Incubating Ideas in the U.S., Hatching Them Elsewhere

WALL STREET JOURNAL (Opinion)

By Alexandra Starr

September 10, 2012

http://online.wsj.com/article/SB10000872396390443759504577631651529404854.html?mod=rss_opinion_main

In 2009, Argentinian entrepreneur Pablo Ambram spent three months at a prestigious business incubator in San Diego, Calif., developing his company, Agent Piggy, which uses technology to teach children about financial management. The Founders' Institute helped Mr. Ambram develop his business and introduced him to promising contacts. Mr. Ambram assembled a board of directors that included a former Oracle executive.

But in the end, Mr. Ambram did not incorporate in the United States. Why? Because he wasn't allowed to stay here. "I met with a few lawyers," he says, "and they said trying to sponsor myself as the CEO of a company would be very expensive, take months, and there was no guarantee it would work."

The most obvious route to residency would have been through a job offer from a U.S.-based company, but Mr. Ambram wanted to start a business. When his six-month visa expired, he left for Chile, where he has raised more than $300,000 and hired four employees. "It was frustrating," he says, "because I wanted and still want to be based in the States. The marketplace there is unparalleled."

The United States—unlike Chile, Britain, Singapore, New Zealand and other countries—does not have a visa category for immigrants who aspire to found companies and create jobs. That means we are turning away potential job creators like Mr. Ambram. The unfortunate state of affairs has drawn attention on Capitol Hill, with lawmakers including Sen. Marco Rubio (R., Fla.) and Rep. Brad Polis (D., Colo.) proposing that immigrants who raise cash from U.S. investors be allowed to remain in the country to launch companies.

But no legislation has been passed. If Congress does move on the matter, lawmakers would be wise to stipulate that visa-granting decisions take into account advice from the existing start-up ecosystem—venture-capitalists and business incubators—rather than giving the task solely to immigration adjudicators, who would be less well-equipped to identify deserving recipients.

The first business incubator popped up in Batavia, N.Y., in 1959, but the most influential programs are less than a decade old. Places like YCombinator in Mountain View, Calif., and TechStars in Bolder, Colo., have nurtured hundreds of tech companies. According to the National Business Incubation Association, there were 1,115 business incubators in the U.S. as of 2006.

The top-flight programs, which are sometimes called accelerators, generally offer office space for three or four months, provide equity capital, and—most important—make introductions to venture capitalists and mentors. Participation can substantially increase a young entrepreneur's odds of success. According to Inc. magazine, of the 126 companies that have gone through the full TechStars program, only 8% have failed, a fraction of the bankruptcy rate for most technology start-ups.

Relatively few of these graduates are foreigners—in part, according to TechStars co-founder David Cohen, because foreign applicants "on the bubble" of gaining acceptance are sometimes turned away because incubators know they have little prospect of being able to remain here. Those who do participate in the programs come on tourist visas, because most incubator programs last just a few months.

Staying in the U.S. can be all but impossible. Mr. Cohen says he has seen graduates who raised hundreds of thousands of dollars in the U.S., yet for lack of visas have had to leave and run their businesses remotely from abroad. That limits their productivity and means that jobs that would have gone to American workers were filled elsewhere.

Other countries use incubators to select immigrant entrepreneurial talent. In the U.K., immigrants participating in incubators are granted one- to two-year visas to develop their businesses. The Chilean government has created an incubator in its capital city, called StartUp Chile. It provides work space, visas and $40,000 to entrepreneurs willing to relocate to the city for a minimum of six months. Those who choose to stay longer are allowed to extend their residencies. StartUp Chile lured Mr. Ambram, the Argentinian, to Santiago.

Stars of the tech community have pushed novel solutions to the visa quandary. PayPal founder Peter Thiel is backing a venture to launch a cruise ship 12 miles off the coast of San Francisco that would be populated with foreign entrepreneurs eager to develop business ideas in the U.S. market. Residing offshore would let them circumvent visa issues. Paul Graham, founder of YCombinator, advocates the creation of 10,000 founders visas, with an unspecified group—presumably from the venture capital community—developing the accreditation procedure.

Proposals for entrepreneur visas still don't make use of our elite business incubators as a way to identify worthy applicants. The StartUp Visa bill, introduced by Massachusetts Democrat John Kerry and Indiana Republican Richard Lugar, and StartUp Visa Act 2.0—which has Mr. Rubio and a bipartisan group of senators behind it—require that foreigners raise a minimum of $100,000 for a two-year visa to launch a business. That would leave out many incubator participants because of a chicken-and-egg problem; investors might be wary of writing checks if it's unclear whether the entrepreneur could reach the threshold to remain in the U.S.

Gaining acceptance to the most selective incubators should be weighed in an applicant's favor. The StartUp Visa 2.0 bill provides a blueprint for how we could do this: It proposes that a university graduate with a higher degree in science, technology, engineering or math from a U.S. university who raises a minimum of $20,000 can earn a temporary visa.

If the immigrant's company has created three jobs and raised at least $100,000 within two years, the founder can apply for a green card. Basically, the bill uses the filter of an advanced degree to identify foreigners who show enough promise that they deserve more leeway to start a company here.

Extending a similar opportunity to those who participate in the best incubators would be a low-risk proposition. It would give them a chance to make good on the faith that investors have shown in them. And that would help ensure that fewer Pablo Ambrams get away.

Ms. Starr is the author of a new report on Latino-immigrant entrepreneurship for the Council on Foreign Relations, and an Emerson fellow at the New America Foundation.