Is Startup Act 3.0 the Right Path?

High-skilled immigration is becoming an important topic for American business, so much so that President Obama devoted time during this week’s State of the Union to discussing the issue. The topic is particular important for the startup community, who want to tap into foreign high-skill talent, particularly the tens of thousands of non-citizens who graduate with degrees in science, technology, engineering, and math (STEM) from U.S. universities.

Although the President and the White House have made it clear that they prefer to only deal in comprehensive immigration reform, a group of senators including Senators Moran, Warner, and Coons introduced the Startup Act 3.0 yesterday, which contains an immigration section that focuses on high-skill immigrants. In particular, the bill would create 125,000 new visas in two categories. The first category includes 50,000 visas for foreign students who graduate from a U.S. university with a master’s degree or higher in a STEM field to pursue a career here in the U.S. in those fields for up to five years, with a pathway to permanent residency or citizenship.

The second category includes 75,000 so-called “entrepreneur visas” for persons already holding a H-1B or a F-1 student visa to allow them to stay here and start businesses. However, in order to qualify for this visa, the individual must within the first year of the visa start a company and raise at least $100,000 of investment or capital and hire at least two U.S. citizens or legal permanent residents (who are not relatives of the visa holder), and employ an average of at least 5 citizens or permanent residents over the following three years after the first year.

While I applaud the intentions of the bill’s authors in creating a startup visa, I don’t think the provisions fully appreciate the realities of entrepreneurship. For starters, there are a few ambiguities in the requirements, notably the employee requirement — do co-founders count as employees? Then there is the requirement of raising at least $100,000 in capital; while bootstrapping has its detractors, it likely has at least as many who subscribe to it, but that road appears to be foreclosed to those working under this entrepreneur’s visa.

But most importantly, the provisions underestimate the difficulties of starting a business — raising over $100,000 is beyond merely tapping family and friends, but instead usually requires being fortunate enough to win grants, hitting the jackpot on crowdfunding sites, or finding an angel investor, but few angels will invest in a company without a minimum viable product or some sort of market validation, and it’s hard to get to that point in the span of a year. It can and often does take years, not months, after pivoting, innovating, and refining one’s product, to build a startup to the point of being ready for investment or hiring employees.

I can appreciate the need to ensure that people who are granted entrepreneurship visa are coming to legitimately start businesses and are making the most of their opportunity, but rigid and difficult-to-reach goals serve no one. Immigration reform that directly affects the entrepreneurship ecosphere is going to need the input of the community to explain to legislators how the startup building process works.

Because the White House is primarily interested in comprehensive immigration reform, it’s not likely that Startup Act 3.0 will pass on its own with the immigration provisions in it — if those provisions live on, they will most likely get wrapped up into a larger comprehensive bill on immigration. In that time, there is opportunity to make sure the high-skill and entrepreneur immigration provisions reflect the needs and realities of the startup ecosystem.