Foreign Entrepreneurs Keep Coming To Silicon Valley — For Now

By Trisha Thadani
San Francisco Chronicle

WWR Article Summary (tl;dr) Despite the frustrations some foreign entrepreneurs face, there is a historically large class of founders from abroad going through incubators in Silicon Valley. Both “500 Startups”, a highly competitive tech incubator and Y combinator remain extremely popular.

San Francisco Chronicle

It’s 10 p.m. on a recent Thursday, and Daniel Kravtsov still has a long night ahead.

Over the next five hours he will sit in his Hayes Valley apartment, directing a team of developers in Russia via Skype.

While long hours come with the territory of being an entrepreneur, foreigners like Kravtsov feel that almost everything about growing a startup would be easier if they weren’t so tied up by the red tape of the U.S. immigration system.

“If we have technical problems, we need to wait several hours until my developers wake up,” said Kravtsov, CEO of Improvado, which helps advertisers process data. If the prospect of sponsoring visas for his employees wasn’t so hopeless, Kravtsov said he would bring some of his developers — who he said have irreplaceable skills — to the U.S.

Despite the frustrations entrepreneurs like Kravtsov face, his company is part of a historically large class of founders from abroad going through 500 Startups, a highly competitive tech incubator. Another well-known startup finishing school, Y Combinator, has been hosting more foreigners than since it started keeping records about its founders’ nationality.

These incubators and others like them admit classes of early-stage companies every year and give them a small amount of financing as well as direction on how to succeed. Entering these programs is often seen as a mark of prestige for nascent companies around the world.

The founders in 500 Startups’ current class are about 43 percent international, up from the past average of 33 percent.

Y Combinator’s previous class was 41 percent international — a big jump from prior years. Its current class is closer to the historical average of 29 percent, but includes entrepreneurs from Nigeria, Singapore, India and Finland.

Foreign entrepreneurs, investors said, are often highly motivated. “When the companies from overseas are trying to tackle a global problem, in some cases you’re getting a better deal because they want to come over here and work harder,” said Marvin Liao, a partner at 500 Startups.

But just because these entrepreneurs are in the U.S. doesn’t mean it is easy for them to stay and thrive here.

There is no straightforward path for a foreign entrepreneur to reside in the U.S. as they build a company.

It is still unclear how that will change under President Trump, who has talked about a “merit-based” system for immigration that could favor entrepreneurs, but whose moves so far seem designed to broadly limit the number of foreigners coming into the country.

The International Entrepreneur Rule is the closest Silicon Valley has come to the “startup visa” some here have called for. But that rule will likely be amended or dropped before it is set to go into effect July 17, experts said.

This lack of clarity and direction in the U.S. forces foreign-born founders to get creative.

Some work at other companies on an H-1B visa (which allows them to live and work in the U.S. for up to six years) and build their startups on the side, during work breaks or late into the night. Others go through mountains of paperwork to convince immigration services they qualify for other visas, such as an O-1 or L-1.

Then there are founders like Ignacio Harriague from Argentina. His answer? Spend thousands of dollars on plane tickets, keeping his stays under the legal limit.

“It would be a lot easier, a lot faster, if we could be here on a consistent basis,” said Harriague, who is part of 500 Startups as the co-founder of content-distribution company Croma. “It’s an expenditure you don’t want to have in the nascent stages of a company.”

Visas aren’t the only problem, said Elizabeth Jamae, an immigration attorney at D’Alessio Law Group. There are the steep U.S. taxes. And venture capitalists often don’t want to invest in a company if the founder’s status in the U.S. is in flux.

“The one thing I hear repeatedly from venture capitalists outside of the U.S. is that if startups want to grow their company, they have to be in the U.S. market — the rest of the world is just not big enough,” she said. But “our government hasn’t been proactive in putting forth legislation that would support entrepreneurs coming here.”
While other countries, including Australia, Canada, Chile, Ireland, France and New Zealand, have programs to attract entrepreneurs, Silicon Valley and other U.S. innovation hubs remain attractive to company founders.

But experts say the allure of the U.S. will falter if the administration continues to clamp down on foreigners. And if the perception of a crackdown lingers, will the extra hassle that comes with being in the U.S. — the late hours, the extra expenditures, the stress and uncertainty — be worth it?

Kravtsov say yes: Staying up late into the night is easy to justify if it means you can also take advantage of the U.S. market and make connections with American investors and partners.

But others would rather spend their energy elsewhere.

“We don’t have that much time to spend on applications and processes when we’re building a business,” said Juan Melano, a co-founder of Croma and native of Argentina. “What am I going to be using my time for? Getting my business to grow, or to live somewhere?’

His answer: “Grow the business.”

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