while 13% of all female owned companies are run by women born outside the U.S. A report from the Partnership for a New American Economy found that in 2017, 43% of Fortune 500 firms had at least one founder who either immigrated to the U.S or was the child of immigrants.

Another measure of financial strength at which foreign-born Americans differ from native-born: immigrants use credit less often for purchasing large items such as cars and homes. This results in significantly lower levels of indebtedness. For example, a Pew Research Center study shows that 34% of foreign-born Hispanic Americans report no credit card or installment loan debt of any kind, as compared to just 19% of the general population. Credit is also scarcer in most developing countries, requiring individuals to save more to afford their goals. However, I do find some irony in this. In 2020, 29% of Americans had a credit score of 669 or below, representing 95M consumers segmented into “fair credit” or “poor credit” below 579. Many individuals that fall under “poor credit” do so by not being able to build consistent credit scores. Alternative ways to building credit, such as paying rent in small increments, or using a debit card of a neo bank, provide unique methods of payment to do so. While it is great immigrants sometimes do not take on debt, there is a difference between having the ability to apply for credit in the first-place vs not.

Venture Funding in Immigrants                                                                     

I think back to when I decided to start DestaPlan with two of my close friends. Fresh out of college, zero product development experience, working a full-time job in consulting, and having the courage to go and pitch dozens of investors on this eventually, groundbreaking travel-tech platform, where Facebook meets TripAdvisor. Two years later, we didn’t have money to go acquire new users with our go-to market strategies or provide a sufficient runway for ourselves, and we couldn’t raise funding as we plateaued on user growth. Shutting down the start-up was the only plausible route. After summarizing what I had learned with my first start-up here (highlighting the difficulties of building in consumer travel tech) and coming close to accepting an offer from a soon-to-be ponzi scheme accelerator (can read here and here), I decided to pledge to be a lever of support and an avenue of unlock for entrepreneurs raising capital. For the past ~3.5 years I’ve invested across enterprise software and consumer internet start-ups at Cobalt Capital and RIV Capital (FKA Canopy Rivers).

Raising venture funding is flat out difficult, particularly in today’s macro environment. Fundraising success can often boil down to the founder’s pre-existing network. Crunchbase analyzed data from over 4,500 investors and found that 12 schools produced over 42% of all VCs. One can hypothesize that affinity bias can be at play given the tendency individuals have to associate with others of similar background. But what about those with unorthodox backgrounds, that didn’t have the right network to get in front of investors, or go-to market in North America? This can be difficult.

An interesting excerpt from the book The Power Law: Venture Capital and the Making of the New Future highlights the influence that immigrants had on the rise of silicon valley. Pejman Nozad, now Managing Partner at Pear, but then a scout in the early 2010’s, had become Sequoia’s ambassador to the Iranian diaspora in the valley. Sequoia, now known as one of the most recognized venture firms in the world, valued Nozad’s connections because of its belief in the immigrant hustle: Michael Moritz, Doug Leone, and Roelof Botha, all Sequoia partners, were born in Wales, Italy and South Africa, respectively. At that time, three in five Sequoia-backed successes had at least one immigrant founder. Another example from the book has John Collison, co-founder of fintech behemoth Stripe, recounting his experiences with Michael Moritz upon raising their Series A. “I’m not quite sure what he saw at the very early stage. We were just squirrels in a trench coat, masquerading as a company. I think Mike has a pattern he likes. Young immigrant founders with pluck, basically.”

In recent years, some venture firms, such as Unshackled Ventures and OneWay Ventures, have set up funds that work exclusively with ventures founded or cofounded by immigrant entrepreneurs. Along with startup support, they provide services tailored to the needs of foreign-born founders, including visa and legal advice. As OneWay Ventures argues, “immigrant founders have a competitive advantage when it comes to building impactful, global reaching ventures.” While Unshackled Ventures claims to have supported 100+ immigrant founders through their immigrant journey, with 200+ filings created and generating $2.7B of total enterprise value via immigrant entrepreneurs. Harlem Capital Partners (HCP) is a venture firm that focuses on early-stage, minority-owned tech startups with the mission to invest in 1,000 diverse founders over 20 years. There are several firms that have been founded on the premise to provide minority founders with the opportunities that they otherwise may not have.

The Fight for Public Policy

Immigrant entrepreneurs typically gain their status as refugees, or on family / employer sponsored visas. One of the most discussed pathways to the U.S is through the H-1B visa. The H-1B is a temporary (nonimmigrant) visa category allowing employers to petition for highly educated foreign professionals to work in specialty occupations – typical duration is three years, sometimes extended to six. Jobs in the field of mathematics, technology, medical sciences and engineering often qualify. What is the problem then? Well, the demand for visas has outstripped supply in recent years.

The USCIS reports that for FY22, the agency received ~308K registrations from employers and selected ~85K, pegging a 28% acceptance rate. For FY23, the agency is said to have received ~483K registrations, selecting ~127K, pegging a 26% acceptance rate and a 57% increase in the number of registrations! There is a considerable gap between demand and supply and the percentage of acceptances has dropped.

There are several reasons why public policy should encourage immigrant workers, potentially with more visas granted. First, to not invest into immigrants is to not invest in entrepreneurship given that majority of billion-dollar companies founded in the U.S have at least one immigrant in a key leadership role. Second, immigrant workers spend and invest wages in the U.S economy, henceforth increasing consumer demand and creating new jobs. Third, immigrant workers expand the horizon of business that can be done on a multi-national level. Fourth, immigrants themselves frequently create new businesses, thereby expanding the U.S labor market. Ultimately, public policy should support nascent entrepreneurs among immigrants by providing funding, training, access to workspaces, and help navigating the administrative processes associated with starting a business as an immigrant.

Why am I writing All of This?

As the child of Ukranian and Israeli immigrants, I’ve watched firsthand the difficulties that are involved in starting from scratch. I’ve been fortunate enough to have had many individuals take a chance on me when they didn’t need to. For a long time, I’ve tried to do the same, and is part of the reason investing in start-ups enables me to fulfill the dream others may have. In the past year, I’ve also spent time matching talent to companies that are hiring (if you’re looking to explore something new – fill out this form and I’m happy to help).

If you are an immigrant founder looking to raise money, I would love to help you on your journey to do so. If you come from a non-target background and are looking to navigate your career and land your first or second job, I’d love to discuss what that path may look like.

If luck is what happens when preparation meets opportunity, then let’s create more opportunities for those who deserve it.