Immigrant Entrepreneurship Could Take Hit From Trump Policies

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By Laura D. Francis

Entrepreneur Victor Santos faces an uncertain future when his temporary immigration status expires in two years.

The 26-year-old emigrated from Brazil with his parents at age 12, and he was recently named to Forbes magazine’s 30 Under 30 list. Santos is a founder and chief executive officer of technology company AirFox, which raised $15 million through an initial coin offering in October.

The company helps provide mobile internet access to low-income communities, but with the new funding it is using blockchain technology to create a platform for providing microloans. “We wanted to do something bigger,” Santos told Bloomberg Law.

An ICO is an unregulated fund-raising vehicle for startups that use cryptocurrency such as Bitcoin.

But Santos’ ability to remain the company’s CEO is dependent upon his status under the Deferred Action for Childhood Arrivals program. The Trump administration announced in September that it would wind down the DACA program by March of this year. The program provides deportation protection and work permits to young, undocumented immigrants who came to the country as children.

DACA recipients whose permits were set to expire between Sept. 5, 2017, and March 5, 2018, were allowed to renew if they did so by Oct. 5, 2017. And Santos did.

But there are no more DACA renewal opportunities, and it remains uncertain whether Congress will reach a deal to provide DACA recipients with permanent legal status.

President Wants ‘Merit-Based’ System

It’s likely that Santos—and others like him—wouldn’t be able to immigrate to the U.S. under policies being proposed by the Trump administration.

President Donald Trump favors a “merit-based” immigration system under which immigrants would be selected for admission based on their score in a points system. Santos came to the U.S. as a child of immigrants on temporary work visas, rather than on his own merit.

Trump has also called for an end to “chain migration"—where immigrants who have been granted citizenship sponsor their family members for green cards—and a diversity visa lottery that randomly awards green cards to immigrants from countries with low levels of migration to the U.S.

The White House additionally plans to scrap an Obama administration program to “parole” immigrant entrepreneurs into the country to form startup businesses that create jobs for U.S. workers. The parole power allows admission of immigrants outside the normal channels for humanitarian reasons or if it would have a significant public benefit.

A representative for the White House didn’t respond to Bloomberg Law’s request for comment.

Higher Entrepreneurship Rates

Restricting the number and type of immigrants allowed into the U.S. has the potential to cut back on their startup activity. There currently is no “startup visa” for immigrants who open up new businesses.

Immigrants are almost twice as likely as native-born citizens to be entrepreneurs, according to the Ewing Marion Kauffman Foundation.

There are some 2.9 million immigrant entrepreneurs in the U.S., employing more than 5.9 million workers, according to a recent report from New American Economy. As of 2016, 40.2 percent of Fortune 500 companies had at least one immigrant founder or a founder who was the child of immigrants.

NAE is a bipartisan coalition of mayors and business leaders who support immigration. It is co-chaired by Michael Bloomberg, the CEO of Bloomberg Law affiliate Bloomberg LP.

The National Foundation for American Policy recently found that more than half (51 percent) of the country’s $1 billion privately owned startups—known as “unicorns"—had at least one immigrant co-founder. They include SpaceX, Palantir Technologies, and Uber, among others. NFAP is a nonprofit, nonpartisan organization dedicated to public policy research on trade, immigration, education, and other issues.

Analyst: Statistics Favor Skilled Immigration

But the statistics don’t mean that all immigration leads to high rates of entrepreneurship, Washington, D.C.-based public policy analyst Jason Richwine told Bloomberg Law Jan. 5.

It depends on “who the immigrants are,” said Richwine, a blog contributor for the Center for Immigration Studies, which supports lower immigration levels. There’s a “big difference” between high-skilled immigrants who mostly come from Europe and Asia and lower-skilled immigrants from Latin America, he said.

An “almost negligible” number of immigrant entrepreneurs come from countries that primarily send low-skilled immigrants, Richwine said. If you’re using immigrant entrepreneurship as an argument in favor of more immigration, “you’re arguing for having a specific kind of high-skill immigration, not for a kind of open immigration,” he said.

Who will be an innovator can’t always be predicted based on skill level or country of origin, Richwine said. But an immigration policy that requires the admission of 45-year-old immigrants with a high school diploma or less in order to attract entrepreneurs doesn’t make sense, he said.

It may be that a U.S. citizen’s brother is a genius, but he should be able to immigrate to the U.S. based on the skills he brings, not because of his relationship to someone already here, Richwine said.

Richwine didn’t conduct his own research into different types of immigrants’ potential for entrepreneurial success.

But the Congressional Budget Office recently found that passing the Dream Act—a bill to legalize the young, undocumented immigrants covered by DACA—would increase direct government spending by $26.8 billion over the next 10 years. The increase would be the result of new eligibility for government benefits aimed at low-income individuals and families, suggesting that many DACA recipients aren’t expected to be successful business owners.

‘More Likely to Succeed’

The data are “very, very clear” that immigrants are “disproportionately more likely to succeed” in business, Semyon Dukach, the founding partner of One Way Ventures, told Bloomberg Law Jan. 5.

The Boston-based venture capital fund specializes in providing capital to immigrant-founded businesses, including AirFox. Dukach himself came to the U.S. from the Soviet Union when he was 11.

Investing in immigrants “makes sense financially,” but also, “we really believe in them,” Dukach said. Immigrants have shown that they’re able to adapt to a new environment, a new language, and a new culture, on top of the difficulty of starting a business, he said. “They don’t give up as easily,” he said.

Richwine disputed the claim that immigrants are necessarily more entrepreneurial than native-born Americans. Many immigrant entrepreneurs are co-founders rather than sole founders of their businesses, and their participation rates tend to mirror their representation in the general population, he said.

Regardless, immigrants’ economic contributions are “not the reason to let them in,” Dukach said. Rather, it’s the right thing to do, he said.

“What right do you have as an American to judge the worth of another human being?” Dukach asked.

‘Uncharted Territory’

As with other DACA recipients, Santos considers the U.S. his home. He would experience “reverse culture shock” going back to Brazil, he said. “Ideally, Congress does something and I can rest in peace,” he said.

But Santos said he’s in “uncharted territory” with the end of DACA looming.

Santos is looking into applying for an O visa, a temporary work visa for immigrants with extraordinary ability. But he would have to leave the U.S. to obtain one.

“We’re creating jobs here in Massachusetts,” Santos said of his company, which currently has 20 employees. But in terms of a visa that allows him to stay and build on that start, “there’s nothing that can be done for me,” he said.

To contact the reporter on this story: Laura D. Francis in Washington at lfrancis@bloomberglaw.com

To contact the editor responsible for this story: Terence Hyland at thyland@bloomberglaw.com

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